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School districts across the state and anyone involved in the school construction or facilities industry should definitely be keeping up to date on the developments of AB 247. It’s going to affect the entire industry.

In our first installment, our President & CEO, Jamie King-Iseman, and Senior Funding Associate, April Thompson, delve into the intricacies of the new statewide school facilities bond, AB247. This conversation sets the stage for a series of engaging discussions with the King team, partners, and industry friends, where we’ll cover topics, news, and trends relevant to you. We’re excited to embark on this venture and look forward to your feedback and suggestions for future episodes. Let’s dive in together!

Episode Transcript

Floyd: Well, first, why don’t you introduce yourselves?

Jamie: I am Jamie King-Iseman. I am the president at King Consulting. We are a small firm that helps districts with all of their capital facilities planning needs.

April: I’m April Thompson, I’m a senior funding consultant here at King Consulting, and I’ve been working in school district finance for the last maybe ten years. And now here with King Consulting, helping districts all over the state.

Floyd: So tell us about AB 247 and how it’s going to affect you and your clients.

Jamie: So AB 247 is an assembly bill that’s moving through the state legislature here in California. And it is a $14 billion bill to help support school districts with their capital facility needs. It’s a kindergarten through community college state bond. And when it passes in November, we don’t like to say if, it will fund the state school facility program, which is—think of it like an umbrella with a lot of different funding mechanisms underneath it. For districts that need to modernize existing schools or build new schools or new classrooms, if they need a minimum essential facility like a multi-purpose room.

April: There should be some additional programs under that also that were in the last statewide school bond, like funding for career tech education facilities at the high school level. Also, some charter school funding for those types of programs.

Jamie: It will also change the funding structure somewhat from the way that it’s written right now. Of course, it may change before it goes on the ballot, but we do expect it will go on the ballot. There is some language in there, intent language to include a special provision for small school districts to set some of the funding aside, specifically only for small school districts. And then there’s also some provisions in there to fund schools with a higher percentage of socioeconomically disadvantaged students.

April: There’s also some changes and potential changes in this new bill as to how the last bill was passed in regards to the financial hardship program, which will also affect a lot of small school districts right now. In order to automatically qualify for financial hardship, school districts can have a bonding capacity of less than $5 million, which is pretty low these days. And in the language for AB 247, they’re looking at raising that to $15 million.

Jamie: I think that’s a really important point. That’s going to be huge, especially for some of the smaller, more rural districts. You know, your bonding capacity is essentially a percentage of your assessed valuation or property valuation. But they have not updated this threshold since the program began in 1998. And, you know, a district with a bonding capacity in 1998 of less than $5 million might have a bonding capacity now of $10 million or $15 million. And it just means, you know, that has hasn’t caught up to, hasn’t maintained a pace with, you know, what the costs have done, how costs have increased since that time. And so if they raise that threshold from $5 to $15 million, there’s going to be a lot more districts that can qualify for financial hardship. And that’s not a standalone program. Every program at the state has a required district match. Financial hardship districts, though, the state funds 100% of what they’re eligible for. So, that’s a really important, I think, change to the program that is desperately needed. And we’re really hoping to see that.

April: Yeah, I think it’s going to give a lot of support to those small school districts and rural districts. Like Jamie said, you know, if you think about 1998, the commercial real estate and the housing costs at that time, it’s really time for that language to be updated to bring it to where our current assessed valuations are in 2024.

Jamie: Absolutely.

Floyd: How do your clients understand all this, and should they be doing anything before the election happens?

April: Our clients, the school districts across the state, as well as owners’ representatives like us and anyone involved in the school construction or facilities industry, should definitely be keeping up to date with the developments of AB 247. It’s going to affect the entire industry. And there have been multiple calls to action from organizations like the Coalition for Adequate School Housing, as well as CASBO, which is the California Association of School Business Officials. Both of those organizations are really important and have been lobbying on school districts’ behalf at the state level. So, it’s really important to make those phone calls to your local representatives and submit letters of support for AB 247 so that the legislators in Sacramento understand how important this program is and how important this bill will be to the school districts all over the state.

