Published Online: April 10, 2009
Published in Print: April 22, 2009, as Stimulus Offers Funding Support For Ed. Facilities
Updated: April 4, 2012
Includes correction(s): April 4, 2012

Stimulus Offers Funding Support For Ed. Facilities

Some two months after enactment of the federal economic-stimulus package, school facilities directors are still trying to piece together how much money will be available under the measure for school construction projects, what it can be used for, and when it can be accessed.

“Nobody really knows what’s going to happen, and what kind of money is going to be available,” said Sue Robertson, the president of the Council of Educational Facility Planners International, or CEFPI, which is based in Scottsdale, Ariz.

“But the people who are wise and experienced in this field,” she said, “are doing their best to be ready in a position with a good master plan ... so that when there is money available, they’ll be able to take advantage of that opportunity.”

Before President Barack Obama signed the $787 billion American Recovery and Reinvestment Act into law on Feb. 17, the U.S. House of Representatives had passed a version of the bill that included $14 billion specifically for school construction, renovation, and modernization. Likewise, the U.S. Senate had included $16 billion for school facilities in a version of the legislation, but the provision was taken out to obtain the support the stimulus package needed from key Republican senators.

Federal Stimulus Aid for School Construction

FUNDING

State Fiscal Stabilization Fund—This $48.6 billion pot of money can be used for a variety of needs by public schools, including school modernization, renovation, repair, and construction. It can also go toward preventing teacher layoffs and program cuts, which is where the majority of the money is expected to be spent.

Impact Aid Construction—This $100 million is reserved for emergency repairs and school modernization projects in public districts with students who live on American Indian lands and military bases, with $40 million available through a funding formula, and the other $60 million to be distributed through discretionary grants.

Energy Efficiency Grants—Public and private nonprofit schools or districts may receive money from the $3.2 billion Energy Efficiency Block Grants Program and/or the $3.1 billion State Energy Program to make school buildings more energy efficient and to utilize renewable sources of energy.

BONDS

Qualified School Construction Bonds—This program provides $22 billion over two years for the construction, rehabilitation, or repair of public school facilities, or for the acquisition of land for public schools to be built on. The money goes toward giving bondholders tax breaks on the bonds so that they are able to offer those to schools interest-free.

Qualified Zone Academy Bonds—Under this program, known as QZAB, public schools or districts with 35 percent or more of their students eligible for free or reduced-price lunches, or schools or districts located in federal enterprise or empowerment zones, are allowed to take out noninterest-bearing loans for rehabilitation or repair of school facilities. The loans must be paid back over a period of up to 12 years. The bond requires a 10 percent match from a business or nonprofit partner. The pre-existing program’s funding has been increased from $400 million to $1.4 billion for fiscal 2009 and $1.4 billion for fiscal 2010.

Build America Bonds—States may apply to use these tax-credit bonds for a wide range of projects, including public school construction and modernization.

Qualified Energy Conservation Bonds—Through this $3.2 billion program, public and private nonprofit schools or school districts can apply for tax credits for capital expenditures that reduce energy consumption by at least 20 percent.

When the bill went to a House-Senate conference, the construction money remained stripped from the legislation, although language was added that allows states to use money from the law’s State Fiscal Stabilization Fund—$48.6 billion total—for public school renovation and modernization. (That stabilization fund also includes an additional $5 billion in “Race to the Top” grants that the U.S. Department of Education will administer, but those grants won’t involve school renovation or modernization.)

Sixty-seven percent of that money—or $32.5 billion—is available for states as soon as they submit their applications. States will be eligible for the remaining $16.1 billion as early as July 1, after the Department of Education has determined that states are making progress in key areas with the first round of stimulus money.

Urgent Needs Compete

But facilities experts say that although states have the option of using some of that money for school facilities projects, the funds will most likely go toward preventing teacher layoffs and backfilling other budget shortfalls, leaving little, if any, for renovation, modernization, or construction projects.

Funding from the stimulus package is available for public schools, including charter schools. Private schools are not eligible for the aid.

“A good number of states are in such dire straits that they’re probably going to use most of this for just the most basic backfilling [of budget gaps],” said Judy Marks, the associate director of the Washington-based National Clearinghouse for Educational Facilities, or NCEF.

Part of the money from the fiscal-stabilization fund—18.2 percent—will be distributed through state governors’ offices, and the rest will be distributed through state funding models.

Guidance on how the federal money could be used, released April 3 by the Education Department, provides more flexibility on facilities spending than both legislators and facilities experts had anticipated. The guidance allows for money from the stabilization fund to be used for new school construction projects. ("First Education Stimulus Aid Flows to States," April 1, 2009.)

However, few observers believe that there will be much money left over from the stabilization fund for such undertakings.

“In our state, the education budget has been cut by almost 40 percent,” said Gaylaird Christopher, the president of Architecture for Education Inc., a Pasadena, Calif.-based company that designs educational facilities. “The facilities people that I talk with are very pessimistic about whether or not that money is really going to get down to the facilities side of things.”

“Unfortunately, it looks like that money is going to backfill programs that are already there,” he said. “There isn’t going to be much money out there on the construction side to put people back to work.”

Some of the school districts his company is working with were considering using federal stimulus money to update and expand science labs and invest in career and technical education programs, Mr. Christopher said.

“That would be a great opportunity for this stimulus money, to build those types of environments that would also allow those citizens to pick up skills,” he said. “Unfortunately, it looks like the funding won’t be there initially.”

Bond Opportunities

In addition to the fiscal-stabilization funding, the stimulus measure created the Qualified School Construction Bond program, which will receive $11 billion for fiscal 2009 and another $11 billion for fiscal 2010. In addition, the law expanded the Qualified Zone Academy Bond, or QZAB, program by increasing its funding from $400 million to $1.4 billion for fiscal 2009, and provided another $1.4 billion for fiscal 2010.

“A lot of us are counting on the bond money that’s in there to really be the most helpful thing in terms of school construction,” said Ms. Robertson of CEFPI, who is also the director of the New Orleans-based educational facility planning and development company Planning Alliance. “The fact that they’ve increased the dollars for QZAB is a big deal.”

As with any facilities aid under the stabilization fund, only public schools, including charter schools, are eligible for such bonds.

John K. Ramsey, the executive director and chief executive officer of CEFPI, said he was particularly energized by the new Qualified School Construction Bond program.

“We believe it could pave the path for future federal involvement in capital initiatives for school construction at the local level,” he said.

The Qualified School Construction Bonds may be used for construction, rehabilitation, or repair of school facilities, or for the acquisition of land on which to build a school. Forty percent of the funding will be distributed to the 100 districts with the largest populations of school-age students in poverty, as well as to an additional 25 districts to be designated by U.S. Secretary of Education Arne Duncan.

The remaining 60 percent will go directly to the states to be distributed to districts or schools.

The money will go toward providing tax breaks for the bondholders, who in turn agree to provide the bonds to schools interest-free.

To participate in QZAB, the previously created Qualified Zone Academy Bond initiative, a school or school district must have 35 percent or more of its students qualify for free or reduced-price school lunches, or the school or district must be located in a federal enterprise or empowerment zone. Applicants must also provide at least a 10 percent match of the net total present value of the bond from a business or nonprofit partner.

But persuading districts to take on the bonds, which most likely would need to be paid back out of general-fund money that is also used to pay teachers, will be a hard sell if those districts are facing layoffs, some education experts said.

“School boards may not want to borrow money when they have a deficit, especially if they’re trying to cut teacher salaries,” said Appu Kuttan, the chairman of the National Education Foundation, an Alexandria, Va.-based nonprofit group that aims to bridge the digital divide between less well-off and better-off students.

Mr. Kuttan provides guidance to states on how to apply for QZAB.

Energy-Efficiency Dollars

Another area where schools may be able to scrape together funds for renovation and modernization projects is the energy-efficiency funding and bonds established by the stimulus bill.

Both public and private nonprofit schools are eligible for grants to increase energy efficiency and make use of renewable resources through the $3.1 billion State Energy Program and the $3.2 billion Energy Efficiency Block Grants Program.

A $3.2 billion Qualified Energy Conservation Bond program has also been set up to provide tax credits for capital expenditures on public buildings, including schools, that have plans to reduce energy consumption by 20 percent.

In addition, districts with students on military bases or American Indian lands may qualify for money in a $100 million fund set aside for emergency repairs and school modernization through the impact-aid construction program.

Although many facilities experts were disappointed by the lack of money specifically set aside for school facility projects in the recovery act, “anything is certainly better than nothing,” said Ms. Robertson, from CEFPI. “We just have to be smart,” she said, “about figuring out how to access it.”

Vol. 28, Issue 29, Pages 1,14-15

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Correction: 
An earlier version of this story incorrectly identified one of the bond programs. It is the Qualified Energy Conservation Bond program.

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