School Facilities Financing Working Group

SCHOOL FACILITIES FINANCING REFORM

OPTION # 2

Principles for Facilities Funding Reform

1. Funding should be adequate, equitable and sustainable.
2. All districts should have access to comparable funding for comparable needs based on uniform procedures and eligibility criteria.
3. Local school districts should take the lead in determining facilities project needs, scope, and design.
4. Funding formulas and administrative procedures should be as simple as possible, so as to minimize administrative burdens / paperwork and maximize local control, while providing accountability.
5. Property tax levies for facilities should be equalized in a manner that minimizes variations in revenue per student for comparable tax effort regardless of variations in local tax base, and provides stability over time.
6. Special provisions should be made to ensure adequacy and equity for districts that have incurred facilities damage due to natural disasters.
7. Funding for charter schools should be comparable to funding for district schools

Operating Capital Revenue

1. Beginning in FY 2017, repeal the separate building lease levy except for the intermediate district portion and add $162 to the allowance for operating capital revenue. Districts may use the funds for building leases or any other operating expenditures.
2. Beginning in FY 2017, index the operating capital allowances to the consumer price index.
3. Beginning in FY 2017, index the equalizing factor for the operating capital levy to the state average ANTC per Adjusted Pupil Unit to maintain stability in state and local shares of revenue over time.

Alternative Facilities / Deferred Maintenance Revenue

1. Make all school districts eligible for the alternative facilities program and repeal the deferred maintenance program.

2. Since alternative facilities funding can be used for health and safety funding, repeal the health and safety program as a separate revenue category. Allow alternative facilities funding to be used for health, safety and environmental management costs up to the same limit as under the current health and safety program.

3. Rename the program as “Facilities Maintenance Revenue”.

4. Revenue as defined in local facilities maintenance plan; no limit on revenue per pupil unit.

5. Equalize the levy, whether pay-as-you-go or bonded debt based on 100% of the state average ANTC per Adjusted Pupil Unit. Portion of revenue for bonded debt recognized in debt service fund and goes to reduce required debt service levy for long term facilities maintenance bonds.

Voter Approval

1. Voter approval continues to be required for projects that cannot be funded using board-approved revenue sources.
2. Voter approval could be for the issuance of long term debt (e.g., bond issue), or for an ongoing source of revenue for up to 10 years for projects to be funded on a pay-as-you-go basis (e.g., capital projects referendum).

Debt Service Equalization

1. Beginning in FY 2017, modify the current debt equalization formula as follows:
a. Lower the threshold for debt service equalization from 15.74% to 10% of ANTC;
b. Replace two-tiered debt equalization formula with single tier based on 100% percent of the state average ANTC / third year prior APU to ensure equity and stability over time.

c. Current requirements for bond schedules to qualify for equalization would continue (e.g., 20 year term).

Capital Projects Referendum Equalization

1. Continue the current capital projects levy revenue but base revenues approved in elections held in 2014 and later on a rate per pupil unit, and equalize the levy based on 100% of the state average ANTC per Adjusted Pupil Unit.

Review and Comment

1. Review and comment would be required for projects exceeding $2 million in cost per site that also meet one or more of the following criteria:
2. New facilities to be used for regular K-12 education (e.g., elementaries. middle schools, high schools);
3. Major additions to existing regular K-12 facilities (e.g., > 20% of existing square footage);
4. Remodeling / capital improvements that go beyond maintaining / replacing existing facility components with like components;
5. Other locally-defined facilities and technology projects that require voter approval because they cannot be funded fully with facilities and equipment revenue.
6. Information to be required to be submitted for review and comment would vary depending on the type of project (e.g., construction of new schools requires more/ different information than remodeling or technology purchases).

Facilities Grants

1. Rename the Cooperative Facilities Grant Program the “Facility Grant Program”.

2. Strengthen eligibility criteria by eliminating cooperation / consolidation as a factor and limiting eligibility to:

a. For projects receiving a positive review and comment, project costs exceeding the amount that would require the district to levy a debt service tax rate exceeding __% of ANTC (e.g., 30%) after factoring in debt service equalization, assuming a 20 year bond schedule.

b. Notwithstanding paragraph (a), districts that have had property damage in a natural disaster are eligible for revenue based on approved project costs for building replacement or remodeling necessitated by the disaster that are not funded with insurance proceeds or FEMA.

3. Other procedures would be consistent with current program, including requirement for specific legislative approval and requirement for local referendum to cover local share of project costs.

Other

1. No change in other miscellaneous funding provisions:

a. Lease levies for integration

b. Bonding for cities of the first class

c. Taconite funding