Ideas. Action. Results.

Will Congress Include Schools as Infrastructure?

By Jake Varn,

Friday, December 21, 2018

States and school districts collectively spend about $99 billion each year on operations, maintenance, and construction of school facilities. Still, of the nearly 100,000 public K-12 schools in the United States, more than one in four are in poor or unsatisfactory condition. In order to modernize every school in America, states and local governments would need to annually spend nearly 50 percent more.  

As with other types of infrastructure, finding additional funding for school facilities is inherently challenging. But the dire condition of America’s schools has repeatedly pushed the issue into the national spotlight. Going into 2019, some in Congress are rethinking the federal government’s role in funding needed upgrades for school facilities as a part of a broader initiative to invest more in infrastructure.  

Effects of Failing School Infrastructure 

Failing school infrastructure is a pervasive problem across the United States and one that has serious impacts on public health and educational outcomes. One-sixth of the U.S. population passes through a public school each weekday, including 50.7 million students. When a critical function of a school facility fails or falls into disrepair, it endangers students and staff. Several high-profile failures have occurred in just the past year, from inadequate heating in Baltimore to elevated levels of lead in the drinking water at thousands of schools (including systemic problems discovered in Detroit, San Francisco, and Indiana). In 2017, 13 million students attended schools where testing revealed elevated lead levels, though only 43 percent of schools were aware of having recently tested their drinking water. 

In addition to the health risks that lead and asbestos exposure pose to students and school employees, school facility failures also have a detrimental effect on educational outcomes. Students that attend schools with better air quality, that are kept at proper temperatures, and are equipped with flexible and stimulating learning environments achieve higher grades than their peers. Importantly, low-income communities and communities of color have been, and continue to be, disproportionately affected by poor school conditions. 

Current Funding Doesn’t Make the Grade 

Traditionally, state and local governments have been responsible for school infrastructure. From 1994 to 2013, $1.26 trillion was spent nationwide on school construction—81 percent from local sources, 19 percent from state programs, and 0.2 percent from federal programs.  

Property taxes are the most common local revenue source. In 2014, local property taxes accounted for 36 percent of the total revenue for public schools. However, relying on property taxes has an underlying flaw: the quality of a school can affect property values, and vice versa. A 2013 study by Redfin found that homebuyers will pay an average of $50 more per square foot for a house in a top-ranked school’s neighborhood, which results in more tax revenue for that school. This self-perpetuating dynamic between school conditions and property value fuels inequality and results in disparate educational outcomes.  

Nationally, districts with high poverty rates spend 16 percent less per student than wealthier districts. This disparity is not new. Since the early 1970s, nearly every state has been subjected to at least one lawsuit over the equity of school funding, to varying degrees of success. Some states have responded by establishing statewide grant programs. However, 12 states currently do not provide any state-level funding for school facilities, instead relying predominately on local sources like property taxes.  

At current funding levels, state and local governments would need to spend an estimated $46 billion more to bring every school into a state of good repair. To address these massive funding shortfalls, policymakers at all levels of government are looking for new options to repair and modernize America’s schools.  

Source: 21st Century School Fund, “State of Our Schools” report, 2016. 

The Federal Government  

Historically, the federal government has provided limited and targeted funding for school infrastructure, typically through low-interest loans or direct grants. Currently, FEMA is—unintentionally—the largest federal contributor of funding for public K-12 schools through disaster recovery funds. Outside of natural disaster spending, the U.S. Department of Education is responsible for the largest share of federal support for school facilities. Other agencies, listed in the table below, have made varying degrees of resources available for school infrastructure within the past decade.  

Examples of Federal School Infrastructure Programs

Federal Department Funding Programs Brief Description
EducationState Charter Schools Facilities Incentive Grants; Credit Enhancement for Charter School Facilities; Every Student Succeeds Act; Alaska Native Educational Equity, Support, and Assistance Act Funding for charter schools, schools in rural districts and local education agencies, and schools with historically underrepresented populations
Agriculture USDA Community Facilities Loans and Grants program Can be used for the construction and improvement of school facilities in rural areas, including broadband loans and grants
Commerce Public Works and Economic Development Facilities Program Competitive grants for construction or rehabilitation of schools for economic development outcomes
Energy State Energy Program Grants eligible for schools to adopt renewable energy and energy efficient technologies
Health and Human Services Head Start Funding for construction and renovation of early childhood facilities
Homeland Security Public Assistance Grant Program; Hazard Mitigation Grant Program Can help school districts recover from natural disasters and implement long-term hazard mitigation measures
Housing and Urban Development Community Development Block Grant Program Can be used for the construction and rehabilitation of schools in low- and moderate-income neighborhoods
Treasury Public Purpose Tax Exempt Bonds; Tax Credit Bonds; Private Activity Bonds; Qualified Zone Academy Bonds; Qualified School Construction Bond program Tax subsidies to support low-cost financing for school construction

Generally, federal support has flowed to school facilities as part of a broader initiative or to address a very specific inequity or education-related priority. For example, the Environmental Protection Agency recently launched a $20 million grant program for schools to test their water for lead. Notably, the recent America’s Water Infrastructure Act passed by Congress also authorized (but did not appropriate) $15 million over three years for a new grant program to replace lead-tested drinking water fountains in schools and increased the grants available for lead testing to $50 million over two years.  

