Can taxpayers afford billions for school construction?

By: Lindsay Marchello - Carolina Journal

RALEIGH — Stough Elementary school has seen a handful of repairs and renovations since it was built in 1968. The aging facility soon will be torn down, and a new building will take its place to accommodate more students without the need for mobile trailers.

The project will cost more than $37 million.

“We are fortunate to be in Wake County, where that local funding is appropriated for these measures,” Stough Elementary Principal Chris Cox said. “Funding is different from county to county, and ultimately our local funding does provide that capacity to move into new spaces and also to come back to brand-new spaces.”

The school is just one of many in need of a revamp. In 2016, the Department of Public Instruction reported North Carolina public schools needed $8.1 billion for new school facilities or renovations.

The N.C. School Bond would have provided $1.9 billion in public school facility grants for all 100 counties, if voters had approved it.

But voters won’t get the chance. The General Assembly didn’t pass House Bill 866 and place the bond on the November ballot. Instead of adding state debt, lawmakers increased capital spending from current revenues. Senate Majority Leader Harry Brown, R-Onslow, reflected the attitudes of legislative leaders by saying it was better to spend money in hand and complete construction quickly than to owe money after the buildings were finished.

Construction won’t begin on Stough Elementary until July 2019 and is scheduled to finish in 2020. In the meantime, students and teachers will use a new school — Barton Pond Elementary. The project is funded through the Continuous Building Program and a $810 million school construction bond passed in 2013.

Wake County voters will get the opportunity in November to vote on a $548 million bond for that county’s school system.

“Wake County is one of the fortunate counties that stepped up and provided a bond referendum for school construction,” Gov. Roy Cooper said during a July 11 tour of Stough Elementary.

While Wake County has the tax base to be able to pass a bond, the same can’t be said for low-income counties with shrinking populations.

Richard Bostic, assistant director at the N.C. School Board Association, said low-income counties have a hard time raising revenue to meet construction needs.

“Wake, Mecklenburg — which passed a bond last year — and the other Tier 3 [high-income] counties have an easier time handling a bond debt, but the poorest counties don’t,” Bostic said. “Their property tax really doesn’t raise a lot of money, so we think it’s important especially for the lower income counties to have some state help.”

Traditionally, the state provides operating funds and the local government provides capital, but the roles have been blurred. Bostic said local government increasingly supplements operating costs.

“We think that since we are handling a share of state responsibility, why doesn’t the state help locals with some capital responsibility?” Bostic said. “They have in the past.”

The N.C. Education Lottery was enacted in 2005, with 40 percent of the annual net proceeds funneled into the Public School Building Capital Fund. After the recession, the percentage was replaced with a flat appropriation of $100 million — becoming less than 20 percent of lottery proceeds — until 2017, when it increased to $130 million. Lawmakers said they intend to restore the 40-percent capital target over the next few years.

The state also introduced the Needs-Based Public School Capital Fund to help low-income counties with their building needs. Counties applying for money through the fund must match every $3 of state money with $1 from local sources.

Johanna Reese, director of government relations for the N.C. Association of County Commissioners, said the state has increased construction funding, but the school bond is needed to reduce a backlog that accumulated during lean times. The NCACC also backs House Bill 333, which would allow local voters to approve new local sales taxes dedicated to public education.

“The school capital needs in counties across the state are different, therefore the solutions from county to county are different,” Reese said. “Some counties can’t build schools fast enough to keep up with student population growth, some have older, dilapidated schools that need major renovations and technology upgrades, and others are losing population and need to consolidate schools through either new construction or renovation.”

A February debt affordability study suggests the state can afford to take on more debt, but that study was done before the state budget included the $3 billion Build N.C. Bond. State Treasurer Dale Folwell cautioned against adding more debt, especially considering the state’s existing financial obligations.

“School construction, and finding a way to do school construction, especially in rural, depopulating parts of North Carolina, is vitally important,” Folwell said during his monthly Ask Me Anything conference call with reporters. “But it has to be done with the understanding that, unlike the federal government, we do not have an unlimited credit card.”

While traditional public school buildings cost anywhere from $19 million to $60 million to build, public charter schools often have to find ways to reduce costs because of limited access to state and local funds.

Charter school operators don’t receive capital funds to build facilities, so they have to get creative if they want to build a school. Gregg Sinders, the N.C. state director for TeamCFA, said charter schools often have to dip into operating funds to pay for construction.

“I think our challenge becomes staff versus facilities. How do we attract and retain? You can’t afford to put 15 to 20 percent of your money into facilities and offer participation in the state retirement system because that’s 18 percent alone,” Sinders said.

Charter schools often don’t have the same amenities as traditional public schools — such as cafeterias, sports stadiums, or auditoriums. Sometimes, as is the case with Sugar Creek charter school in Charlotte, the school retrofits an existing building instead of building a new facility.

“We have a limited budget so sometimes we have to combine those things. Sometimes the auditorium, the cafeteria, and the gym are all one in the same,” Sinders said. “Some charter schools invest in athletic facilities, others don’t. That’s a big cost factor, too.”

Sinders said the cost to build Pine Springs Preparatory Academy, a TeamCFA school which serves more than 500 students, was about $13 million. Students eat their lunches in the classroom, and it doesn’t have sports programs.

“When you have a limited budget you have to establish priorities real quick,” Sinders said.

Lindsay Marchello is a staff writer for Carolina Journal.

Lindsay Marchello

Carolina Journal