Federal funding restrictions could force schools to spend millions improving buildings that should be replaced

Virginia schools received nearly $2 billion from the federal government in its latest round of COVID-19 relief funding for public education.

But while current guidance allows that money to pay for pandemic-related improvements — including new HVAC systems, window repairs or replacing carpeted areas with tile — it strongly discourages new school construction, according to James Lane, the state’s superintendent for public instruction. Local administrators are worried those restrictions could lead to millions of dollars in spending on school buildings that should be replaced.

“Outside of teacher pay, I can’t imagine there’s a bigger need for public education in the state than school construction,” said Keith Perrigan, the superintendent for Bristol Public Schools and president of the Coalition for Small and Rural Schools of Virginia. “So the fact that we may be forced into a situation where we put good money into old buildings is very frustrating for us.”

It’s an issue that’s become especially resonant as state legislators consider how to address years of underfunding in public school infrastructure. School construction is a perennial debate in the state’s General Assembly, but the most recent session led to the formation of a commission specifically tasked with studying the issue. 

At a Thursday meeting, Lane presented new information on the state’s current building inventory — the first time data has been updated since a 2013 study ordered by then-Gov. Bob McDonnell. A survey of nearly every local division found that more than half of all school buildings are more than 50 years old (the state’s oldest facility was built 184 years ago, according to the Virginia Department of Education). 

Eight years ago, VDOE estimated it would cost roughly $18 billion to renovate all schools more than 30 years old. The department’s latest survey now estimates it would cost the state more than $24.7 billion to fully replace every building more than 50 years old.

“When we surveyed school divisions, there were more than 1,000 buildings that met that criteria,” Lane told legislators. Some of those could potentially be renovated rather than fully replaced, he said. But a review of capital spending by local districts over the last decade indicated that renovations and additions were only slightly less expensive — and generally don’t last as long as a newly constructed facility.

“I would not assume you’d get the same longevity out of renovation as you would with a brand-new school,” Lane said.

A legacy of underfunding

Understanding how school construction needs reached such massive proportions in Virginia requires going back decades. In a 1993 report, the Joint Legislative Audit and Review Commission — a watchdog for state agencies — found that Virginia’s government began moving away from school construction in the 1930s. That decade saw the passage of the Byrd Road Act, which tasked the state with funding county road construction and passed the responsibility for new school buildings largely onto localities.

By the 1960s, Virginia had moved almost exclusively to providing loans for school construction through the state’s Literary Fund — a miscellaneous pot derived from criminal fees, forfeitures and unpaid lottery winnings, among other sources — and a financing program known as the Virginia Public School Authority. The state did provide $55 million a year for school construction to localities from 1999 to 2002, but slashed that assistance to $27.5 million annually for the next six years. In 2010, that funding was completely removed from the budget.

Today, Virginia stands alone among neighboring states — including the much-poorer West Virginia and Kentucky — in not providing any direct funding for school construction. “We’re definitely the anomaly in our region,” said Chad Stewart, manager of education policy and development for The Commonwealth Institute for Fiscal Analysis. 

In 2017, the General Assembly did allow schools to resume using up to 40 percent of their lottery funds — a significant contributor to the state’s education spending — for non-recurring expenses including capital projects. But in many rural and low-income districts, that funding is needed to boost per-pupil spending on things like teacher salaries and basic classroom supplies.

“Bristol spends about $9,000 annually per student,” Perrigan said. “In some parts of the state, they’re spending $20,000 per student. So we’d be supplanting money that we really should be spending on our kids.”

In recent years, the disparities between wealthy suburban school districts and low-income divisions — often in rural areas of the state — have become a point of tension in the General Assembly. Rather than invest state money in school construction, some legislators have suggested that localities should raise their tax rates to support new projects. 

But the reality isn’t that simple. In Bristol, for example, more than 20 percent of residents are living in poverty and the median household income is only $37,500 (the state median is $74,222, according to the U.S. Census Bureau). “To think we can raise property taxes more than what they are — that just doesn’t make sense,” Perrigan said.

