Meet Virginia
Last week, a reporter from a National Public Radio station in Richmond, Virginia emailed me to talk about school buildings. She's writing a story about how the state's school buildings. I knew a little about Virginia's school buildings, but I didn't have a fine-grained sense of things there. So I tried to get familiar and came up with a whole profile of the state's school building finance situation: the problem, why it's happening, what're policies being pursued, and what could be done. What I found out makes for a good case study of what Jeff Vincent, in a conversation with me recently, calls "state regimes" of facilities finance. So here's what I learned about Virginia.
Flood in the computer room
There's a coalition of rural schools in the state that recently made a big push for school facilities funding. They did this by organizing a "Crumbling Schools Tour" where officials visited rural districts in every region to check out the school buildings. They found some scary stuff. For example, the computer room at King and Queen Elementary in Mattaponi floods ankle-deep with water when rain gets heavy.
In Page County, only the high schools have hot water in their bathrooms. Luray Elementary school doesn't have air condition in its gym, doesn't have enough electrical outlets, and apparently "It's not uncommon that a teacher comes in to make copies and the room next door loses power," according to the assistant principal. To put a finer point on it: Luray Elementary still has ceiling and floor tiles from when it was a segregated school in the 1950s. It was built in 1961 as a school for only white kids.
There are fearful financial stories too. The city of Charlottesville needs to rebuild Burton Middle School, which was also built in the early 1960s. But it's going to cost $70 million and the city doesn't know exactly where that money will come from. The town of Isle of Wight needs a new elementary school, which was projected to cost about $27 million a few years ago. That same proposal will cost them $40 million now. How to close the $13 million gap?
These stories are examples of the overall status of Virginia's school buildings, half of which are over 50 years old (55% of their elementary schools are more than 50 years old!). According to the American Society of Civil Engineers, the state has a $978 million expenditure gap. That means they miss about a billion dollars of funding each year to keep up with their buildings. Meanwhile, the state government estimates that it would take $25 billion to replace everything that needs replacing. Not great. How does this happen?
A local affair means its unfair
We bought our house in Philadelphia about five years ago. Everyone told us we have to keep up with the house, meaning we have to fix things as they come up and maintain the building so we can live in it. Luckily, we have good salaries, little to no debt, and can save money for big projects when they come up and also fix stuff as it happens. Like school districts around the country, Virginia isn't so lucky. School districts (which they call divisions) carry about $7.2 billion of outstanding debt for their facilities costs. On average, local governments devote 9.2% of their operating budgets to debt service, which ideally should be zero but is still, practically speaking, about 1.2% too much.
What I mean is that Virginia's school districts have to shoulder the burden of covering the costs of their school construction. Which is difficult, since school districts aren't allowed to levy taxes like some other states do. They rely on local governments--counties and cities mostly--to do the necessary lending. Those local governments need to tax into their peoples' holdings to pony up the money, which means that poorer places--rural and urban--won't have enough for their school buildings.
That's because of racial capitalism, of course. But the nitty-gritty of it (beyond the reliance on private credit markets) comes down to the state government not being super helpful. It contributes less than 24% to school facilities according to the 21st Century School Fund, who have a neat map to show you contributions from around the country.
But it gets worse. Not only does the state not contribute that much, it's decreased this support as Virginia's student population has increased since the financial crisis. According to a very helpful report produced by a commission specifically looking at school construction in VA, beginning in FY99, $55.0M per year was appropriated for grants to divisions for public school facilities. That reduced to $27.5M per year between FY03-FY09. It ended completely after the financial crisis in 2009. Then, between 2010-2020, the state added 40 million new full time students (or about 5% of the population). So as schools increased their need for newer and better buildings, state funding decreased across the board.
Oh and get this: there is some state grant money for facilities in the Basic Aid per pupil formula. But it's only $700,000! Total! That's nothing.
That's how you get a situation where there are a lot of local governments in high fiscal distress with a lower ability to pay for things like school buildings. The graph below shows a troubling bunch of districts that have low composite indices (a government calculation of how much they should contribute to per pupil expenditure) and their fiscal stress. Basically, there are a lot of districts who only contribute a small amount to operating expenditures and can't afford to cover facilities costs.
