Committee reviews how to restart school‑construction aid, weighing bond capacity and out‑of‑state models
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Summary
At a March 31 Ways & Means hearing, state and outside witnesses reviewed options to restart school‑construction aid, including a reimbursement model, the bond bank as fiscal agent, the state's debt capacity, and public‑private partnership examples used elsewhere to speed projects and control costs.
The Ways & Means Committee on March 31 heard a broad review of options for restarting state school‑construction support and how the state might pay for it.
John Gray of the legislative council summarized the current legal landscape, noting a moratorium on the prior state school‑construction program from 2007 remains on the books and that, under existing rules, most construction costs are borne through local bond votes and property taxes. "Under current law . . . school construction costs are captured in the general state funding of public education," Gray said, and warned that bond debt approved after July 1, 2024, may count toward the excess‑spending threshold and therefore change districts' homestead tax rates.
Michael Gaughn, executive director of the Vermont Bond Bank, urged the committee to consider a fiscal‑agent role for the bond bank if the state adopts a reimbursement approach. He described the bond bank as a convenient way to "monitor that debt service payments have occurred, validate that, and then . . . reimburse that school district for those costs." Gaughn said centralized procurement and aggregating projects can help control construction‑cost escalation.
Representatives of the state treasurer's office provided the committee with current debt figures and issuance guidance. The treasurer's staff reported roughly $547 million in general obligation bonds outstanding and about $192 million authorized but unissued. They said the Capital Debt Affordability Committee (CDAC) set a guideline of roughly $50 million per year for new issuance, with scenarios showing $86 million per year might fit metrics; staff added planners had run scenarios suggesting another $50 million per year could be feasible in some cases but cautioned that larger issuance could pressure bond ratings and raise borrowing costs.
Committee members heard how other jurisdictions have structured aid. Sean Matlock, formerly Prince George's County capital director, described using public‑private partnership (P3) delivery and design‑build‑finance‑maintain contracts to accelerate construction, consolidate buildings and lock in long‑term maintenance, noting P3s permitted six schools to be designed, built and delivered within about three years. Mario Carino described Rhode Island's reimbursement model, where districts issue bonds and the state reimburses a portion of debt service over 20–30 years; reimbursement rates there range widely based on a wealth index.
The witnesses agreed there is no single technical barrier to restarting aid but emphasized tradeoffs. As David Sherr and Scott Baker from the treasurer's office put it, the state can increase capacity but must balance timing, project pipeline, workforce constraints and rating agency views. "We don't want to issue too much debt," one official said, explaining that rating downgrades increase borrowing costs for both the state and entities that rely on the state's moral obligation.
Next steps identified by the committee included refining statutory language about which debt would be excluded from excess‑spending calculations, assessing a reimbursement timeline and administrative role for the bond bank, and comparing program designs (reimbursement, census or weighted‑foundation models) against both fiscal capacity and federal maintenance‑of‑effort requirements for special education.
