Office of Public School Construction (OPSC) Implementation Committee Meets – Discusses Funding Priority

By Dennis L. Dunston - February 20, 2009

Prior to December 17, 2008 few people had heard of the Pooled Money Investment Board (PMIB). The PMIB is made up of the State Treasurer, the State Controller and the Director of Finance and controls the disbursements from the Pooled Money Investment Fund. The PMIF is like the State’s checkbook; deposits are made from the sale of bonds and held until needed by the State programs. One of the programs effected by this is the School Facilities Program (SFP), used to build and modernize school facilities across the state.

As reported earlier, on December 17, the PMIB announced a freeze on all disbursements from the fund. In November 2006, the voters approved Proposition 1D which authorized the sale or $7.329 billion in bonds for K-12 school facilities construction. There is currently about $3.8 billion of that authorization left. However, the State has been unable to sell bonds since last June leading to the freeze in funding.

At the January 28 meeting of the State Allocation Board (SAB), a representative from the State Treasurer’s office reported on the status of bond sales and PMIF disbursements. At that time he indicated that, when the budget crisis was resolved and a plan to fund the $41 billion deficit was approved, the bond market would improve and money would start to flow again.

However, at the PMIB meeting on Wednesday, the State Treasurer indicated that it may take a “year” before the State would be able to sell enough bonds to cover the deficit in the PMIF and restore the funding for school projects.

The PMIB has the authority to sell the number and the types of bonds that they feel is in the best interest of the State. They could choose to sell Prop 1D bonds first and get school construction restarted, adding jobs that are associated with that construction. Or they could choose to sell bonds for other infrastructure projects that are needed throughout the State.

Currently, SFP projects that are ready for approval and funding are on hold. Projects that were apportioned and had not received a fund release by December 17 remain unfunded. At the Implementation Committee yesterday the primary topic of discussion was recommending priorities for funding to the SAB while funding is unavailable or limited. The discussion was difficult due to the lack of information on what will happen with the bond sales.

At this week’s meeting, the Committee recommended several priorities for funding: Projects which have been apportioned and have started construction should have high priority. Financial Hardship districts with no local funding should be funded first. Projects in districts with local funding, that have the ability to temporarily fund their projects, should have a lower priority.

In the end, the Committee decided that projects should be funded in order of approval, however, exceptions should be made for the cases listed above.

Despite the Committee’s decisions, there are still a number of major issues to be resolved:

Does the SAB have authority in law to set priorities at this point? The Board’s legal counsel is looking into this;
If a district obtains interim financing to continue construction projects, is the interest and loan origination cost refunded by the State? This has been true in the past, however, the DOF has asked for an Attorney General’s opinion;
If a project has been started and could not continue due to the lack of funding, will the restart costs be paid by the State?
How long will it be before enough bonds can be sold to resume full or partial funding of projects?

The OPSC staff will review the comments made at the Implementation Committee meeting and prepare a report to be presented at next Wednesday’s meeting of the SAB.

Editor's Note: Dennis L. Dunston is the Director of District Support Services with the educational consulting firm Total School Solutions.