School Infrastructure Funding in Pennsylvania
The MLF strategy calls for better terms on Fed bond purchases to fund school infrastructure improvement. One question in that strategy when it comes to Pennsylvania is who—which entity—should apply for a bond issuance.
I’ve mentioned this issue before. It’s confusing. At first, it seemed to me that school districts themselves should apply. They’re the ones that create their budgets and fund and finance those budgets. But school districts aren’t eligible issuers to the MLF since they don’t issue revenue bonds.
But funding for school infrastructure projects have a unique financing structure in Pennsylvania. Districts can actually get reimbursed by the state for infrastructure projects through a set of forms called the School Construction and Facilities Workbook (known as PlanCon for short).
The Division of School Facilities in the commonwealth’s Department of Education reviews these forms and approves reimbursement. Should the DOE apply for the LF loans? The Division of School Facilities?
History
PlanCon’s process and history are actually way more complicated, according to a new report by the amazing Research for Action group. Looking at its history and current practice is important not just for people in Pennsylvania thinking about funding school infrastructure, but is one example of idiosyncratic conduits of school funding across states.
State government had been helping fund school infrastructure since the 1950s. In 1973, PA passed Act 34 which changed the process for securing the funding. The law started PlanCon, an 11-step process for getting reimbursements on school district construction.
If an elementary school needs a new gym, the district would submit the project and potentially receive partial state funding for the gym.
Since 1979 the state has spent $8.1 billion on school maintenance and new construction reimbursements through the program. The money for these projects came out of the General Fund, the big reservoir of tax revenues for the state.
But everything went to hell in the wake of the 2008 financial crisis. Conservative Gov. Tom Corbett took a knife to government spending on education. He put a moratorium on any new applications to PlanCon in 2013. There were still a lot of programs in the pipeline, and they kept getting reimbursed, but no new applications were allowed.
Corbett’s cuts were unpopular and he lost his re-election bid on the issue, specifically education funding. Tom Wolf took over, opening up PlanCon for new applications. But something happened (still looking for the story here) and Wolf put a new moratorium on PlanCon projects in 2016.
This wasn’t any old moratorium. Wolf reconfigured the program’s financing structure.
In some ways, this reconfiguration was worse than what Corbett did. At least the General Fund is a clearer cut appropriation. From what I can tell the state kept appropriating funds for reimbursement through 2016. But then it completely stopped.
That sharp decline is due to Wolf’s new plan (which actually looks like a proposal out of the Appropriations Committee). Rather than the General Fund, reimbursements would be financed through bonds issued by the Commonwealth Financing Authority (a very interesting government body I hadn’t heard of before, going to do some research on them).
So the state would go into debt for these projects rather than just fund them. The 2016 plan called for $2.5 billion in bond issuance, but crucially only for projects that had been waiting for reimbursement.
Another thing that happened in 2016 is the creation of an advisory committee to figure out what to do with PlanCon moving forward.
The Public School Construction and Reconstruction Advisory committee took two years to do its work. In 2018 it issued a final report with lots of recommendations, many of which were adopted last year as part of Act 70. One of those recommendations was to streamline the 11-step process to a 4-step process. Another was to create another program: the Maintenance Project Grant Program.
MPGP provides up to $1 million reimbursements for “roof repairs and replacement, heating, ventilation and air conditioning equipment, plumbing systems, health and safety upgrades and emergencies, as well as other maintenance issues.” Excitingly, Gov. Wolf was planning on setting aside $1 billion for lead and asbestos remediation at the outset of 2020.
But then COVID hit and that initiative evaporated as the state government went into crisis mode. The moratorium on PlanCon funding was extended. Like everything else, the future is uncertain.
That brings us to today. RFA’s recommendations are to end the moratorium, fund the program through the General Fund rather than CFA’s bond issuance.
Eligible?
My original question was whether PlanCon or something related to PlanCon could be an eligible bond issuer for the MLF. I think the answer is probably not. PlanCon is a program that the state used to figure out how to disburse General Fund money to school infrastructure projects across the state. The Appropriations Committee oversees that process.
But the Appropriations Committee is a committee of the government, so it wouldn’t apply to the MLF. However, I think in Gov. Wolf’s reconfiguration there may be a lead to follow: the CFA.
The Commonwealth Financing Authority is just the kind of entity that would apply to the MLF. It issues bonds. It does at the state-level. It appears to issue many kinds of bonds, including revenue bonds.
So something to look into. But in general, it’s helpful to know about these obscure parts of the state government apparatus to know exactly how the funds would flow when trying to get green school infrastructure projects financed at low-cost through the Fed.