New Bill Bolsters Incentives for Local Funding and Public-Private Partnerships in Education

A newly introduced bill – HB 1079/SB 627 sponsored by Delegates Shoemaker, Afzali, Buckel, Ghrist, Hornberger, Long, McKay, Metzgar, Reilly, Simonaire, and Szeliga, and Senators Eckardt, Ready, and Reilly – presents several fixes to the local education funding system that would promote county government investment in new education programs and technologies, and public-private partnerships in school construction.

The bill has three main elements:

  • Clarifying the process for county government investment in one-time costs, such as the start-up of new educational programs, new computer labs, new technologies, and new libraries
  • Ensuring that business investment in school construction provided the same treatment as traditional school construction under education funding laws
  • Repealing mandated increases in local education funding that have no relation to school operating or facility costs

Current laws intend to provide opportunities for special one-time county government investments in education through an exclusion to the maintenance of effort law. Implementation of the exclusion, however, and recent reports on costs that have been denied by the Maryland State Department of Education reveal impediments to accessing the nonrecurring cost designation. Under maintenance of effort laws, counties must provide the same amount of education funding per pupil each year to local school boards. Only when a cost is approved as nonrecurring by the State Board of Education may it be excluded from the annual maintenance of effort calculation – without this designation, even if an expense is one-time, it will be added in to the education budget in all future years.  This bill clarifies types of costs that are excluded from maintenance of effort and the process for nonrecurring cost applications.

A platform for private-public partnerships in public school construction is outlined in the Maryland Code’s provisions for alternative financing. The law provides that in order to finance, speed delivery, transfer risks, or otherwise enhance the delivery of public school construction, a county may use alternative financing methods, including public-private partnerships. Local education funding laws, however, fail to clarify that alternative financing qualifies for the same fiscal treatment as traditional school construction, creating a chilling effect these novel uses for private investment in our schools.  This bill provides that county funding for public-private partnerships will be excluded from the maintenance of effort calculation after the lease of a school facility under the partnership has ended.

The “escalator clause” of the maintenance of effort law provides that in some cases, a county must increase its education budget based on a factor of county education funding and local wealth. Under current law, Baltimore City and Worcester County could be required to increase their minimum payments towards operating expenses of their public school systems next year, even absent additional costs. According to the Department of Legislative Services, Baltimore City has a 25.2% poverty rate and Worcester County has a 10% poverty rate, but the wealth calculation used by the State for the escalator clause emphasizes property values, which can be high in urban areas like Baltimore and Ocean City.  These jurisdictions also have additional pressing needs, including addressing the public safety concerns of the heroin epidemic and aging transportation infrastructure, which require large portions of the local budget.  This bill repeals the maintenance of effort escalator.

The House Ways & Means Committee will hold a hearing on HB 1079 on Thursday, March 5. The Senate Budget and Taxation Committee will hold a hearing on SB 627 on Tuesday, March 10.

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