2023 -- H 6221

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LC002616

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

     RELATING TO EDUCATION -- FOUNDATION LEVEL SCHOOL SUPPORT

     Introduced By: Representatives Messier, Alzate, Kazarian, Cruz, Henries, Stewart, and
Shallcross Smith

     Date Introduced: March 29, 2023

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. WHEREAS, Pursuant to Article XII of the Rhode Island Constitution, it is

the duty of the State of Rhode Island (the “state”) and the Rhode Island general assembly to promote

public schools as the diffusion of knowledge is essential to the preservation of the rights and

liberties of the Rhode Island people; and

     WHEREAS, It is the duty of the state and the Rhode Island general assembly to adopt all

means which they deem necessary and proper to secure to the people the advantages and

opportunities of education and guarantee adequate public school housing for all public school

children in the state; and

     WHEREAS, School facilities provide more than a place for instruction. The physical

learning environment contributes to the successful performance of educational programs designed

to meet students’ educational needs, and good educational outcomes depend on safe healthy school

buildings. Every student needs a safe, healthy, and sanitary learning environment that promotes

student learning and development; and

     WHEREAS, School buildings in various municipalities and school districts in Rhode

Island are in need of major repairs and upgrades, presently interfere with the effective operation of

schools, and negatively affect the health, safety and welfare of the children of such municipalities

and school districts; and

     WHEREAS, At the general elections held on November 6, 2018, and November 8, 2022,

the electors of the State of Rhode Island approved a total of $500,000,000 in general obligation

bonds of the state to provide funding for construction and renovation of public schools; and

     WHEREAS, The state currently provides state housing aid reimbursement to

municipalities and districts for school housing construction as a percentage of debt service; and

     WHEREAS, The state’s reimbursement costs are directly related to the interest rates the

municipalities and school districts pay on their general obligation school bonds; and

     WHEREAS, The state is able to issue appropriation-backed bonds at lower interest rates

than many municipalities and districts are able to obtain on their general obligation bonds; and

     WHEREAS, It is less costly for the state to finance its share of a school project at lower

interest rates than for such municipalities and districts to finance the projects at higher interest rates

and seek state housing aid reimbursement from the state. NOW THEREFORE:

     SECTION 2. Section 16-7-40 of the General Laws in Chapter 16-7 entitled "Foundation

Level School Support [See Title 16 Chapter 97 — The Rhode Island Board of Education Act]" is

hereby amended to read as follows:

     16-7-40. Increased school housing ratio.

     (a)(1) In the case of regional school districts, the school housing aid ratio shall be increased

by two percent (2%) for each grade so consolidated.

     (2) Regional school districts undertaking renovation project(s) shall receive an increased

share ratio of four percent (4%) for those specific project(s) only, in addition to the combined share

ratio calculated in § 16-7-39 and this subsection.

     (b) In the case of projects undertaken by districts specifically for the purposes of school

safety and security, the school housing aid share ratio shall be increased by five percent (5%) for

these specific projects only, in the calculation of school housing aid. The increased share ratio shall

continue to be applied for as long as the project(s) receives state housing aid. In order to qualify for

the increased share ratio, seventy-five percent (75%) of the project costs must be specifically

directed to school safety and security measures. The council on elementary and secondary

education shall promulgate rules and regulations for the administration and operation of this

section.

     (c) For purposes of addressing health and safety deficiencies as defined by the school

building authority, including the remediation of hazardous materials, the school housing aid ratio

shall be increased by five percent (5%) so long as the construction of the project commences by

December 30, 2023 2024, is completed by December 30, 2028 2029, and a two hundred fifty

million dollar ($250,000,000) general obligation bond is approved on the November 2018 ballot.

In order to qualify for the increased share ratio, twenty-five percent (25%) of the project costs or a

minimum of five hundred thousand dollars ($500,000) must be specifically directed to this purpose.

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     (d) For purposes of educational enhancement, including projects devoted to the

enhancement of early childhood education and career and technical education, the school housing

aid ratio shall be increased by five percent (5%) so long as construction of the project commences

by December 30, 2023 2024, is completed by December 30, 2028 2029, and a two hundred fifty

million dollar ($250,000,000) general obligation bond is approved on the November 2018 ballot.

In order to qualify for the increased share ratio, twenty-five percent (25%) of the project costs or a

minimum of five hundred thousand dollars ($500,000) must be specifically directed to these

purposes.

     (e) For replacement of a facility that has a facilities condition index of sixty-five percent

(65%) or higher, the school housing ratio shall be increased by five percent (5%) so long as

construction of the project commences by December 30, 2023 2024, is completed by December 30,

2028 2029, does not receive a bonus pursuant to subsection (f) or subsection (g), and a two hundred

fifty million dollar ($250,000,000) general obligation bond is approved on the November 2018

ballot. In order to qualify for the increased share ratio, twenty-five percent (25%) of the project

costs or a minimum of five hundred thousand dollars ($500,000) must be specifically directed to

this purpose.

     (f) For any new construction or renovation that increases the functional utilization of any

facility from less than sixty percent (60%) to more than eighty percent (80%), including the

consolidation of school buildings within or across districts, the school housing aid ratio shall be

increased by five percent (5%) so long as construction of the project commences by December 30,

2023 2024, is completed by December 30, 2028 2029, and a two hundred fifty million dollar

($250,000,000) general obligation bond is approved on the November 2018 ballot. In order to

qualify for the increased share ratio, twenty-five percent (25%) of the project costs or a minimum

of five hundred thousand dollars ($500,000) must be specifically directed to this purpose.