That leaves rural and low-income districts at a significant disadvantage when it comes to new school construction, which wealthier localities are often able to fund independently. Low-interest state loans, including through the Literary Fund, are highly competitive. The maximum award is $5 million, and for several years — from 2010 to 2015 and again in 2017 — the state eliminated school construction funding within the program.

“Even with funding, it’s a drop in the bucket compared to what’s needed,” Stewart said. Lane also pointed out that many low-income localities have specific policies against taking on new debt. In Bristol — once identified as the most financially challenged locality in Virginia — it’s virtually illegal.

“We are fully at our debt capacity,” Perrigan said. The only way the city could independently fund a new school building is through what’s known as a triple-net lease, which would require it to lease school property to a financier for the construction and then continue to pay operating expenses on the property.

Those disparities are evident in a statewide review of 117 capital improvement plans — detailed outlines of future projects that are generally developed by local school boards and approved by localities. In Northern Virginia, there are 31 new schools planned over the next several years. In Western Virginia, a superintendent’s region that includes Alleghany, Roanoke and Pittsylvania counties, there are zero.

“So the locality is not even foreseeing the possibility of a new school with their funding structure,” Lane told legislators. In some counties, even basic improvements are difficult to manage. 

Greg Mullins, the superintendent for Wise County Public Schools, said a flock of buzzards once developed a serious taste for the rubber membrane roof on St. Paul Elementary School. The state’s Department of Wildlife Resources said the birds were a protected species — making eradication impossible — and the district couldn’t afford a new roof at the time. So for months, Mullins tried out various methods of scaring off the birds, from sound deterrents to the inflatable tube men that usually bedeck used car lots.

“We eventually put together the funding to replace that roof,” Mullins said. “But we had that buzzard problem for at least three years.”

With the challenges facing many local districts, school construction remains a major problem in  Virginia — one that’s likely to require a major infusion of cash. Henrico’s new Highland Springs High, for example, is expected to cost $80 million. Estimates for new elementary schools in Roanoke County range from $20 to $40 million. 

Unlike in previous years, though, the discussion is coinciding with an unprecedented influx of federal funding. Zack Robbins, a fiscal analyst for the House of Delegates, said there’s more than $1 billion remaining for schools from two previous federal aid packages in addition to the $1.9 billion allocated through the Elementary and Secondary School Emergency Relief Fund (more commonly referred to as ESSER) in the American Rescue Plan. That money is earmarked specifically for pandemic-related school improvements. 

The latest round of funding, though, must be spent by September 2024 and all projects are subject to state approval, according to Lane. Nearly $380 million statewide must be set aside for programs to address learning loss, and the most recent guidance from the U.S. Department of Education specifically discourages using the money for new school construction.

“There are some concerns from the federal government that the funds may not put a school division in the position where they can complete a building by 2024,” Lane said. VDOE has issued tentative approval to some counties for school additions, which have been necessary for some school divisions to maintain three to six feet of social distancing between students.

The bigger concern, for Perrigan and other superintendents, is that current guidelines will force school divisions to pay for improvements on outdated buildings. In Bristol, for instance, the division has requested to use some of their money for modular units and new property. The property acquisition could pave the way for new construction in the future, but it’s unlikely the city would be able to fund it independently, Perrigan said. 

He’d rather use the money to consolidate and replace three aging elementary schools with a new facility — a long-time goal that the division hasn’t been able to afford.

“It’s really a moonshot moment for us,” Perrigan said. “We could make a multigenerational impact in the city of Bristol if we just had the flexibility to use the money that way.”

It’s likely to become a political issue when the General Assembly meets this summer for a planned special session on spending more than $4.3 billion allocated to Virginia through the American Rescue Plan. While education is a frequently touted priority for the majority Democratic legislature, Stewart said there’s been little discussion of earmarking additional federal funding for school construction — separate from the more restrictive ESSER funds.

“There’s a huge pot of money that could be allocated toward that,” he said. Some of the funding is specifically intended to supplement government services that suffered due to revenue loss. Perrigan said he’s advocating for a portion of that to be set aside specifically for school construction and renovation — in addition to restoring the state’s basic contribution toward capital expenses.

“We should return, at a minimum, to those pre-Recession levels,” he said. “It’s not the state’s responsibility to build new schools for every locality. But it does have to take a share in that.”