Agenda - 03-30-1995 - II - Laserfiche WebLink

Browse Search

8 school La« Bulletin ��in[er 199j Figure 6 Figure 7 Spending for Capital deeds, 1983-93,as a Percentage Spending for Capital Needs,1984-93,as a Percentage of Schools'10-Year Needs Reported in 1988,by County of Schools' Earmarked State Aid, 1984-93,by County 100 or More I I 300 or more 8 75-99 I4 v 200--299 7 j Z 50-741 26 175-199 to �._ z o�v 150-174- 9 35--19 16 100-149 19 25-34 I1 v ti 75-99 20 C_ ss - cn 15-24 16 50-74 7 Less than 15 6 Less than 50 t=5 Number of Counties Number of Counties rather than spend the aid or its own funds on new con- of$250 million borrowed by Durham and Wake coun- struction.18 ties; borrowing by the 24 other counties that borrowed Counties that spend more than they receive in that year totaled $454.7 million.) Altogether the coun- state aid do so by spending more than the earmarked ties borrowed $1.5 billion for school construction be- portion of sales tax revenues, or by providing addi- tween 1983 and 1993. Most of that occurred from 1989 tional funds from local sources. The most effective way to 1993, when borrowing totaled$1.39 billion, equal to for a county to take advantage of state aid is to leverage more than one-third of the total statewide ten-vear it by issuing school construction bonds and using ear- needs reported in 1988. marked sales tax receipts to pay debt service payments. Of course, these trends in county borrowing re- 4.Did Counties Leverage State Aid by Borrow- flect other factors in addition to receiving state aid. ing for School Construction, or Did They Pay Off First,-the trend toward lower interest rates made bor- School Indebtedness? Figures 8 and 9 show the dra- rowing more attractive. Interest rates were very high matic rise since 1984 in the use of debt financing for during-the early 1980s and low during the early 1990s. school construction (the numbers include a few install- Municipal bond rates exceeded 11 percent in 1981 and ment and lease-purchase agreements but exclude bor- 1982.20 From 1985 to 1990, rates remained fairly stable rowing to refinance previous debt at lower interest between 7 and 8 percent, and then fell to 5.6 percent in rates).19 There was no borrowing during fiscal years 1993 before rising somewhat in late 1993 and 1994. 1981 and 1982, and during 1983 and 1984 all borrow- Second, during the early 1980s almost all counties ing totaled only $2.3 million. Between 1985 and 1993, were expecting declining or stable enrollments, while all except 29 counties borrowed for school construc- at the end of the 1980s many school units were expect- tion, and total borrowing increased to more than $700 ing substantial enrollment increases, million in 1993. (That amount for 1993 includes a total As noted, borrowing allows counties to leverage state aid, as well as local resources, to obtain funds to meet needs. From 1986 to 1993, borrowing equaled at 18. Earmarked funds from the 1983 sales tax can be used to pay off least 50 percent Of the amount Of state aid received in past debt, while funds from the 1986 sales tax can be used to pay off only debt incurred in the five years prior to the effective date of the tax in each 52 counties. Borrowing exceeded the amount of state county. which was during the 1986-87 fiscal year for all counties. Not- withstanding those restrictions,a county might choose to pay off debt with money that it might have spent on school construction if state aid had not been made available. as long as it meets the maintenance of effort prod- 20. Interest rates cited are annual figures for high-grade municipal sions of the 1986 law. bonds. Ecomunic Report of the President to the Con;res 19. Data on school bond issues were provided by the N.C. Depart- Fehruarc 1994 (Washington. D.C.: Government Pnntin, Office. l yy4 i, ment of State Treasurer. Table B-72,p. 352.