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Arizona’s nearly decade-old state program to pay for building new schools will pose a steadily increasing burden as student enrollment continues to surge amid rising construction costs, a legislative watchdog agency warned Aug. 17.
The state spent nearly $2 billion under the Students First program administered by the School Facilities Board from when the law was enacted in 1998 through the end of 2006.
During that period, the state has authorized districts to build 231 elementary schools, 42 middle schools and 53 high schools at state expense.
The recently ended 2006-2007 fiscal year added another $330 million of spending for school construction.
Higher costs looming
Larger costs are likely in coming years — totaling $2 billion to $2.4 billion over the next five years — according to the first comprehensive review by the Auditor General’s Office of the program’s performance.
Higher construction costs and enrollment increases “are converging that will place increasing demands” on the new school building program and its funding source, the states’ general fund, the audit said.
K-12 student enrollment grew by almost 19 percent from 1999 to 2006 and projections call for an increase of an additional 27 percent by 2017, the auditors said.
Meanwhile, approved inflation adjustments for construction costs exceeded 12 percent in each of the past two years.
While the state has used lease-purchase arrangements to borrow some of the money in the past, the Republican-led Legislature has successfully pushed Democratic Gov. Janet Napolitano to go to a cash-only approach more recently.
A $400 million outlay for school construction would represent about 4 percent of the state’s current $10.6 billion general-fund budget.
Securing new school money a concern since program began
The difficulty of squeezing enough dollars out of the state budget for new schools has been a concern for the program’s entire existence, periodically prompting lawmakers to call for changes but resulting in no action.
The auditors’ report was generally favorable but said improvements are needed in several administrative areas, including increased oversight by the School Facilities Board of school districts’ spending of maintenance money.
The auditors also questioned whether the board’s interpretations of its minimum adequacy guidelines, which produced $31.8 million in additional costs in the last fiscal year, went beyond its legal authority.
The interpretations included new or revised standards for carpeting, gym floors, exterior lighting, canopies, playground structures and landscaping.
The board, which had been urged by some districts to expand its funding criteria, responded to the audit by saying its funding practices conform to state law. Nonetheless, it agreed to request a formal attorney general’s opinion on the issue.
Even before the release of the audit, the programs’ rising costs and the board’s inclination to provide additional funding for some construction projects were already concerns for some lawmakers.
“We’re not asking you to not build a school,” House Appropriations Committee Chairman Russell Pearce, R-18, told the board’s executive director during an oversight hearing Aug. 16. “We’re asking you to not put in extras.”
Pearce cited an emerging shortfall in the current state budget because of a smaller-than-expected surplus at the end of the last fiscal year. “It is a serious crisis,” he said.
Executive Director John Arnold replied that the possibility or desirability of cutting back school construction costs because of the recently spotted budget problem hadn’t been on his radar.
“In all honesty, until this moment I hadn’t considered that,” Arnold said. “At this time we do not have plans to scale back the design standards.”