Schools across North Carolina are in desperate need of repair due to age, or in need of new construction due to attendance growth or class size changes. After two hurricanes ravaged schools in the eastern part of the state within the last four years, some of the repairs and new construction are particularly urgent.
The North Carolina House and Senate are running competing plans on the best way to fund school construction and capital needs. Both contain funds around the $2 billion mark, but legislators are debating over which model is the best.
House Speaker Tim Moore (R-Cleveland) is backing a statewide bond proposal. Senate Majority Leader Harry Brown (R-Onslow) has a bill that would draw from an existing fund.
Moore, other House Republicans and Gov. Roy Cooper are backing the issuance of a $1.9 billion bond that is specifically for education construction and capital needs. $1.3 billion of the total $1.9 billion would go to K-12 capital construction needs, while the community college and the university systems would receive $300 million each.
There are potential roadblocks for a bond. For one, a bond issuance could take several years and has no guarantee it will be passed by the voters of the state. In addition, a bond comes with debt attached. According to the Fiscal Research Division of the legislature, the bond will cost the taxpayer $3.1 billion over 30 years in interest payments,
Speaker Moore and many House Republicans have engaged in a statewide listening tour and forums on the bond. The idea that the bond money might be used for more than construction was mentioned in a press release by Speaker Moore during a tour stop in Columbus County.
“A key reason counties need a statewide school bond is school safety,” said Moore. “It’s so much easier to give our [school resource officers] what they need in newer buildings. It’s easier to keep students safe in newer schools.”
The other option for funding school construction is a legislative one.
Senate Bill 5 is titled “Building North Carolina’s Future” and it proposes to make available over $6 billion over a nine-year period for school construction needs as well as funding to community colleges, the university system and address other state needs.
The bill, put forth by Sen. Brown, is more of a “pay-as-you-go” plan that relies on funding from the State Capital and Infrastructure Fund (SCIF) which was established in 2017. The SCIF currently receives 4 percent of state revenue to deal with state debts and capital projects. State revenue that goes to that fund would be increased to 4.5 percent under Senate Bill 5.
“The Building NC’s Future Act provides more money for school capital faster and at a lower cost than a bond,” Senator Brown said in an email to North State Journal. “It would not only get the money out quicker, but it wouldn’t limit what can be done in the future, the way a bond would.”
Whereas the bond is dedicated only to education and gives the lion’s share of its $1.9 billion to K-12 needs, Senate Bill 5 would split over $6 billion in funding three ways between K-12, community colleges/universities and other state agencies.
The Senate proposal puts over $2 billion in dedicated funding for K-12 school capital over the next nine years, with zero interest payments. The funds would be allocated according to information provided by the Department of Public Instruction, who will rank applications that are submitted by the districts based on the severity and immediacy of the need.
Senate Bill 5 recently cleared the Senate Committee on Appropriations/Base Budget. During the meeting, a number of questions were raised by the Democrat members of the committee.
Sen. Jay Chaudhuri (D-Wake) made the point that the bill language would not “bind future general assemblies” to continuing the funding currently set out in the bill.
“We have been building up a rainy-day fund, I think to address the next downturn,” said Sen. Brown in response. “I think if this bill passes, it’s like any bill — there will be a lot of pressure to continue to fund it because the need is definitely there.”
Chaudhuri then raised the question whether Brown viewed Senate Bill 5 as an alternative or whether it could it be coupled with a bond. Sen. Brown said he saw it an alternative.
“You max out your credit card with a bond, basically,” said Brown.
“How does this [SB5] get the money out quicker? That’s what I am a little bit confused about.” asked Senate minority leader Dan Blue (D-Wake).
“What it will do, Sen. Blue, is it will take a couple years to get the bond proposed, get it on the ballot, and get it passed and then figure out how you are going to allocate those dollars,” replied Brown. “So, it’s about a two-year plan normally after a bond passes to start getting those dollars out. For this [SB5] you can get it out immediately.”
Brown followed up by explaining that with bonds the funds don’t all go out at once, it takes time to get all those dollars out. Brown also reiterated that a bond comes with debt and his proposal does not.
In a lengthy commentary, Sen. Blue asked why some of the funds in Brown’s bill couldn’t be used now as bridge funding until a bond kicked in. Sen. Don Davis (D-Pitt) later re-asked the question of whether the bill could be done as an “enhancer” by also doing the bond.
Brown replied that Senate Bill 5 is an alternative to the bond to avoid debt servicing and to get the money out fast. Brown also reminded the committee that the SCIF was created two years ago to “start paying for these capital needs up front.”