Urging Federal Update for Critical Texas Program Providing for Cost-Effective School Construction Before Potential November Cutoff

Washington, D.C. – U.S. Representative Lloyd Doggett (D-Austin), U.S. Representative Jodey Arrington (R-Lubbock), and a bipartisan group of 24 other Texas members of Congress pressed the Department of the Treasury and the Internal Revenue Service to make a necessary update to a federal administrative exemption that allows Texas to continue to support cost-effective school construction in the state—and avert a potential November 2022 cutoff of funding which could cost school districts hundreds of millions of dollars.

The members write to request an update to a 2010 exemption that makes it possible for the Texas Permanent School Fund (“PSF”) to guarantee new bonds under the Texas Bond Guarantee Program (the “BGP”) for the construction of school facilities in the State. The BGP lowers the cost of financing new school construction for school districts, thereby saving taxpayers an estimated $425 million per year. The BGP has been in place for nearly 40 years, helping school districts and taxpayers save money on borrowing costs for critical school infrastructure. While the current exemption is fixed to the PSF’s value at a moment in time well over a decade ago, Texas’s school population and the need for new and updated facilities have steadily grown since then.

“For growing Texas schools serving growing Texas students, and for our state’s fiscal health, we need action now: The Administration must quickly update the exemption which allows the Bond Guarantee Program to ensure cost-effective financing for new school construction,” said Rep. Doggett. “Without this needed update, millions of taxpayer dollars will be needlessly wasted on financing costs instead of new classrooms and updated facilities.”

“Building new schools and upgrading existing facilities are important components in accommodating the State of Texas’ rapid population growth. The Public School Fund and its Bond Guarantee Program have been instrumental in helping school districts achieve lower financing costs for critical school infrastructure and meeting the needs of our K-12 students,” said Rep. Arrington. “I am proud to team up with Rep. Lloyd Doggett and the Texas Delegation in leading a letter to the Administration urging them to grant additional relief to allow the BGP to continue its assistance of public school financing. Additionally, our legislation will permanently address a provision in the tax code that inadvertently limits Texas’ ability to ensure lower financing costs to the detriment of our students, teachers, and taxpayers.”

In 2009, the PSF hit a prior exemption level and the Fund was precluded from guaranteeing newly issued construction debt for close to a year. Treasury and the IRS provided an exemption in 2010, following a Texas Delegation letter in 2009, which has given sufficient room for Texas to utilize the BGP in the financing of school projects, until now.  

Reps. Doggett and Arrington have each sent separate letters on this issue and have now worked together to lead this bipartisan delegation letter. The two Representatives have also authored legislation – the Keeping Texas School Construction Costs Down (HR 9044) – to provide a permanent fix for this recurring problem.

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