How to privatize public school buildings
In response to a previous post about the socialist position on school bonds, reader Jennifer Kates made an interesting comment. I've been critiquing municipal bonds pretty heavily, but she thought leftists should look at the privatization of school construction, buildings, and maintenance too. Bonds are only one practice on the spectrum of threats to public school buildings.
I agree: we should be aware of these kinds of practices too and get ready to fight against them. Taking stock of what's happening with privatizing school buildings can prepare us for things to come in Philadelphia and elsewhere.
Black Democratic leaders supporting Trump policy
In 2017, a funny little article came out in Politico comparing two unlikely things: the Trump Organization's purchase of the Old Postal Service building in Washington, DC and the state of US public school buildings. (Remember when Trump opened a hotel in Washington and got elected President? Good times. He just sold it, btw!) The common thread here is financing updates to old public buildings. The article explains that, thanks to a Reagan era policy, Trump got big tax credits for taking over a historic public building and redoing it for a private purpose.
You could do the same thing with public school buildings, the authors point out, but there's a clause in the policy that says you need to change how you're using the building to get the tax break. It's called the prior-use clause. Trump changed a post office building into a hotel, using it for something new. So he got a tax break. But if school buildings are going to keep being school buildings, then school districts doing projects on them can't get that break. If the clause wasn't there, school districts could contract with private companies to take over their school building construction and maintenance through public-private partnerships (what are nauseatingly called P3). Another way to do this would be private activity bonds (PABs), where a local government takes out a loan but all the proceeds go to a private company.
Republicans campaigned to get rid of that prior use-clause in 2016 and Trump talked it up when he tried and failed to do infrastructure legislation. But we have to imagine that Hillary Clinton would've proposed the same thing. She probably did. After all, five years later, we see Democratic representative Dwight Evans, along with Philadelphia Superintendent William Hite, supporting the same federal tax credit program as part of the Build Back Better agenda. They cheered it on at a press conference last month. It was covered in the Inquirer as being a solution to Philly's crumbling school buildings.
Evans even wrote explicitly about the Trump Hotel in his press release when he came out supporting the program. At first glance, it looks like he's creatively appropriating a rightwing policy for leftwing purposes. But it's actually just a nominally leftwing politician passing a rightwing agenda item. Centrists gonna centrist.
David Dayen reminded us awhile back that getting rid of the prior use-clause and expanding the tax credit program for historic infrastructure was a Trump policy, a "stalking horse for privatization." Dayen calls it asset recycling. I'm sure you'll be shocked to hear that this Republican stalking horse ultimately made it into the 'historic' bipartisan infrastructure deal that Democrat Biden is signing now in the form of private activity bonds.
These are the kinds of things we have to keep in mind. While they're just talking about it in Philly, there are school districts around in the country that have actually been privatizing their school buildings in various forms already.
Beware of 'alternative construction finance'
In Prince George's County, Maryland the school board recently voted to approve a $900 million project to build six new school buildings. There was a taxpayer gasp at the news. People concerned at the cost of this project. But the CEO of the school district calmed them with soothing tones. There's no new money being spent on this project, she said. We won't need to raise taxes, she said. Some money, about $211 million, is coming out of a fund already dedicated to school buildings.
So how can the district afford to do this without dipping into operating costs? The stalking horse of asset recycling.
The district enters into a public-private partnership with construction companies who win the bids for these schools. The companies will own the school buildings for 30 years after their completion. The school district will pay them rent during that time. In exchange for ownership of the buildings, the private companies don't ask for the full amount of capital up front for the projects and get to charge the district whatever they want for maintenance and other costs along the way. It's like payday lending but for school buildings. In the article, the district leadership calls it Alternative Construction Finance.
With the new infrastructure legislation, there's now federal backing for this kind of move. I wonder if districts will follow Prince George's lead?
Other stalking horses
There are other ways to privatize public school buildings. One of them is to force school districts to sell vacant or under-utilized buildings to charter operators or private schools. The Wisconsin state government, run by feral Republicans, tried to do this in 2015-2016. Their methods were somewhat different. Rather than permit districts to enter into partnerships with private companies, who would then own the buildings, or letting districts issue bonds whose proceeds would go to private companies, they passed budget legislation to force a district--Milwaukee--to sell its buildings.
In another fun application of high-stakes testing, the law created an independent board of state officials to make key decisions about 'underperforming' schools, including what happens to their buildings. It was called the Opportunity Schools and Partnership Program, specifically the Surplus Property Law. But the district wasn't exactly motivated to do so, since opening more charter schools would weaken its own revenues. Conservatives huffed and puffed about it (and they still do) but their top-down, use of force hasn't really worked.
It did get the district to do something about the buildings. It has a website where it lists buildings for sale for other uses, for sale to education operators, and sales pending. (Hat tip to Eleni Schirmer for these sources.)
Epic fail
I've been focusing on school buildings finance in this newsletter due to the long-time struggle of Philadelphia's diverse working class over toxic school buildings. The city's school buildings need $5 billion of work. We may find out soon that that number has gone up and not down since 2017 when a new report comes out. The number will trigger fresh debate about what to do.
School buildings are fixed infrastructure serving a public good that's locally funded. In a society where neoliberal austerity has been the dominant policy framework for more than forty years, where schools are funded through a racist regime of local property taxes and state taxes, and school buildings are financed through state and local streams without federal backup--this is a perfect storm. And not just for Philly. The whole country's school buildings are in bad shape. It's a massive failure.
I understand this failure as a failure of capitalism. School districts have to take out big loans, most of the time from private credit markets. These loans are costly, requiring high fees (which I'm writing about now) and perversely punitive interest rates, but it's their only option for getting enough capital for their buildings. In places like Pennsylvania, there are no state reimbursement programs to pay districts back. So districts with old buildings, low property value, and bad credit are left out in the cold. Which can be literally true when school building heating systems break down in the winter.
Failing to fund school building infrastructure is a good example of what marxists call a contradiction in capitalism. The system can't finance the buildings that train people to exist in the system. You'd think that such a systemic failure would spell trouble for the private property approach to public school buildings. But capitalism can feed on its own failures.
To use some technical terms, if we don't fight on a conjunctural terrain and turn the tide against a dominant tendency, that tendency can flow and even get stronger. School buildings are a great example. Got problems financing your public school buildings? Well, says capital, trying privatizing the process more. This is exactly what Democratic and Republican lawmakers are doing in Maryland, Wisconsin, in the recent bipartisan infrastructure bill, and which Philadelphia leaders support too.