CHARLOTTE – Republican state senators Todd Johnson of Union County and Dan Bishop of Mecklenburg County have signed on to a Senate plan that supporters say would pump billions of tax revenue into public school construction over nine years.
Johnson and Bishop are two of 19 co-sponsors of Senate Bill 5 that would provide a pay-as-you-go method for funding school construction that would be divided among K-12 schools, community colleges, the University of North Carolina System and state agency buildings.
SB 5 is different from a plan being pushed by Republican Speaker of the House Tim Moore. Late last year, Moore announced a plan to put a $1.9 billion education bond before the state’s voters in 2020. The specifics of that bond have not yet been announced. Democratic Gov. Roy Cooper has indicated he also supports putting an education bond before the voters.
The money for public education in SB 5 would come from the State Capital and Infrastructure Fund, which was created in 2017 to mainly benefit the UNC system and state agencies. Annual SCIF spending would increase from its current 4 percent of General Fund revenues to 4.5 percent and SB 5 would add K-12 schools and community colleges to the fund.
As the law stands now, the SCIF has approximately $237 million available this year, but supporters say that annual amount is projected to grow and the SCIF will have around $1 billion a year available by 2028.
If approved, supporters say SB 5 would provide $6 billion of spending over nine years but that amount is not guaranteed as it is based on revenue growth projections.
Johnson, who is in his first term in the General Assembly, said the Senate proposal is the most prudent way to fund school construction projects, especially with the state’s economy performing well. According to a 2015-2016 Statewide Facility Needs report the state’s 115 local K-12 school administrative units (LEA) had combined five-year needs of $8 billion.
“I think pay as you go is the best route,” Johnson said. “This is instant money. The way I view it, the systems need money now. We don’t need it in three years, we need it now. It’s the smart thing to do.”
Johnson also said the Senate plan is the most fiscally responsible way to go.
“If you look at the plan Gov. Cooper and Speaker Moore have come together to work on, it’s a $1.9 billion bond but over the course of the bond you will pay out $1.3 billion in interest alone,” Johnson said. “And you are looking at two years minimum to get it voted on, get the bonds sold.”
Under SB 5, the Department of Public Instruction would determine LEA allocation, which is something Johnson supports. Republican Mark Johnson is the current elected Superintendent of Public Instruction and leads the DPI. If a bond is issued and structured like previous bonds, each LEA receives a specific amount and that would be spelled out before the proposal is voted on.
“Superintendent Johnson will have the authority to make it need based,” Johnson said. “The part that I really like about it is that it is not tiered based, it is based on a true need. Where is the highest need at this point in time? I feel the superintendent is more able to identify those needs more so than the General Assembly because it is their system and they know exactly where those needs are.”
House District 105 Rep. Wesley Harris believes funding public education projects through a bond is best for the state. Harris, a Democrat who is in his first term in the General Assembly, contends that bond money will get to needed projects more quickly as it is guaranteed amount of money. That in turn, he said, will also provide a greater economic impact for the state.
“I stand more on the bond side,” Harris said. “I read over SB 5 and while it seems attractive on the surface to not have to pay interest to get the school funds, it’s pretty much the equivalent of buying a house using cash instead of getting a mortgage. You have to save up money before you can buy it. While you save money on the interest expense, it will take longer because you have to accumulate all the cash up front.
“Being able to pass a bond will allow us to get the cash into the system a little faster. And these are investment projects and these projects will have a net economic benefit. That is the only reason North Carolina is allowed to borrow money for. At the end of the day, our net economic benefit is going to be greater than any interest expense that we are going to pay. It would be nice if we had the cash on hand. We don’t.”
House District 69 Rep. Dean Arp was the lead sponsor in establishing the SCIF in 2017. The Monroe Republican who is in his fourth year in the General Assembly said school construction is a top priority.
“I think it is important to help in school construction and we have always been involved in that,” Arp said. “We are continuing the conversation of what is needed. There are two fantastic proposals, and a couple of years ago I did the pay-as-you-go plan and that is current law. If we manage our debt properly and we look at this, we have a fantastic opportunity to do what we need to do. It’s too early to stake yourself out. The bond proposal hasn’t even been filed, so we don’t know what that looks like. It’s hard to make a comparison right now.”
House District 55 Rep. Mark Brody, a Republican who represents a part of Union County and Anson County, said a pay-as-you-go method may be best for the state.
“I tend to look to (North Carolina State Treasurer) Dale Folwell for some advice on the bonding, and of course Dale is coming out and saying we are stretching ourselves pretty thin with a bond issue,” Brody said. “The pay as you go is something that Rep. Dean Arp put into our statues to set up the program. The Senate is looking towards that. I would say that pay as you go would be better.”
But Brody also said it is too early in the process for him to make a final decision on the competing plans.
“There are going to be a lot of questions that are going to be needed to be answered before we can do anything,” Brody said. “Who is going to get the money? How are we going to get the money? There are a lot of questions that need to be asked. We have 100 counties and 115 LEAs and everybody has a need.”