Up with the literary fund!
What's weird in this situation is that Virginia actually has come cool public-financial policies at the state level when it comes to financing school buildings. They certainly have more than Pennsylvania, where I live. We can see these policies when we look at where districts get their loans from. Unfortunately, 53% have to go Wall Street for their loans (which is probably why there's about $480 million of debt service costs across Virginia school districts, gross!). But the fact that this number is below 100% means that there are other places districts can go for loans.
The biggest is the Virginia Public School Authority, which houses a loan pooling program with an interest rate subsidy. This means school district leaders can take out a loan from the VPSA at lower rates than they'd get by going directly to Wall Street since the authority's credit rating is high. In addition to lower interest rates, I have to imagine there are lower fees also, since those fees vary widely depending on school district size. So that's cool! Even cooler is that 48.5% of districts use the VPSA's pooling bank.
But there are other programs too, including the quirkily named Literary Fund which is "a permanent and perpetual school fund derived primarily from criminal fines, fees, and forfeitures, unclaimed and escheated property, and repayments of prior loans for school construction." I don't quite understand the practical difference between the VPSA and the Literary Fund when it comes to facilities finance, since the VPSA's interest rate subsidy comes from the Literary Fund. But apparently 10.7% of districts use this program, which prioritizes projects that are capped at $7.5 million and has interest rates tied to the district's composite fund.
So when it comes to things that Virginia could do, I'd recommend leaning into this apparatus they have to blunt the force of Wall Street. Ideally, the state government would increase its grant money for school buildings on a regular basis--which, it turns out, it's actually doing with a new $1.25 billion program for 2023. So up with the Literary Fund (except for those carceral fees, let's get rid of those)! In addition to this one-time spending, the amount of which only covers their yearly expenditure gap, I'd recommend
Trying to get the Basic Aid formula amount for facilities up at least past 1 million, c'mon folks;
Aiming to have the VPSA lending to two-thirds of divisions rather than Wall Street, which will create a savings for local taxpayers;
Increase cap on project cost from literary fund to 10m, decouple interest rate from composite index, make it no-cost loan program;
Oh, and advocate for a National Investment Authority (see below).
Of course, ideally ideally, I'd like Virginia's workers to own the means of production and for their worker-owned firms' leadership councils to appropriate funds directly from their revenues for schooling, but that's not going to happen soon. But it's entities like the VPSA and Literary Fund that we'll want to strengthen, build out, and build up to get a more just (and socialist) policy for school buildings.
Where's the federal government?
While I was reading about Virginia, I came across a pretty shocking number. According to that report from 2021, "in 1938, the federal government funded 45% of local construction costs. In subsequent decades, federal funding for capital costs significantly decreased to less than 1% of local costs." It shouldn't be shocking of course, since the Works Progress Administration financed the construction and maintenance of thousands of schools all over the country. Coming out of the Great Depression, part of the New Deal was mobilizing federal government spending to build back the US economy precisely through things like fixing up and building school buildings.
That's the kind of energy Virginia needs, and so does the rest of the country. If there were a National Investment Authority backing up a Green New Deal for Schools--modeled after the Reconstruction Finance Authority from the New Deal--then Page County wouldn't have to always be worried about what to fix in their schools while their elementary students don't have hot water in their bathrooms. Actually, one of the facilities guys in Page County, Timmy Williams--the supervisor of facilities and maintenance-- put this anxiety really well. “When do you say when?" he said. "You can keep patching, but there is a breaking point where it’s no longer feasible.”
School districts across the country have to worry about what they're going to fix and what they're going to keep living with in their old school buildings. They have to worry about this stuff, while taking on billions in debt, giving billions to Wall Street in debt service fees, and have to spend hours and hours trying to navigate the municipal bond market--all while their kids' computer rooms get flooded when it rains. If we had federal programs for maintaining the patient capital of school buildings, we wouldn't have this collective action problem.