It’s Time to Separate Facilities From Operations

The way we build, manage and maintain public school buildings is inefficient and exacerbates some of the biggest challenge in public education. With the recent growth of the public charter school sector, the rise of tech-infused learning models, and the migration of student populations across options and geographies, it’s time for us to rethink the relationship between learning programs and public facilities. It’s time to decouple the delivery and the ownership of school buildings.
School districts are usually granted two special powers by their state constitution: the right to grant diplomas and the right to levy taxes. Most districts run an annual operating levy that (which in most states) augments state funding. Districts periodically propose a tax to build and remodel schools.
There are some old problems with this way of provisioning facilities:

1. The tax base (specifically aggregate value of property per capita) is much lower in high poverty communities; hence beautiful schools for the rich, and run down schools for the poor.
2. Most districts can only raise money in big chunks repaid over 30 years. In between districts don’t have a reliable way to pay for regular maintenance. As a result, districts let schools get really run down and then do major remodels when they can raise money (state matching incentives can exacerbate this perverse behavior).
3. Because few districts can pass a separate levy for technology (and other 3-5 year assets), districts buy lots of technology and pay for it with 30 year bonds.
4. A medium sized district with 20,000 kids probably has a real estate portfolio worth several billion dollars, but there is often no one charged with actively managing the portfolio and balance sheet.

There are some new problems with the way we provision schools:

1. District schools are not the only game in town any more. There are more than 6000 charter schools nationwide and most of them don’t have access to local funding or public facilities. As former head of the National Alliance of Public Charter Schools Nelson Smith noted recently, this is big flaw in public policy–about 5% of kids attend schools with no means for provisioning facilities. Charter schools typically can’t access bond funding or other low-interest financing vehicles. Without local funding they usually operate on a smaller budget and then have to pay rent.
2. Not only do public charter schools lack a facilities provisioning mechanism, in most urban areas they are treated with hostility and can’t even access unused or underutilized existing district facilities. The combination results in a huge waste of public facilities and resources.
3. There is a new digital layer of opportunity. We’re early in the shift from education as a place to learning as a bundle of personal digital services. With expanded full and part time online opportunity and an emerging range of blended models, it’s time for a new way to provision space.
4. The shift to personal digital learning requires an investment in creating and maintaining a high access environments that blend online and onsite learning. Blended learning requires a different kind of facility, one that has big open flexible spaces (see the 10 design principles of blended learning).

So, we have a combination of old and new problems–a big mismatch between taxing authority and need. That’s why it is time to separate school operations from facilities provisioning. Following is an immodest proposal to completely change how facilities are provided for public education programming
Move facilities into a public trust. Moving school facilities into a public trust would enable one public entity to focus entirely on ensuring that facilities were used to promote efficiency and school quality. It could solve the access challenge for charters, create new funding streams to finance infrastructure upgrades to promote technology, and help districts to build endowments that could be reinvested in other areas like instructional innovation and teacher quality.
A new and more flexible provisioning mechanism would benefit the creation of innovative small flex schools linked to community assets (e.g., museums, libraries, colleges, employment clusters) or addressing specific community needs.
It will probably take a constitutional amendment and/or really good incentives to convince districts to transfer facilities to a trust. Urban district could, as an alternative, sell properties to a public Real Estate Investment Trust (REIT). Like the sale of student loan portfolios that formed Lumina and KnowledgeWorks and the sale of nonprofit hospital that formed Colorado Legacy Foundation, property sales could yield huge proceeds.
Incentives for transfer could include:

• Districts could keep a portion of the sale proceeds to form their own endowment
• The trust would provide attractive lease rate/terms
• The trust would make investment in modernization including flexible blended learning spaces and upgraded power and broadband access.

Provide state fixed asset funding. In addition to (weighted, portable, performance-based) operating funding, states should add about 10 percent for facilities and fixed assets (e.g., $50 on top of $500 for a semester credit). The additional funding would allow any authorized school or provider to lease facilities and buy equipment.
A small increase in state tax (perhaps a blend of revenues) would be offset by the reduction in local facilities tax.
Performance contracts for operators. While we’re making sweeping changes, states could put all school operators and education service providers on a performance contract–authorizing as the accountability system. School operators could match their contract term with their lease term. If their enrollment grows, they can lease more space.
The basic inequity of locally provisioned facilities and the growing number and type of educational providers suggests that it’s time for a new solution. We need to separate service provision from facilities development and management. It won’t be easy but it needs to happen.
Thanks to the CEE-Trust.org for their commitment to this cause and contribution to this blog. For more, view Carri Schneider’s “Buildings That Teach” on Getting Smart and Michael Dearmond’s “Getting Out of the Facilities Business.” This blog first appeared on EdWeek.