CDAC Hears School Construction Update

At its August 11 meeting the Capital Debt Affordability Committee (CDAC) heard an update on school construction from Dr. David Lever, Executive Director of the Interagency Committee on School Construction.  Dr. Lever stated that for the last three fiscal years, Public School Construction Program requests have declined, from a high of $893.8 million in FY 2008 to $729.1 million in FY 2011.  He noted that while enrollment growth has declined in most jurisdictions, the need to fund renovation and replacement projects has not.  He maintained that while substantial progress has been made by State and county governments to correct the school facility deficiencies identified in the final report of the Task Force to Study Public School Facilities, there is still a large gap between available funding and needs that still must be addressed.

Instead, Dr. Lever attributed the decline in requests to:  (1) the impact of the economic downturn on the availability of local funds; and (2) continuing low construction costs.  He noted that counties, especially smaller and less wealthy  jurisdictions, have deferred several major projects that were approved for planning in FY 2009 or earlier due to fiscal constraints.  He also explained that construction costs continue to remain low, with many contractors who do not normally handle work in Maryland submitting bids.  Some bids are 25-30% below the budgets that were established in CY 2008 or earlier.  He did caution, however, that material prices may increase between 6 and 8% by the end of CY 2010.

Dr. Lever also discussed the Aging Schools Program, which provides counties with money from the State operating funds to address repairs and renovations that cannot always be funded through general obligation bonds in the capital budget.  He noted that for FY 2012, the Department of Budget and Management plans on allocating $6.1 million in operating funds, leaving the remainder of the mandated funding level to be filled with $4.2 million in bond proceeds.  While expressing a preference for operating funds, Dr. Lever noted that there were sufficient projects to make use of the bond money.

Finally, Dr. Lever mentioned the Qualified Zone Academy Bond (QZAB) Program.  QZABs provide funding to address small to mid-sized renovation and repair projects in schools that have more than a 35% Free and Reduced Price Meal Program population.  A private entity (non-government) must provide a match equal to 10% of the construction cost, although the contribution may be in the form of cash, equipment, or in-kind donations of time and effort.  Under the American Reinvestment and Recovery Tax Act, Maryland received a 2009 QZAB authorization of  $15.9 million.  In order to sell these State tax-credit bonds, the General Assembly must approve the sale in the 2011 Session.

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