CMAA Northern California Chapter October 3, 2012 William Savidge , Assistant Executive Officer State Allocation Board

1. The Future of School Facilities Funding & Construction in California CMAA Northern California Chapter October 3, 2012 William Savidge, Assistant Executive Officer State Allocation Board Kathleen Moore, Director School Facilities and Transportation Services Division California Department of Education

2. Agenda • A decade of strong commitment • A new world of State/local bond debt constraints • State school facilities funding in transition • School facilities construction over the next 2 years • Where do we go from here? • UC Berkeley Center for Cities and Schools Report: “California’s K-12 Educational Infrastructure Investments: Leveraging the State’s Role for Quality School Facilities in Sustainable Communities.”

3. Over a Decade of Strong Commitment • School Facilities funding prioritized • Meeting California’s growth needs • Modernizing existing schools • Over $35 billion in State Bond Funds • 1998 School Facility Program • Growth of targeted state funding programs • Not just New Construction & Modernization • High Performance • Charter Schools • Overcrowding Relief Grants • Seismic Mitigation • Joint Use

4. Over a Decade of Strong Commitment • $66 billion local funding for school facilities • General obligation bonds • Passage of Proposition 39 was a huge impact • Growing local responsibility • State partnership important in selling to voters • Developer Fees in addition to local bonds • Local residential growth impact funding • Local development districts • CFD’s, Mello Roos, others

5. The New World: Debt Constraints • Changed economic climate—financial crisis! • State infrastructure investment impacts • Schools one infrastructure area competing for voter-authorized funding • Parks, levees, transportation, high-speed rail…

6. The New World: Debt Constraints • Impacts to the State General Fund • Debt-service payments continue to rise • Compete with other funding priorities • In a time of difficult choices, reduced revenue, limited budgets • Solution—measured pace of bond sales • In the new era of restricted school facilities funding • Bi-annual bond sales • SAB instituted Priority Funding process • Certify to be under contract in 90 days to receive cash • The “shovel-ready” project is king!

9. State Debt Service Forecast • We’ve come out of the recession stronger • Balanced state budgets from legislature and governor • Reducing long-term structural deficit • Future scenarios regarding infrastructure investment • Strategic Growth Plan future investment needs • With anticipated new debt—including school bonds • Will still have a high level of bond debt as percent of General Fund revenues

10. State Debt Service Forecast

11. Local Debt Constraints • Local funding for school facilities • Developer fees have dried up with the housing market… • Local General Obligation Bonds • Proposition 39 limits • The 55% majority blessing • But…individual tax limitation @ $60/$100,000 of assessed valuation (“AV”) for Unified Districts • And…overall bonding capacity limitations @ 2.5% of AV • As local Districts continue facilities investments • Tax rate limitations become critical • LAUSD has billions in voter-authorized bonds—unable to sell

12. Local Debt Constraints Local debt service and limitations—finding ways to create room under the line!

13. State funding end game…

14. State funding in transitiion… • Still $2.4 billion in the “pipeline” • Including Unfunded Approvals waiting for cash • Funds/programs with remaining authority • Earliest date for new state school facilities bond • November 2014 • OPSC has applications in-house • That exceed remaining bond authority • Modernization $116 million • New Construction $58 million • As of August 31, 2012

15. State funding in transition • State Allocation Board action • Acceptance of Applications Beyond Bond Authority • Creation of new process • “SAB-Acknowledged Workload List” • Limited processing of applications • No “Unfunded List” as in the past • Board concerns regarding • No guarantee of state funding in future • Changes to state program

16. School Facilities Construction • Navigating the next 2 years • Local bond funding continues for schools • Green building standards, renewable energy systems • Increasing regulatory complexity for state-funded projects • Locally funded projects that may be funded/reimbursed in the future by state funds

17. Local Districts have placed $11.4 billion in bonds on the November ballot. In addition, $750 million was passed by locals in November 2011—an “off” year. Most recently $1.6 billion was passed by locals in June 2012. Significant opportunities for continuing school facilities construction. 2012 School Facilities Bonds

