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Home > Blogs > Get on the Bus > Archives > 2007 > March > 15
Thursday, March 15, 2007
What does this mean for school construction?
(Bradford’s $14 million, K-12 school — 90 percent state funded using Tobacco money — was one of the first built under the state program when it opened in 2002.)
Did Gov. Ted Strickland Wednesday propose halting the state’s $12 billion construction program and instead earmarking dollars from Ohio’s share of the national tobacco settlement — which is funding the building program — for other purposes?
That’s what it sounded like to me. Here’s what he said in his state of the state address:
“And, finally, my budget will authorize securitizing Ohio’s tobacco settlement funds for approximately 5 billion dollars.
Armed with those resources, we will help firm the financial foundation of our school systems for at least a generation.
With 2.2 billion of that money, we will meet all current commitments of the school facilities commission. Within five years, every dollar will be in the hands of local school districts as they create facilities of the future.”
What exactly does it mean to “securitize” the tobacco money? I think what he is suggesting is we follow the example of other states that have mortgaged future income for the sake of quick cash today.
A good recent case is Illinois, which privatized its state lottery. What this means is investors paid a chunk of up front cash today ($10 billion) and in return get to keep all profits from the lottery for the next 75 years.
This is something you see TV ads for all the time: “Are you receiving payments under a structured settlement? Contact us and get your money now!”
Strickland didn’t go into detail, but I can’t see how Ohio could attract investors without crafting a deal that would be a loser for the state in the long term. Yes, we could get an infusion of cash now, but wouldn’t we have to give away more money in the long run to make the deal work?
And if we don this, will some school districts be left out of the construction program altogether? Strickland said “… we will meet all current commitments of the school facilities commission. Within five years, every dollar will be in the hands of local school districts as they create facilities of the future.”
While 190 districts have benefitted with new or rebuilt schools under the program so far, that means more than 400 districts have not gotten any state money for school construction. Some of those others may be in the pipeline for new buildings and therefore the state might be “committed” to them under Strickland’s language, but many, it seems to me, would be left out.
This was a long time worry of school districts during the Taft administration — that at some point the state would tap the school construction money and redirect it for other uses. If I’m reading Strickland’s comments wrong, someone please correct me.
(Image credit: Chris Stewart, DDN)
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