Creating an Environment that Supports Excellence

Modernizing America's Public Schools

Excerpted from The Opportunity To Excel by the National Education Association Feb01

"A great need exists for construction and renovation of public schools if American educational excellence is to be maintained."
-- Committee Report of the House Ways and Means Committee, Chairman William Archer (R-Texas), 1998

Modernizing America's Public Schools

• The Problem: An Unmet Need Continues to Grow
• The Solution: A Creative Federal/State/Local Partnership
• Summary of NEA's School Modernization Recommendations

Would America expect the executives and employees of its great corporations to work in overcrowded buildings where the roof leaks, the ceiling is crumbling, mold and mildew abound, the indoor air quality makes people sick, the heating does not work properly in winter, there is no air conditioning for hot days and the rooms are not even wired for Internet connections?

Of course not.

Then why should America tolerate these conditions in the classrooms that are training the CEOs, officers and employees of tomorrow's great corporations? Why should anyone expect educators to teach effectively and students to learn successfully in environments that stifle the spirit, smother creativity, harm people's health and extinguish their energy?

Yet conditions such as these exist in one of every three public schools in America, which need major repairs or total replacement.1 Moreover, more than 60 percent of the public schools in every state need at least some repairs, according to an October 2000 U.S. Department of Education study. A June 2000 report by the National Center for Education Statistics found that 11 million students (one out of every four) attend public schools in less than adequate condition. Approximately 3.5 million of these students go to school in a building in poor condition. This is unacceptable.

A growing body of research adds the weight of empirical evidence to what most Americans already know: The condition of school buildings impacts student performance. For example:

• A 1996 study by Virginia Polytechnic Institute and State University found that students in above-standard school buildings had higher test scores than students in substandard buildings.
• More than 94 percent of U.S. educators believe computer technology improves teaching and learning in the schools, according to an April 1997 poll by the American Association of School Administrators.

Surely, school modernization, renovation and construction must be a compelling national priority. It is as essential to student excellence, and to teacher recruitment and retention, as any other step that can be taken.

I. The Problem: An Unmet Need Continues to Grow

The National Education Association's School Modernization Needs Assessments has determined that $321.9 billion is needed for school modernization across America. This includes:

• $268.2 billion for school infrastructure repairs, estimated over the next five to 10 years; and
• $53.7 billion over the next three to five years for education technologies to connect every classroom to the Internet, equip classrooms with the most advanced teaching techniques, integrate the new technologies into curriculum, and train teachers and staff in their use.

This is based on a comprehensive analysis of the current research literature, all available research databases, NEA's annual survey and analysis of state finance legislation, and an exhaustive questionnaire sent to the research arms of education associations in all 50 states.

The problem has several components. These include:

A. Crumbling schools and deferred maintenance

Nearly 14 million American children attend public schools in which at least one building needs major repair or replacement. These children come from all segments of society: large-scale repairs are needed in 38 percent of urban schools, 29 percent of suburban schools and 30 percent of rural schools.

A majority of America's public schools need at least some repairs or upgrades to reach good overall condition. In every single state, a minimum of 62 percent of the schools need upgrades or repairs, according to a 1996 General Accounting Office study. In California, the figure is 87 percent; in Delaware and the District of Columbia, 97 percent; in Illinois, 89 percent; in Missouri, New York and North Carolina, 90 percent; and in Ohio, 95 percent. In 25 states and the District of Columbia, the percentage of schools needing repairs or upgrades is at least 85 percent.2

At a minimum, the dilapidated condition of many of these buildings can cause children to suffer needlessly from asthma, allergies, airborne diseases such as influenza, injuries and sick building syndrome. At their worst, crumbling school buildings can even be life-threatening. At one Alabama elementary school, the roof collapsed just minutes after the children had left for the day.

Other examples, while less stark, are certainly troubling:

• Teachers in one Chicago school must use cheesecloth to filter out the lead paint dust and chips getting into their classrooms through the heating and ventilation system.
• Signs warn of asbestos problems in a Baton Rouge school, the gym floor is buckled and more than 12 classes are held in trailers.
• Students in an Orlando school are constantly sick from poor air quality.

