As the work to carry the good news about Referendum 52 out to local school districts gets underway some reasonable questions have arisen about the impact of R52 on local school districts and how it works. Let’s take a quick run through some questions that have come up.
Will the passage of Referendum 52 affect my school district’s bond rating or the state’s rating?
No. Both the state and local school district bond ratings will be unaffected by the passage of Referendum 52 for four reasons. First, local school districts will not be borrowing the money or paying it back. The state will authorize and sell the bonds to fund an account for projects. Local districts don’t assume any risk with the passage of Referendum 52.
Second, the Referendum authorizes a relatively tiny increase in the state’s debt. Look at this chart:
The increase in the debt load (the arrow next to EHB 2561) for the state is less than 1.5 percent, a relative drop in the bucket compared to big ticket projects like the $4.5 billion tunnel project in Seattle.
Third, the bottled water tax that is extended by passage of the bill provides additional general fund revenue which makes rating agencies and the state treasurer happy. More general fund revenues mean the state backed bonds authorized by Referendum 52 are lower risk, which protects the state’s excellent credit rating.
Fourth, the projects funded by Referendum 52 funding will actually save the state money in the long run. Funding projects will extend the life of some existing school buildings by as many as 15 years which could mean a savings of $610 million in new school construction bonds and a potential savings of $86.5 million in debt service over the next eight years.
For more on Referendum 52 and the state’s credit rating, review our report.
Will debt service requirements created by the passage of Referendum 52 end up eating into state general fund dollars allocated to K-12 education?
No. The general fund is just that, a general undifferentiated pot of money that gets appropriated by the state. The state allocates more than 40 percent of its biennial budgets for the paramount duty of the state, K-12 education. While debt service for bonds sold under Referendum 52 will come from the general fund, those monies will not come from already allocated education funding. And remember, if the referendum passes, there will be revenue coming in to the general fund from the bottled water tax and sales tax revenue created by all the construction work funded by the legislation.
Does my school district have to use only the contractors the state approves?
No. Local school districts can use any contractor they want, provided that the contractor meets the requirements of the legislation. As we’ve mentioned in other posts, performance contracting—energy retrofits that pay for themselves—is a practice in our schools that has a 25 year long track record. The state’s General Administration Department has at least 14 approved energy services contractors that are experienced in doing performance contract work for schools and other government agencies. But it’s up to local school districts to decide who they use.
So, passage of Referendum 52 is all about local control and local benefit. If the referendum passes, local school districts decide where and what they want to work on and they get to use state dollars to make the improvements. And all the money savings generated by retrofits stays in local school districts. Passage of Referendum 52 means a big change for local schools that can get state help in fixing their buildings and saving money that can be put back to work educating kids.
Photo courtesy of jdurham from morguefile.com.
