HOUSE BILL REPORT

HB 2378

BYRepresentatives Leonard, Holland, Walker, Cole, Nutley, Pruitt, Prentice, Kirby, Heavey, Ebersole, G. Fisher, Peery, H. Sommers, Miller, Winsley and Wineberry

Changing the authority of educational service district boards with regard to the purchase and sale of property used for the operation of the educational service district.

House Committe on Capital Facilities & Financing

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (13)

      Signed by Representatives H. Sommers, Chair; Rasmussen, Vice Chair; Schoon, Ranking Republican Member; Betrozoff, Bowman, Braddock, Fraser, Heavey, Jacobsen, Peery, Rector, Wang and Winsley.

House Staff:Barbara McLain (786-7135)

AS REPORTED BY COMMITTEE ON CAPITAL FACILITIES & FINANCING

FEBRUARY 3, 1990

BACKGROUND:

Educational Service Districts (ESDs) receive funding from three main sources:  state allocations, competitive state and federal grants, and cooperative agreements with school districts.  State funding is based on statutorily defined "core services" provided by each ESD.  State funds make up as little as 5 percent of an ESD's budget.

Overhead costs such as housing for the ESD's offices are included in cooperative agreements and as part of the state funds allotted for core services.  ESDs have authority to enter into contracts for up to 20 years to rent or lease building space.  The service districts also have authority, with prior approval of the State Board of Education, to purchase or otherwise contract for real or personal property necessary for the operation of the ESD.

Since ESDs do not have taxing authority, they cannot issue bonds for the purchase of buildings or other real property.  Some ESDs have been able to purchase facilities through lease-purchase agreements.

SUMMARY:

SUBSTITUTE BILL:  Educational Service Districts (ESDs) are given authority to borrow funds to acquire real or personal property necessary for the operation of the ESD, subject to whatever provisions the State Board of Education may establish for such an acquisition.  When borrowing funds, the ESD may pledge as collateral the property being acquired.  Borrowing requires the existence of a note or other instrument between the district and the lender.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  ESDs are authorized to pledge as collateral the property to be purchased with borrowed funds.  Borrowing requires the existence of a note or other instrument between the district and the lender.

House Committee ‑ Testified For:    Terry Lindquist, Superintendent, Educational Service District 121 and Hugh Spitzer.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    ESD 121 will soon lose its lease for its current building.  There are no other vacant school buildings available.  ESDs may acquire facilities through a lease-purchase agreement, but the interest charged is higher than conventional tax exempt borrowing. A better solution would be to allow ESDs to borrow funds to purchase needed facilities.

House Committee - Testimony Against:      None.