Grants are not always the only or even the most common type of federal support for school facilities. As shown in the table above, school infrastructure has also been eligible for federally-backed financing programs. The Qualified Zone Academy Bonds that were created in 1997 support low-interest loans for facility rehabilitations and repairs to schools located in “empowerment zones,” communities where at least 35 percent of students were eligible for the free or reduced lunch program. These bonds were issued from 1998 to 2017 and were capped at $400 million annually, though the cap was increased in 2009 and 2010 during the recession. The recently enacted Opportunity Zones tax incentive program could potentially impact school infrastructure in the designated communities, but the exact details of the program have yet to be fully laid out. 

Potential for P3s 

A select set of school districts have explored using public-private partnerships (P3s) for constructing and renovating school facilities. P3s have a broad definition; they can be used as a procurement tool, a financing tool, or both. Long-term P3s can even include transferring the operation and maintenance responsibilities (and risks) to a private partner, with performance incentives built into the contracts. P3s also allow for several similar projects to be bundled together into a single procurement, potentially creating additional savings by leveraging economies of scale.  

Recent P3 school projects in the United States have been able to reduce costs and project delivery times: 

  • In 2010, the  Yonkers Public Schools District in New York financed a $1.7 billion P3 project to build and refurbish 40 schools over a 15-year period using a design-build-finance-maintain model. This approach shifted the risk associated with construction and maintenance to the private sector partner, while public school authorities retained control and ownership of the school buildings.  
  • Since 2002, dozens of schools have been constructed or renovated as P3s in Virginia under the state’s Public-Private Education Facilities and Infrastructure Act. Recently, the City of Norfolk began a $133 million P3 project to build five new elementary schools in a 6-year period, or one-third of the city’s timeline under traditional procurement methods. 
  • Faced with overcrowding challenges while constrained by tight financial and staffing capacities, the Natomas Unified School District in Sacramento, California, used a P3 lease-leaseback model to complete the construction of a new high school, one month ahead of schedule and $2 million under budget.    

Yet P3s are not always an option. In fact, only 39 states have laws in place permitting P3 agreements. New Jersey recently joined the list, passing a bill in August that authorizes school districts or county vocational schools to enter into P3s for any infrastructure projects. But most states limit P3s to the transportation sector. Even for states with P3-enabling laws, many local agencies lack the capacity or technical expertise to pursue a P3 project. As BPC has previously recommended, the federal government could support additional P3 development by offering new and enhanced financing tools and by establishing programs that offer technical expertise to local officials. 

Political Landscape 

Despite the federal government’s limited in role in funding school construction and rehabilitation, a variety of plans and talking points have emerged in the past year that target public schools as a part of an infrastructure effort: 

  • At the beginning of 2018, Sens. Lisa Murkowski (R-AK) and Jack Reed (D-RI) sent a letter (along with 23 other Senate Democrats) to President Trump, calling the nation’s public schools “critical infrastructure” and urging a federal partnership with states to support “innovative financing mechanisms” as a part of a national infrastructure plan.  
  • While the White House’s infrastructure plan did not mention schools as one of the potential targets for the proposed $200 billion in federal funding, a counterproposal from Senate Democrats called for $40 billion for the maintenance and construction of public school facilities. 
  • Ahead of the midterm elections, the House Democratic Policy and Communications Committee released a proposal to invest in schools as a part of an infrastructure effort, promising to “leverage federal, state and local resources to invest $107 billion in critical physical and digital infrastructure needs in schools.” 
  • Over the past year, school infrastructure has also arisen in the context of gun safety. Education Secretary Betsy DeVos, along with over a dozen Senate Republicans, has promoted using federal programs to improve “school safety infrastructure.”  

Based on these preliminary plans, and with the recently elected Democratic majority in the House, schools funding will almost certainly be raised in any debate over new federal infrastructure investments, though the issue may prove to be politically divisive. Given the limited scope of existing federal support for school facilities, the federal government’s fiscal situation, and the diverse landscape of school construction funding and financing programs, there are a host of policy questions to weigh: If there were a federal program, would money flow through a formula to the states or directly to school districts? Would the program be based on grants or loans? How would needs be prioritized? How would a school with a leaking roof compare to one with a broken furnace? 

If there is to be an infrastructure package that includes school facilities, bipartisan support will be a prerequisite to pass the House, the Senate, and be signed into law. At the moment, there does not appear to be a clear consensus on even the premise that school facilities should receive federal support, let alone how it would be structured and how it would be paid for.  

KEYWORDS: P3S