One cannot expect children to learn to the best of their abilities in these settings. One cannot expect teachers to teach to the best of their abilities in crumbling classrooms. And one cannot expect to recruit and retain the teachers and staff America's students need if this is the workplace environment they must face. In education, as in so many other fields, the need for human capital and physical capital are inextricably intertwined.

B. The enrollment boom

Of the funds needed for school modernization, an estimated $73 billion is required to build new schools to meet the "baby boom echo" enrollment surge that is expected to continue for at least the next eight to ten years.

The numbers are staggering: Total enrollment in U.S. elementary and secondary schools is projected to climb by another 1.5 million, to more than 48 million by 2008, according to a September 1998 U.S. Department of Education report.3 Other estimates peg the number of additional students at 3 million by 2010. Public high school enrollment, which increased by 16 percent from 1988 to 1998, is expected to increase by another 11 percent between 1998 and 2008.

The Department of Education estimates that 6,000 new schools must be built by 2006 to handle the overflow. Already, many schools are severely burdened by overcrowding. More than one in three schools -- 36 percent -- uses portable classrooms. In California alone, two million children's classrooms are portable.4

C. Class size reduction

Research documents that student performance rises when class size declines:

• Tennessee's STAR Project shows that children in small classes from kindergarten through third grade get better grades through high school, are less likely to drop out and are more likely to graduate on time than their peers who were in larger K-3 classes.
• California's statewide class-size reduction program, launched in 1997, found that third-grade students in smaller classes outscored their peers on achievement tests in both third and fourth grades.
• Students in Wisconsin's Student Achievement Guarantee in Education (SAGE) program, which reduces the student-teacher ratio to 15:1 in kindergarten through third grade in high-poverty schools, show similar dramatic improvements.
• Students in states with the smallest class sizes in early grades scored higher on the National Assessment of Educational Progress (NAEP) than students in states with larger classes (taking income level into account), according to a Rand Corporation study.

In addition, the preponderance of research now indicates that smaller schools, not just smaller classes, makes a positive difference for students, especially in high school. The fewer opportunities for anonymity and the more chance for individualized attention there are, the better teenagers tend to do and less likely they are to get into trouble.

Improving student performance by reducing class and school sizes not only requires continuation and expansion of the Class Size Reduction Program. It also requires more schools and classrooms to be built.

D. Lagging technology

The average school building in America is 50 years old. It was designed and built for a bygone era. Beyond lights on the ceiling, a blackboard for writing, and electrical outlets for overhead projectors and the occasional television set, classrooms were not developed with any additional capacity for technology.

As a consequence, only 27 percent of classrooms and other instructional rooms were wired to the Internet as of 1997. In fact, 46 percent of today's school buildings have no adequate wiring to support the full-scale use of technology. So it is not just a matter of buying equipment and plugging it in. Nor is the highly beneficial E-rate program sufficient by itself, though it should be expanded. Modernization requires major renovation projects in a majority of the Nation's schools.

If America is to be truly committed to educational excellence for all, modernization must commence with all deliberate speed. No student should be denied the world of information available through the Internet, the insights available from the newest educational technologies and the essential computer skills which are prerequisites for the jobs of today and tomorrow.

The investment required is far more than selling gift-wrap to pay for the wiring necessary for classroom Internet connections, as students in Monroe, Georgia, have done. It must be done comprehensively -- and it must be done right.

E. State finances insufficient

As with all aspects of the public schools, state and local government must be the primary sources of funding for school modernization. However, to rely on state and local resources alone will condemn millions of schoolchildren to substandard or overcrowded school buildings that lack the latest technologies. State governments and school district taxing authorities simply do not have the resources to do it alone.

In fiscal year 1999, all of the states' surpluses totaled $31 billion. Even in the unlikely event that every surplus dollar was invested in school modernization, just 10 percent of the national school modernization need would be met.

A further challenge is the wide variation in state and local taxation methods and the revenue they generate. The relative mix of income, property, sales, excise and other taxes can lead to enormous fluctuations in revenues. A state's mix of industries can exacerbate these variations, depending not only on whether the economy is booming but on which sectors are achieving the greatest growth. Consequently, most states do not have the fiscal stability to meet the enormity of the school modernization challenge year after year on their own.

