EDITOR'S NOTEBOOK: INNOVATIVE FINANCE

Total expenditures for education in the U.S. are estimated to exceed $852 billion in the 2003-04 school year. It is estimated that taxpayers will invest an estimated $501.3 billion on K-12 education in the United States and an additional $350.8 billion on higher education. It may not seem like it, but spending for K-12 education has increased substantially — by 101 percent since the 1990-91 school year. When adjusted for inflation and calculated on a per-pupil basis, funding has increased seven percent in the last three years, 15 percent during the past five years and 21 percent in the last 10 years.

Even with the sizable increases in spending, we have a long way to go to meet the need. Increasing enrollment, plus a greater emphasis being placed on the value of a good education, is placing even more demand on an already overtaxed system. The question is, where will the additional funds come from? The answer — many schools are changing their buying habits to ensure the most“bang for the buck.”

Educational Buying Cooperatives

Many school districts and institutions of higher education have turned to educational buying co-ops as a way to save money on major purchases. These organizations aggregate the buying power of institutions across the country and provide goods and services to member institutions at bulk/reduced rates. The value of a buying co-op for the district’s purchasing director can go far beyond advantageous pricing for products and services. A co-op can provide access to current information on supply source, purchasing techniques and pricing — information that must be regularly updated. When it comes to products and services, co-ops can provide products and services that include computer equipment, insurance and health benefits for staff and students, energy-related services, food services, furniture and furnishing, construction materials and more, all at reduced rates.

Energy Performance Contracting

An energy performance contract is an agreement between an energy services company (ESCO) and the building owner. The contract allows the owner to finance an energy conservation project, then reimburse the ESCO and pays off the loan with the energy cost savings realized. The ESCOs provide an array of services that can include conducting a facility energy audit, identifying cost effective projects, project design, managing installation and financing the project. ESCO projects are comprehensive, which means that the ESCO employs a wide array of cost-effective measures to achieve energy savings. These measures often include the following: high-efficiency lighting, high-efficiency heating and air conditioning, efficient motors and variable speed drives, and centralized energy management systems. This is especially important with a performance contract that includes maintenance services and a guaranteed savings clause stating that if the energy cost savings are less than the lease cost, the ESCO pays the difference.

Public-Private Partnerships

Schools across the country have found that public-private partnerships can help them save on the cost of constructing new buildings, take advantage of under-utilized spaces, eliminate duplication and provide more and better facilities and services for school and community alike. The most popular shared spaces include libraries, gymnasiums and playing fields, multipurpose rooms and cafeterias, and performance space. Community colleges can be found sharing classroom space with the local high school. There are challenges to making public-private partnerships work, but the return is worth the headache. The school becomes an integral part of the community, providing services and value to all of its citizens — all in addition to the money saved!

Non-profit Foundations

One of the hottest new trends in fund-raising is locally funded and operated education foundations. Education foundations are privately operated, non-profit organizations established to assist schools to raise, handle and redirect money. Many colleges and universities already tap into endowment funds to support their programs and activities, with much of that money being raised by and solicited from alumni. Increasingly, public school districts are turning to foundations to augment, supplement or complement programs and activities currently being provided by the district. In some cases, foundations are finding it necessary to help cover basic educational expenses, especially in states with voter-approved property tax limitation measures.

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