     (g) For any new construction or renovation that decreases the functional utilization of any

facility from more than one hundred twenty percent (120%) to between eighty-five percent (85%)

to one hundred five percent (105%), the school housing ratio shall be increased by five percent

(5%) so long as construction of the project commences by December 30, 2023 2024, is completed

by December 30, 2028 2029, and a two hundred fifty million dollar ($250,000,000) general

obligation bond is approved on the November 2018 ballot. In order to qualify for the increased

share ratio, twenty-five percent (25%) of the project costs or a minimum of five hundred thousand

dollars ($500,000) must be specifically directed to this purpose.

     (h) For consolidation of two (2) or more school buildings, within or across districts into

one school building, the school housing aid ratio shall be increased by five percent (5%) so long as

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construction of the project commences by December 30, 2023 2024, is completed by December 30,

2028 2029, a two hundred fifty million dollar ($250,000,000) general obligation bond is approved

on the November 2018 ballot, and does not receive a bonus pursuant to subsection (f) or subsection

(g). In order to qualify for the increased share ratio, twenty-five percent (25%) of the project costs

or a minimum of five hundred thousand dollars ($500,000) must be specifically directed to this

purpose.

     (i) Any regionalized and/or non-regionalized school district receiving an increased share

ratio for a project approved prior to July 1, 2018, shall continue to receive the increased share ratio

for as long as the project receives state housing aid.

     (j) For any projects which have received approvals, including passage of an enabling act

by the general assembly, otherwise required by law for the issuance of school bonds or capital

leases, the state may, in lieu of providing state housing aid reimbursement on debt service on a

municipality’s or district’s school bonds enter into a financing agreement (“financing agreement”)

to fund its payment obligation if such financing arrangement will result in a savings to the state

rather than paying state housing aid as a reimbursement on the municipality’s or district’s debt

service, as projected by a municipal advisor registered with the United States Securities and

Exchange Commission. The state, acting through the governor and the general treasurer, may

finance the state’s housing aid contribution directly through bonds issued by the Rhode Island

health and educational building corporation (the “corporation”) and execute financing agreements

with the corporation. The amount financed by the corporation bonds and the state financing

agreement for any project shall not exceed the principal amount, plus original issue premium, if

any, required to finance the state’s contribution to the project including any such additional amount

as is required to finance costs of issuance, funding of debt service reserves, if required, and

capitalized interest on the corporation bonds. The corporation bonds will not constitute

indebtedness of the state or any of its subdivisions or a debt for which the full faith and credit of

the state or any of its subdivisions is pledged. The state’s payment obligations on the corporation’s

bonds pursuant to the financing agreement shall be subject to, and dependent on annual

appropriations made by the general assembly. From and after the date that the governor and the

general treasurer enter into such a financing agreement, the financed project shall not be eligible

for state housing aid reimbursement calculated pursuant to § 16-7-39 but shall be eligible for state

housing aid “bonus” incentives pursuant to § 16-7-40 and foundational aid offered on a pay-as-

you-go basis pursuant to § 45-38.2-4. No corporation bonds shall be issued to finance the state’s

housing aid contribution for a project unless the project shall be approved by the Rhode Island

department of education. The corporation bonds and the financing agreements of the state

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authorized by this section shall not be subject to chapter 18 of title 35 (“public corporation debt

management”). The governor and the general treasurer on behalf of the state are hereby authorized

to execute such financing agreements and other papers as they deem necessary or desirable to carry

out the intent of this section and are also authorized to take all actions and execute all documents

or agreements necessary to comply with federal tax and securities laws, which documents or

agreements may have a term coextensive with the maturity of the corporation bonds authorized

hereby, including Rule 15c2-12 of the Securities and Exchange Commission (the “rule”) and to

execute and deliver a continuing disclosure agreement or certificate in connection with the

corporation bonds in the form as shall be deemed advisable by such officers in order to comply

with the rule.

     (k) The deadlines for construction and completion set forth in § 16-7-40 are not related to,

or conditioned on, the two hundred fifty million dollar ($250,000,000) general obligation bond

approved by state voters on the November 8, 2022 ballot. Increased housing aid provided for in

this section is funded from state bonds proceeds, annual state appropriations and other sources.

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

     RELATING TO EDUCATION -- FOUNDATION LEVEL SCHOOL SUPPORT

***

     This act would authorize the state to enter into financing agreements with the Rhode Island

health and educational buildings corporation (the “corporation”) in lieu of providing state housing

aid reimbursement if such financing arrangement would result in a savings to the state rather than

paying state housing aid as a reimbursement on the municipality’s or district’s debt service. School

projects funded in this manner would not be eligible for state housing aid reimbursement calculated

pursuant to § 16-7-39 but would be eligible for state housing aid “bonus” incentives pursuant to §

16-7-40 and foundational aid offered on a pay-as-you-go basis pursuant to § 45-38.2-4. No

corporation bonds would be issued unless the school projects had been approved by the Rhode

Island department of education. This act would also amend the commencement and completion

deadlines for increased housing aid bonus points by one year.

     This act would take effect upon passage.

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