Certainly, states should devote as many resources as possible to school modernization. This is as strong an investment as they can make in their futures. But, absent federal leadership, states will be unable to meet their growing school infrastructure and technology needs.

II. The Solution: A Creative Federal/State/Local Partnership

There are a variety of innovative ways by which the federal government can help states and localities meet school modernization needs. The ideal federal role is one in which the federal government provides needed resources, while leaving decisions about which schools to build or repair to states and local districts. The three recommendations that follow adopt this approach. Moreover, each proposal -- expansion of the emergency repair program, expansion of federal tax credits bonds, and making "Eddie Tech" the "Fannie Mae" of school modernization -- build on existing law or on previous congressional initiatives. No wheels need to be reinvented.

The federal policy solutions to the school modernization crisis include:

A. Funding direct, zero-interest loans or grants for emergency repairs

An emergency grant and loan program would provide direct assistance to targeted districts for urgent infrastructure repairs. The initiative would primarily assist those districts unable to finance the capital expenditures associated with school renovation, particularly those unable to issue bonds. Funds would be targeted to those districts with the greatest immediate needs. Grant and loan funds would ideally help districts finance large renovation projects, such as plumbing, heating and cooling, electricity and roof repair.

Congress appropriated $1.2 billion for emergency school repairs and renovations for fiscal year 2001. This appropriation was strictly for grants, not loans. Therefore, it will finance the same amount, $1.2 billion, in repairs. Had it been the latter, the federal investment could have leveraged nearly $7 billion for school modernization and financed approximately 5,000 repair projects. That would have made an enormous difference -- but it still would not have been sufficient to address America's most urgent needs.

To meet the full scope of the problem, the National Education Association (NEA) recommends an appropriation of at least $2 billion annually, starting in fiscal year 2002, to be used for grants and loans, structured to leverage the maximum dollar value in emergency school repairs.

B. Paying the interest costs on state or local school modernization bonds

School districts last year issued nearly $33 billion of long-term debt, virtually all of it in the form of tax-exempt municipal bonds. While a seemingly large amount, these bonds comprise approximately 10 percent of the total resources needed for school modernization.

This shortfall exists, in part, because tax-exempt bonds are inherently inefficient and inequitable. States and school districts are rarely able to reduce their interest costs by the full amount of the cost to the federal treasury of the tax exemption. In fact, as much as 35 cents out of each dollar of the federal subsidy goes to high-income taxpayers without benefiting the school districts in need of assistance.5 By covering the interest costs on school modernization bonds, the federal government would remove these inefficiencies and help states and localities leverage many more school modernization resources.

One way the federal government can do this is by issuing federal tax credit bonds: debt obligations in which investors receive a tax credit from the U.S. Treasury instead of an interest payment. The borrower -- the state government or school district -- is responsible only for the repayment of the principal.

The framework for issuing federal tax credit bonds already exists:

In 1997, Congress created Qualified Zone Academy Bonds (QZABs) and authorized $800 million to leverage repair or renovation of existing public schools. In 1999, Congress extended this pilot tax credit bond program through 2001 and expanded it by an additional $800 million. As of April 1, 2000, individual school districts had issued bonds amounting to $400 million of the currently authorized $1.6 billion volume.

Bipartisan legislation introduced in the 106th Congress, the America's Better Classrooms Act (H.R. 4094), would have improved upon the QZAB program and authorized a second, larger, federal tax credit bond initiative -- Qualified School Construction Bonds (QSCBs). This new program, supported by a majority of members of the House of Representatives in the 106th Congress, would authorize tax credits to pay the interest on $22 billion in school construction, repair and renovation bonds. Sixty percent of the bond volume would be allocated to state Departments of Education based on the school-age population. The remaining 40 percent would be allocated directly to larger school districts with a high proportion of households living below the poverty line, as well as to other districts in particular need of assistance.

