School Construction Bond Distributions to States and School Districts

Since the passage of the stimulus bill in mid February, states and school districts have been curious about the details for the new Qualified School Construction Bond program. To date, the Department of Education hasn’t provided many details on the program, perhaps because it is a tax program, not a spending program. Turns out, the Internal Revenue Service (IRS) released guidance and allocations for the program to states and LEAs in mid April. We review these allocations in the post below[1].

The Qualified School Construction Bond program provides $11 billion face value in tax-free bonds in both fiscal years 2009 and 2010 to help fund school construction, rehabilitation, repair, and land acquisition. It is estimated that the federally-funded bonds will save schools nearly $10 billion in taxes over the next 10 years. Effectively, the federal government is providing interest-free loans to schools and districts to finance school construction efforts. While the schools and districts must repay the loan face value, they do not have to pay interest on it. Stimulus legislation stipulates that 40 percent of the bond face value be distributed to the 100 local education agencies (LEAs) with the most students living in poverty and the remaining 60 percent to other LEAs based on the distribution of Title I Part A Basic Education Grants.

According to the IRS guidance for the 2009 bonds, $4.4 billion of the bond face value was allocated to the 100 LEAs with the most students living in poverty. The remaining $6.6 billion was allocated to state education agencies to be distributed to the other LEAs within each state.

State allocations ranged from $773.5 million in California to $6.8 million in Nevada. In an attempt to explore the relationship between students, poverty rates and bond money, we calculated the amount of construction bond face value per student in the state and the amount of construction bond face value per poor student in the state. To take into account the separate bond face value distributions for the 100 districts with the most students living in poverty, we subtracted the number of poor students and the number of total students in each of those districts from those numbers for each state. Our calculations show that, much like Title I stimulus distributions, there is little relationship between the allocations and either the total number of students in a state or the number of poor students in a state.

For example, California has the most poor students (nearly 1.1 million, 16.2 percent of the school age population) and is slated to receive $1,098 per poor student. Wyoming, on the other hand, has the fewest poor students (almost 9,500, 10.8 percent of the school age population) but is expected to receive $2,545 per poor student – the most of any state. Nevada is expected to receive the least per poor student, $472, even though is has over 62,000 poor students, 13.7 percent of the school age population. States with half as many poor students, like Montana and Maine, are slated to receive almost three times as much in bond face value per poor student.

The story is similar when looking at allocations by total student population. Bond face value per student ranges from $286 to $56 with little relationship to total population. California has the largest student population and is estimated to receive $152 per student in bond face value. Wyoming, the smallest state, is expected to receive $283 per student. Florida, the fourth largest state, will receive the one of the smallest amounts per student – $109 in bond face value. Nevada will receive the least, again, with $56 per student. The District of Columbia, an outlier in this calculation with the fewest students, is slated to receive $466 per student.

This analysis is reminiscent of our previous analysis of stimulus distributions for Title I. There is little relationship between the poor student population and the distribution of construction bond face value to states and LEAs. As long as Congress continues to rely on Title I formulas for the distribution of education funds – particularly funds attempting to stimulate the economy and education reform – these seemingly illogical distributions will persist.

A spreadsheet containing data on construction bond distributions to states can be downloaded here.

We also conducted a similar analysis of the 100 LEAs with the most poor students. A spreadsheet containing this data on construction bond distributions to those 100 LEAs can be downloaded here.

[1] In addition to providing details on state and LEA distributions, the guidance gives some details on the use of bond funds. Eligible equipment for purchase using the bonds includes equipment to be used in the school facilities being built or repaired using the bond funds. Eligible issuers of bonds include states, local government agencies, and other entities empowered to issue bonds.