School Building Authority Adjusting To Funding Infusion

Higher Costs Point To Continuing Discussions About Revenue

Source: State House News Service, Colin A. Young, 8/31/23 1:51 PM

AUG. 31, 2023.....Officials at the Massachusetts School Building Authority highlighted the resources and flexibility that the new state budget provided for it and its inflation-impacted projects, and said they're in active conversation about what "even more support" for the agency that helps cities and towns build or renovate their schools could include.

School building projects have become more complicated in recent years amid economic volatility and supply chain issues, and the escalation in construction prices has outpaced the growth in MSBA funding limits. The Senate budget chief said this year that 30 school construction projects around the state entered into arrangements for MSBA support grants and have since seen "COVID-related supply side inflation" push project costs up by more than $300 million.

The new annual state budget raised the annual cap on the amount of grant money the MSBA can approve in a fiscal year to $1.2 billion and increased the rate at which that cap can grow from a maximum of 4.5 percent annually to 6.5 percent annually. It also excluded grants under the MSBA's accelerated repair program from the annual cap calculation and directed $100 million towards MSBA capital supports for districts facing high project costs due to inflation.

"The Legislature has provided the MSBA resources and flexibility to assist districts partnering with the MSBA. We are very appreciative of the work done to bring this legislation forward. Based on the increase in the annual cap from approximately $890 million to $1.2 billion, staff are planning on recommendations for the October board [meeting] that include a number of items," MSBA Executive Director Mary Pichetti said at a meeting Wednesday.

She added about the cap increase that, "Review is currently underway of a one-time, higher-than-typical increase based on this change, with the specific information to be shared on September 6. Staff will continue to study the MSBA's financial capacity to further maximize the availability of grants, including a review of any impacts from this expanded program on the capacity in the construction market."

Pichetti also said that the changes related to the accelerated repair program, which temporarily paused its application process last fall, have agency staff preparing to begin accepting applications again in January with a focus on window, door and roof repair or replacement.

And instead of offering funding to repair or replace boilers through the accelerated program, Pichetti said the agency is "proposing a study to understand what would be needed to bring forward a change to electric and consider boiler replacement using heat pump conversions."

The executive director also said the MSBA is working with the comptroller's office to get its hands on the $100 million that the state budget appropriated for supplemental grants and that the MSBA staff "will need to work with each district to finalize the documentation needed to process and amend existing funding agreements."

Following Pichetti's update, board member Sean Cronin chimed in to say that while what the executive director presented was helpful and "obviously great news on all the fronts," it amounted to a "short-term band-aid" and not a solution to long-term challenges the agency faces.

"I think there's a larger fix to the problem. And the problem being defined as not having enough money to do as many projects or to increase caps so that poorer districts get closer to their real reimbursement rate," Cronin, the Department of Revenue's senior deputy commissioner for local services, said.

Cronin and Pichetti said they have been having conversations along those lines. The executive director said that the MSBA and its finance team "have begun to put together some information that I think will be able to form the basis of a good conversation."

"The bigger picture item that you're taking a look at here is, certainly would need more legislative action, I think, in order to make that work. But the important thing is getting the work ready for conversation so that we can work towards what even more support might look like," Pichetti said. "I think that's a really great point that you made. It's what have we been talking about since we had to do the [accelerated repair program] pause last October: Is it a program that does more or pays more? And there's a direct balance between those two numbers."

The update was part of the first executive director's report from Pichetti, who succeeded Jack McCarthy as head of the MSBA earlier this summer. Pichetti has worked at the MSBA since 2007; first as director of construction and since 2008 as the agency's director of capital planning.

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08/31/2023