Institute Warns of Debt From School Construction “Supercharging”

As legislative leaders tout plans to commit long term bonds to fast track billions in school construction projects, some worry about affordability.

After failure in the 2019 session due to fiscal concerns in the Senate, legislative leadership announced the 2020 return of the Build to Learn Act, a $2.2 billion school construction and renovation bill. The Maryland Stadium Authority would issue bonds to cover the school construction spending and would be paid back over 20 years using Maryland’s casino revenues. While there is consensus that Maryland’s schools are aging and deserve attention, some are concerned that this long-term debt is not a sustainable approach for handling it.

From The Maryland Public Policy Institute’s blog:

For routine capital projects, fiscal policy expert Chris Edwards of the Cato Institute argues that lawmakers should “plan ahead” and “allocate a portion of ongoing tax revenues” for them. In Maryland’s case, this may entail having to cut budgets for other services. It is unfair to shift the burden of financing school maintenance to future taxpayers just because it is difficult to come up with the money from annual budgets.

Second, the state taxpayers should at least have a say when the state makes an immense borrowing decision, as they and their children are ultimately responsible for repaying the debts in the future. In Maryland, only Baltimore City, Baltimore County, and Prince George’s County are required by local laws to place bond questions on the ballot.

The author of the quote above, Carol Park, continues to delve into why Maryland should adopt provisions that limit the state’s ability to take on new debt, referring to “studies showing that states requiring voter reference to issue new debt tend to take on less debt than states that do not impose such requirements.”

More from Park:

Generally, people misinterpret Maryland’s Triple-A bond rating as a sign that the state has very little long-term debt. This notion must be corrected: the rating only means that investors have high confidence the state will repay its debts given Maryland’s willingness to tax its citizens. The state already has an enormous amount of long-term debt and unfunded liability to its retirees, and should be extremely wary of adding more.

Can’t get enough talk of school construction? Join us at #MACoCon on Wednesday, December 4 for a round table discussion of what the future holds for school construction funding.

Details follow:

  • Change Order: Is a Shift in School Construction Funding on the Way?
    • Description: The 2020 General Assembly Session promises to be a year of change for school construction. Major legislation, first introduced last year, is likely to return. At the same time, a statewide workgroup will recommend changes to school construction funding. Join this session for an update from leaders and experts in school construction on a topic that touches the core of constituent interests and county budgets across Maryland.
    • Speakers:
      • The Honorable Jan Gardner, County Executive, Frederick County
      • Perry Willis, Executive Director of Support Services, Cecil County Public Schools
      • Shawn Matlock, Director of Capital Programs, Prince George’s County Public Schools
    • Date/Time: Wednesday, December 4, 2019; 10:30 am – 11:30 am

Learn more about MACo’s Winter Conference: