REP. ELDRIDGE ANNOUNCES PASSAGE OF SCHOOL BUILDING ASSISTANCE REFORM BILL

State Representative James B. Eldridge (D-Acton) today praised passage of a bill by the House of Representatives which establishes the school modernization and reconstruction trust to fund all projects currently on the school building assistance wait list, continues paying all current obligations of the program, and dedicates a penny of the sales tax to school construction in order to secure reliable funding for this program well into the 21st century.

“I was pleased to support this bill today,” Rep. Eldridge said. “The SBA backlog has grown to more than 420 projects, representing $5.7 billion of capital construction.  At current funding levels it would take between 10 to 12 years to reach the end of this list.  Under the Governor’s plan, completion of the list would take five years, with no guarantee of any program beyond that date. Our plan in the House is to fully meet the existing obligations of the state in the same time frame and guarantees a dedicated funding stream for future projects.”

“I am especially pleased,” Rep. Eldridge continued, “that we also will maintain our commitment to fund wait list projects at pre-existing reimbursement rates.  Any project currently on the waiting list will be funded at the reimbursement rate promised by the Commonwealth. And because the Trust will be authorized to pay the full state share for each project before a municipality moves to long term borrowing, the state will save on long term interest costs, and the municipalities will get more of their promised grant money more swiftly than they expected.”
 
Rep. Eldridge explained that in order to accomplish these improvements, the SBA reform bill passed today permanently dedicates a penny of the existing state sales tax, phased in over seven years, for a School Building Assistance Trust that will act as a financing authority for the state’s portion of school building projects. The Trust will provide communities with cash for the state’s share of reimbursable school construction costs -- alleviating the need for the entire project to be financed at the local level.  In the future, communities will finance only their own portion of these projects. 

The Trust will also be responsible for making contract assistance payments on old SBA obligations.  These will be paid, as currently, according to pre-existing amortization schedules.  The Trust would be given a penny of state sales tax revenues from the budget -- but it would also assume all of the liabilities of the existing program.  This move to a sustainable off-budget entity allows for an increased financial commitment accompanied by structural improvements and a managerial focus to produce the best use of this funding.

Rep. Eldridge added, “One of the most exciting features of this proposal is that, in the long run, the trust will be able to shift school funding from borrowing to pay as you go financing, creating a more sustainable school funding model for decades to come. Unlike the Governor, who proposes issuing 40 year debt, which costs the Commonwealth $2.5 billion in increased interest costs, the proposal crafted by the legislature and Treasurer devotes more resources to clearing the wait list now so that the program is sustainable in the long term.”

Rep. Eldridge explained that, while the trust would begin by issuing 25-year debt backed by dedicated penny, over time, it would move to paying capital costs directly out of the penny from the sales tax.  The proposal is thus structured to transition into a program that uses 100% of the revenues that we collect for capital construction of school projects.  Rep. Eldridge noted that, by contrast, the Governor’s plan for 40-year debt would do exactly the opposite, dramatically increasing the interest expense of the commonwealth by more than $2.5 billion, creating a short-term benefit, but significantly jeopardizing the long-term sustainability of this program. 

“This plan represents a multi-billion-dollar reform of the program, and is the most sweeping change made since the inception of the program in 1948,” Rep. Eldridge concluded.  “I am proud to have worked with my colleagues in the House and Senate, and with the Treasurer, to craft this reform package, which guarantees funding for the schools in my district which need this funding desperately, and ensures that this vital program will continue for many years.”