• Allan J. Mucerino


Updated: Mar 20, 2018

A recent study of school facility spending, Investing in schools: capital spending, facility conditions, and student achievement, published in the Journal of Public Economics in 2016, provided empirical evidence that spending on school facilities generates little if any improvements in student achievement, despite state and local governments spending more than $65 billion a year (among the largest educational investments in the U.S.).

Supported by a research grant to the University of Michigan by the Institute of Education Sciences, U.S. Department of Education, the authors (Paco Martorell from UC Davis; Kevin Stange from the University of Michigan; and Isaac McFarlin Jr. from the University of Florida) discovered that a dearth of evidence exists that studied the public investment in repairs, modernization, and construction of schools, despite the magnitude and ubiquity of the investments. How the money is spent, how it is allocated within and across districts, and its impact on student outcomes is surprisingly understudied.

The evidence that spending on school facilities generates little if any improvements in student achievement had little impact on California voters on November 8, 2016. Statewide voters passed an initiative to issue $9 billion in bonds to fund improvement and construction of school facilities. Backers, mostly deep-pocketed construction groups, raised more than $9 million to fight for its passage. The League of Women Voters of California supported Proposition 51 too. Vocation education advocates also supported Proposition 51 since it includes funds for Career Technical Education, a current movement in California, as evidenced by the recent passage of AB288. It enables local high schools and community colleges to upgrade vocational education programs and contribute to California’s economy.

Gov. Jerry Brown did not support the measure. He called it a “developers’ $9 billion bond” that would deepen school inequity. He said, “The funding process favors schools that apply for projects early, meaning affluent districts with more seasoned administrators could muscle out poorer ones. It’s a blunderbuss effort that promotes sprawl and squanders money that would be far better spent in low-income communities.” Among groups that argued against the initiative, the nonpartisan Legislative Analyst's Office (LAO) called for an overhaul of the school construction system, arguing that the system needs to be fixed rather than perpetuated, which is why voters should reject Proposition 51. Furthermore, they reported that as long as there is money in the state fund, developers of big new housing projects will not bear more than half the cost of building the schools necessary to serve those homes. That extra subsidy for new construction at a time when many existing schools are underutilized only encourages the sprawl that has been an environmental and resources drain on the state.

Meanwhile, local districts passed school-bond measures at as high a rate as ever (beyond the average historical rate of 80%), even in conservative counties such as Kern County. Not surprising, Los Angeles County school districts passed 93% of its 28 school construction bonds. Even in conservative Orange County, which did not approve Proposition 51 (51.3% voted no), 8 of 10 school construction measures passed. In San Diego County, which approved Proposition 51 (52.9% voted yes), two districts fell short of the required simple majority vote (Bonsall Unified School District and Cajon Valley Union), while Grossmont Union High School District, Solana Beach School District, Fallbrook Union High School District, National School District, and the Cardiff School District all passed their initiatives.

Now, back to the argument that spending on school facilities generates little if any improvements in student achievement. Californians apparently don’t care. Or, maybe they don't know or maybe don't expect capital improvements to improve student achievement. Maybe only an economist or policymaker cares. After all, California will likely issue the $9 billion in state bonds over a period of roughly five years and make principal and interest payments from the state's General Fund over a period of roughly 35 years. If the bonds were sold at an average interest rate of 5 percent, the total cost to pay off the bonds would be $17.6 billion ($9 billion in principal plus $8.6 billion in interest). The average payment per year would be about $500 million through taxes or reductions in services, or both. The nearly doubling of the principal is nothing compared to pre-AB182 non-callable Capital Appreciation Bonds. Known as CABs, these bonds had 40-year maturities and nominal interest-to-principal repayment ratios of 10-to-1 or even 20-to-1. And guess what? Post AB182 CABs are popular again.

Many school districts became embroiled in CAB controversy. Some became poster children for AB182. Capital Appreciation Bonds (also called Zero Coupon Bonds) became a central theme in my Optimizing Resource Allocation course. Significantly more difficult to understand than traditional bonds, buyers of CABs pay a price deeply discounted from the face value (par value) of the bond. But the buyer does not receive interest payments until the bond reaches maturity, at which point the buyer is paid the face value of the bond, which is the deeply-discounted price (the principal). Plus, all of the interest earned during the term to maturity.

The experience many districts had with CABs has led to many superintendent- or board-appointed committees, presumably to find remedies for the condition the district was left in as a result of issuing CABs. While better late than never, the question is, was there a committee tasked with determining whether an idea was a good idea to begin with? Without the benefit of a crystal ball, it is wise for district leaders to build decision-making capital by employing task forces to study problems and make recommendations, prior to a recommendation to the school board. Superintendents are vulnerable. As are school boards. This is not a better-safe-than-sorry approach. It's just smart.

As a Superintendent of Schools and a teacher of the next generation of education leaders, I have come to value committees and task forces to study issues and make recommendations to governance teams. I have employed task forces often, utilizing the 7/11 committee model, to work on a variety of projects in my districts. A strong and savvy leader is wise to create a culture where decision-making is shared at every level. It's a great way to bond with your stakeholders. The stakes are too high not to.