18. Energy, Renewables, Green Building • Continued focus on school projects • Energy efficiency • Performance Contracting • Rebates, utility and local agency programs • Renewable energy systems • Local bond funding • State funding when available • Energy Commission Loans—”Bright Schools” program • Green building standards • Schools a focus—CHPS, LEED for Schools • Leading the green construction team

19. Construction in our regulated world • School construction ongoing requirements • State funded projects • Continue these programs in order maintain the option of filing to receive state funds • Labor compliance • DIR Compliance Monitoring Unit • Required for all public works projects receiving state bond funds • Mandatory pre-qualification for Contractors • Including MEP Subcontractors

20. Major Benefits from Past 10+ Years of Investment • ~20% enrollment growth • Overcrowding relieved • Upgraded thousands • 70/30 local/state share

22. Comprehensive Look at Past and Future • Sound planning? • Wise investment? • Policies needed?

23. Today’s Context • New economic era • New state policy framework on infrastructure & land use: climate change & sustainable communities • “communities that promote equity, strengthen the economy, protect the environment, and promote public health and safety” (Public Resources Code § 75125, originally SB 732)

24. State Planning Priorities for Infrastructure • Promote infill development and equity • Protect environmental and agricultural resources • Encourage efficient development patterns (Government Code § 65041.1, originally AB 857)

25. CA cannot afford to not be strategic:A shift is needed • To existing facilities focus • To investing in community sustainability • To intentional innovation

26. Why School Facilities Matter • Affect teaching and learning • Affect land use, growth, travel patterns, VMT, housing choices Uline, C. (editor). (2009). Special Issue, Journal of Educational Administration 47(3). Higgins, et al. (2005). The Impact of School Environments. University of Newcastle. U.S EPA. (2003). Travel and Environmental Implications of School Siting U.S. EPA. (2011). Voluntary School Siting Guidelines. PACE and CC&S. (2009). Smart Schools, Smart Growth. UC Berkeley

27. Californian’s Invest in K-12 Infrastructure Source: PPIC 2008 K-12 Schools 34%

28. Sound Planning Infrastructure Best Practices Framework Effective Management Adequate Equitable Funding Appropriate Accountability

29. Estimating K-12 Capital Needs: • New Construction • Enrollment growth/crowding • Building Replacement • Modernization • For health, life-safety, and ADA • For educational program delivery • Capital Renewals • Scheduled replacement or restoration (2-4%)

30. Estimating Needs:$117 billion to ensure safe, modern, equitable, and sustainable learning environments for all students

32. Recommendations:Leveraging the State Role • Establish state vision & master plan • Promote local intergovernmental planning • Assemble needed information • Review & update Title 5 (CCR) • Set funding priorities • Establish state funding of capital renewals • Identify multiple revenue sources • Improve public accountability

33. Harnessing Efficiencies & Benefits Three levers: • Policy reforms • Process innovations • Technology tools

34. 1. Adopt vision & master plan • K-12 on Strategic Growth Council

35. 2. Promote local inter-agency planning • Include K-12 in SB 375, etc. • Require standards-based LEA master plans • Provide guidance for local joint planning • Set minimum green building criteria • Use CEQA strategically

36. 3. Assemble info to bestrategic and prioritize • Develop inventory & assessment tool

37. 4. Review & update Title 5, CCR • Statewide comparison of schools • Supports sustainable communities

38. 5. Set priorities to remedy inadequate facilities and support new construction • Identify state-level need • Establish criteria for ranking • Bring all schools to minimum level • Develop transparent funding formula

39. 6. Establish capital renewals funding • Shift from reactive to proactive approach

40. 7. Identify multiple revenue sources • Consider statewide special tax • Public/private partnership legislation • Periodic bond use

41. 8. Improve accountability • Produce annual report • Inter-agency info system • SFP Citizen’s Oversight Committee • Maintain Implementation Committee • Streamline approval processes • Support technology tools

42. Stakeholder Input Sessions • October 1 School Implementation Advisory Committee Roundtable • October 16 CASH Fall Conference • November 13 Video Conference • December 6 Symposium by Center for Cities and Schools, California Department of Education, and Strategic Growth Council

43. Implementation Recommendations • Prepare Implementation Recommendations for the State Superintendent of Public Instruction by December 31.