Division of Legislative Services > Legislative Record > 2005

HJR 105: Joint Subcommittee Studying the Level of the Commonwealth's Assistance to Localities Necessary for Developing Adequate K-12 School Infrastructure

November 29, 2005

The Joint Subcommittee Studying the Level of the Commonwealth's Assistance to Localities Necessary for Developing Adequate K-12 School Infrastructure, established by House Joint Resolution 105 (2004), held its final meeting on November 29 at the General Assembly Building in Richmond.

Members of the joint subcommittee are Delegate Beverly Sherwood, chairman, Senator Harry B. Blevins, vice chairman, Delegate M. Kirkland Cox, Delegate Terry G. Kilgore, Delegate Terrie L. Suit, Delegate Algie T. Howell, Jr., Senator R. Edward Houck, Senator Stephen D. Newman, Carl R. Shaw, Jr., Arthur E. Anderson, II, Richard L. Hurlbert, Jr., Robert Mills, Peter A. Blake, Thomas M. Jackson, Dr. Jo Lynne DeMary, and Judith W. Jagdmann.


Local School Superintendents
The joint subcommittee began its meeting by hearing presentations on school infrastructure needs from three local school superintendents from geographically diverse school divisions. First, Dr. Edgar Hatrick, Superintendent of Loudoun County Public Schools, explained that growth is the greatest challenge facing his school division. Currently, Loudoun County has 47,361 students in 67 schools, and the number of students is expected to rise to 69,708 in 2012. To accommodate this increase in population, 20 more schools would need to be built at a cost of approximately $971,930,000. Loudoun projects that, unless it receives it receives more money from the state for capital projects, the school division will reach "buildout" at approximately 130,000 students. At that point, the school division will no longer be able to maintain the debt required to educate additional students.

Dr. Hatrick noted that his school division has had particular success curbing construction costs by using prototypical school designs. Repeat use of school designs saves time and money by reducing design and review time, but also provides consistency for students changing schools within the school division and parity in the school division's facilities. Such cost-cutting strategies are essential in light of the school division's total outstanding debt of $1.7 billion.

Next, Larry Massie, Superintendent of Buckingham County Public Schools, spoke to the joint subcommittee about the infrastructure needs of his school division in particular and of rural school divisions in general. The Buckingham County School Division has 2124 students in six schools. Unlike Loudoun County which currently has no mobile classrooms, Buckingham County has 20 trailers surrounding its elementary schools. Other than a middle school built in 2003, Buckingham's newest school was built in 1980. The oldest operating school was built in 1939.

Mr. Massie estimates that Buckingham County has a need for approximately $30 million for new school construction. Without additional funding for capital projects, some of the county's schools will continue to operate without air conditioning and up-to-date computer technology, and the reliance on trailers will persist without the construction of additional classroom space.

Dr. Stephen Jones, Superintendent of Norfolk Public Schools, noted that urban school divisions like his face many of the same infrastructure problems as suburban and rural school divisions like Loudoun and Buckingham. Norfolk City operates 49 schools serving approximately 35,000 students. In the near future, the school division expects to spend approximately $125 million on capital projects. However, at the current level of state funding to local school divisions, Dr. Jones believes that his school division will never be able to meet its capital needs.

In particular, Norfolk faces the challenge of providing the necessary infrastructure to support growing technology needs for instruction and state mandated assessments, to meet minimum security standards, to update laboratory facilities in secondary schools, to provide adequate classroom space to offer universal pre-kindergarten and early learning programs in each elementary school, and to create facilities for extended-day opportunities for students. Additionally, Norfolk could use additional funds to eliminate over 150 mobile units that are currently being used as primary classroom sites.

Virginia Public School Authority
After hearing from the local school superintendents, the subcommittee was provided with an overview of the Virginia Public School Authority (VPSA) by Richard Davis. The VPSA serves as a bond bank that provides low-cost financing of capital projects for primary and secondary public schools in Virginia localities. As of June 2005, VPSA's total indebtedness on behalf of local school construction was over $3.0 billion.

The VPSA is able to finance all types of real and personal property for public schools including land, buildings, and equipment, and is one of the best vehicles for localities to obtain the necessary funding for capital projects. Not only does the VPSA consistently offer the lowest rate to localities for borrowing money for construction costs, but VPSA bonds also have a double-A plus bond rating by the three major rating agencies. Also, under the Virginia Constitution, local issuers of general obligation school bonds are not required to obtain voter approval for bonds sold to the VPSA.

VPSA also offers an Interest Rate Subsidy Program that is available for localities with projects on the Board of Education First Priority Waiting list for direct Literary Fund Loans, subject to availability of appropriations. The purpose of the subsidy program is to fund localities' projects while providing debt service schedules equivalent to what they would have paid had Literary Fund Loans been available.

Department of Education
Dan Timberlake, Assistant Superintendent for Finance at the Department of Education, gave a status report on the Literary Fund. The Literary Fund is a permanent and perpetual school fund that began in 1810 and was later established in the Constitution of Virginia. Revenues to the Literary Fund are derived primarily from criminal fines, fees, and forfeitures, unclaimed and escheated property, and repayments of prior Literary Fund loans. The fund has typically been used to provide low-interest loans for school construction, grants under the interest rate subsidy program, debt service for technology funding, and to support the state's share of teacher retirement required by the Standards of Quality.

As of June 30, 2005, the principal of the Literary Fund was approximately $481.5 million. Since fiscal year 2002, the majority of the Literary Fund revenues have been transferred to pay teacher retirement in order to reduce the pressure placed on the general fund by growing costs in public education. No Literary Fund revenues have been transferred for school construction since 2002.

Virginia Retirement System
Robert Schultze, Director of the Virginia Retirement System (VRS), concluded the presentations by discussing provisions in Title 22.1 of the Code of Virginia permitting local school boards to borrow money from VRS for school construction. According to Chapter 10.1 of Title 22.1, school boards may contract to borrow money from VRS for capital projects for school purposes with the approval of the locality's governing body and the Board of Trustees of the Virginia Retirement System. Referendum approvals are not required for such borrowing. The authority and constitutionality of the statute was challenged in 1959 and upheld by the Virginia Supreme Court. Mr. Shultze noted, however, that since the statute was passed in 1958, no school board has approached VRS to borrow money in this manner. Although VRS loans remain an option for localities to obtain funds for school infrastructure construction, the VPSA is able to offer lower financing than would be available through this method.


In lieu of making official recommendations for new programs, the subcommittee emphasized that the General Assembly should continue to monitor the viability, liquidity, and accessibility of existing programs and sources of funding for school capital construction such as the Virginia Public School Authority, the Literary Fund, and the Lottery Fund.

The Hon. Beverly Sherwood

For information, contact:
Bryan Stogdale, DLS Staff


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