Jamie: April and I talk about this quite a bit. There are a couple of points that I want to make. I think one is, you know, part of their lobbying efforts lean on the vast need that there is in the state of California to upgrade and replace older school buildings. Most schools in California were built in the 1950s, 1960s. And, as you know, these buildings have a useful life expectancy. And most of them have reached their end. So I think, you know, a great way to help demonstrate the need is for districts to update their eligibility for the state programs that we mentioned. Because if you’re sitting on $20 million worth of need, which is demonstrated by calculating what your eligibility is, then that can help inform those state representatives: “Look, you know, we have this much need.” You know, the state bond needs to pass so that we can access these funds to improve our buildings. So I think that’s useful and something that districts should be doing. And I also think that what’s really unique about the language in this bill is, and this is not necessarily related to what district specifically should be doing, but for small school districts and rural school districts, you know, I think many of them — we specialize in working with small school districts, and I think many of them have historically felt really left out of the state funding program. And that has deterred them from participating within it. Because you asked, you know, how do your clients know what they should be doing or how do they get this information? The state program is really complex. From calculating the eligibility to getting the necessary approvals, to all of the funding requirements, you know, registering projects with the DIR—right, April? Feel free to jump in.
But I think that it’s so complex that small school districts have kind of—they don’t have the bandwidth to be able to lobby on their own behalf to calculate their own eligibility, and they sometimes don’t even have the resources to retain somebody like us.

April: Exactly. And it’s not even that they don’t necessarily have the bandwidth; they don’t have the staff capacity, you know. A lot of times, you look at these small school districts, and you have one person who is the superintendent, the principal, and sometimes even a teacher. And they’re wearing all these hats. And so, to expect that, you know, that staff member, that administrator, to be able to adequately, you know, serve their students and also take the time to learn about all of the regulations and requirements for these programs? That’s a lot to ask.

Jamie: It is, and they’re state agencies. So they’re always changing the rules, right? So, no offense to our state agencies. We love you. But I think that, you know, necessarily regulations change, and the requirements change for audit and expenditure reporting, etc. And that’s, you know, that’s what our job is: to stay up-to-date on all of those things, to share with our clients.

April: That’s what we get a lot of the time also from our clients. They’ll forward us an email from a vendor, very well-meaning vendors or contractors in certain fields—that, you know, they see there’s a funding opportunity that’s come up. But to get those sort of, you know, it’s kind of like cold calling. And sometimes the district just needs someone to explain to them what their opportunities are before they sit down and talk to a contractor, you know, who may have, you know, what different like, an ulterior motives may be to, you know, to getting them to participate in this program so that that contractor can get the work, which is great. And it’s, you know, a sound business model, but sometimes the district needs, you know, an owner’s representative to help them understand these programs. And that’s where we come in.
Jamie: And this bond is going to be critical. But I think I also, you know, with Proposition 13 in 2020 that didn’t pass, I think that has also kind of discouraged some school districts. You know, April and I are big proponents of sharing with everyone all the time. There has been continuity of funding in this program since 1998. So whether the bond passes or not, there are just things that school districts should be doing. With the bond passing or in the absence of it passing, you know, on Proposition 13, unfortunately, that number didn’t pass in 2020…

April: I think there were a few other things going on in 2020.

Jamie: Just a couple of things going on in 2020. It didn’t pass. But then, you know, the governor understood the importance of the program. And so there was this huge allocation of general fund money—almost, I think, $3 billion in total—around there. Don’t quote me on that. But, and that those funds were put into the program, and applications continue to be processed. And April and I were just talking earlier today about how we are going to message to our clients and share with our clients how important it is to continue to get your approvals, to check your inboxes, and to get in line because in 2016 or 2008, Proposition 1D passed. By 2013, all of those funds were exhausted. So between 2013 and 2016, there was no funding at the state. They continued to process applications, but there were enough applications that had been submitted to exhaust all of that bond authority in 2008. So in 2013, our clients were saying, “Well, why bother getting in line?” Well, it’s still a first in, first out program, and once your date is stamped in line, the next bond passes and they just keep processing applications. So they have never technically run out of money, they have just always had enough applications in line to consume the remaining funds of the bond. But another bond has always passed eventually, and they have continued to fund those applications.

April: Exactly. And that’s really important to note. There are a lot of people who are saying that their funding applications are, you know, those applications being funded is going to depend on the next school bond passing at the state level, which is not necessarily the case. I’d rather think about it as, you know, those funding applications are dependent on the continued funding in the state school facility program, which when that Prop 13 failed to pass in 2020 and the previous bond was already exhausted, the governor and the state legislation and/or the legislators continued to fund the statewide school facility program. They took the general funds that were available and allocated them or reallocated them to the SFP, the statewide School Facility program, so that they were able to continue funding those applications that had been stacked up in line.
So I think that’s a better mindset than just thinking that if that next bond doesn’t pass, then there’s no way our applications are going to get funded. That’s not necessarily the case. So I think it’s going to take a little shift in mindset. you know, if you look at the consistency in funding in this program over the last 20 plus years, you can see, yeah, 26 years, you can see that it is a priority for the governor, no matter which governor we’ve had over the years, and the state legislature, to keep this program funded.
Jamie: And even prior to the SFP program, there was the LPP program. We always like to tell people it’s not really a matter of if your application will be funded; it’s just a matter of when.