Tax credits for the interest on school modernization bonds offer an ideal approach to helping states and localities finance school modernization:

• Tax credits help foster an effective local/state/federal partnership. The federal government would provide the necessary resources but leave decisions about which schools to build or repair to states and localities.
• Tax credits create no additional bureaucracy. Existing government departments would implement the program.
• These bonds are fiscally sound. An appropriation of $1.76 billion over five years in federal tax credits would leverage $25 billion in bonds, with every dollar going to repair or construction.
• Tax credits would free up local monies normally spent on bond interest for additional investments in teaching and learning.

Tax credits are merely one means by which the federal government can address the interest costs of school construction bonds. A direct federal interest subsidy also would provide the needed assistance. NEA strongly advocates passage of a federal initiative to cover the costs of interest on school modernization bonds, either through tax credits or a direct subsidy, to finance America's critical school modernization needs and make sure no child is left behind in an unsafe or inadequate classroom.

C. Creating a "Fannie Mae" for school modernization

Even with the passage of federal tax credit bonds, states and localities would face significant hurdles in financing capital improvements because the pool of potential investors would remain limited. For example, whether they are federal tax credit bonds, tax-exempt bonds or short-term tax anticipation notes, school-backed securities are usually not an attractive investment option for institutional investors. Funding a mechanism that would facilitate the pooling of school securities could enable school districts to reach the necessary market of investors.

The National Education Technology Funding Corporation ("Eddie Tech"), authorized in the Telecommunications Act of 1996, offers a creative and timely solution. Eddie Tech was established as a private, non-profit entity authorized to provide financial assistance to elementary and secondary schools for the acquisition of high-capacity Internet and other technology-related capital improvements. To date, however, Eddie Tech remains unfunded and non-operational.

If funded, Eddie Tech could provide school districts the full range of financing tools available in other financial markets. Essentially, Eddie Tech could offer taxable securities for institutional investors and create a secondary market for its portfolio, similar to Fannie Mae's role in mortgage-backed securities. Through credit enhancement and leveraging, Eddie Tech could make school-backed securities a more attractive option for institutional investors. It would also lower transaction costs for school districts.

With action by the Administration and Congress, Eddie Tech could provide an effective structure for issuing school modernization bonds.

The American public overwhelmingly supports a significant federal investment in public school repair, renovation, and modernization. It transcends partisanship and geography, recognizing the need to invest in education now in order to ensure America's place in the global economy of tomorrow. Creating an effective federal/state/local partnership to address critical school modernization needs would send a message to every student, teacher and school employee that America values nothing more than education. They will respond to that message with results.

Meeting the needs of the public schools is well within America's capacity as a Nation. NEA strongly urges the Bush Administration and the 107th Congress to develop and enact a legislative package that provides meaningful investment in school modernization and leaves no child behind in crumbling classrooms.

III. Summary of NEA's School Modernization Recommendations

In every state in America, more than three of every five public schools need repairs or upgrades to reach good condition. Eleven million children attend public schools that are in less than adequate condition; 3.5 million children attend a school in poor condition.

To modernize every public school so that every child learns in a classroom that maximizes the opportunity for excellence requires an investment of $321.9 billion over the next 10 years.

The National Education Association recommends creation of a federal/state/local partnership to leverage the modernization of every public school. Building on existing federal initiatives and frameworks, NEA urges the Administration and Congress to:

• Invest $2 billion annually in emergency grants and loans for the most urgent school repairs;
• Pay the interest costs on state or local school modernization bonds, either through expansion of federal tax credit bond initiatives or direct interest subsidies; and
• Turn the National Education Technology Funding Corporation ("Eddie Tech") into a pooling mechanism for the issuance of school modernization bonds, similar to the role Fannie Mae plays in the home mortgage market.

1 American Institute of Architects.
2 U.S. General Accounting Office, "School Facilities, Profiles of School Condition by State," 1996.
3 U.S. Department of Education, "Baby Boom Echo: Growing Pains," 2000.
4 American Institute of Architects.
5 Edward V. Regan, "A New Approach to Tax-Exempt Bonds," The Jerome Levy Economics Institute of Bard College Public Policy Brief, No. 58, 1999, p. 7.

source: http://www.nea.org/lac/bluebook/environ.html