Capital Outlay

At its simplest level, capital outlay refers to the funding of fixed assets of a school district, for example, lands, buildings, and major equipment, like school buses. More specifically, capital outlay may be defined as an expenditure that results in the acquisition of fixed assets or additions to fixed assets that are presumed to have benefits for more than 1 year. In the study of education finance, capital outlay often receives special treatment because the financing of fixed assets may involve the assumption of long-term debt by a school district, often through voter-approved bond referenda. Such debt may span 10 to 30 years. The assumption of long-term debt distinguishes capital outlay from the day-to-day expenditures of school districts, which involve mainly salaries, wages, and benefits. These are commonly referred to as “operating expenditures,” and at the end of each fiscal year, school districts are expected, if not required, to show a balanced budget to local taxpayers and state lawmakers, one where revenues match or exceed operating expenditures.

Because personnel-related costs represent the bulk of school district expenditures, educational leaders and policymakers may overlook the role and importance of capital outlay. For this reason, capital outlay can and should be conceived more broadly as the physical environment of schools whose purpose is to support student learning. More recently, the physical environment has been referred to as school “infrastructure.” School consists of six components: (a) deferred maintenance, (b) new construction, (c) renovation, (d) retrofitting, (e) additions to existing buildings, and (f) major improvements to grounds. An exciting development in school infrastructure research is the emergence of a body of research over the last decade that explores the relationship between student achievement and the physical environment of schools. Presently, this research, mainly empirical in nature, shows a small but positive relationship between the condition of school facilities and student outcomes. It is hoped that this line of research will be instrumental in calling to the attention of policymakers the critical importance of adequate and equitable funding for school infrastructure. Historically in the United States, funding for school infrastructure has rested primarily with local school districts, where the quantity and quality of school facilities were directly tied to the property wealth of the community and the willingness of local taxpayers to pass bond referenda. Not surprisingly, vast inequities in school infrastructure exist within and across states, with property-poor school districts, particularly in rural and urban areas, suffering greatly. Recent research estimates that in order to address these inequities and deficiencies, school districts would require almost 2 billion dollars in new funding. Recent decisions in state supreme courts indicate that the judicial branch has begun to consider school infrastructure as a critical factor in student success and, as such, an issue of social justice that may be brought to the courts by concerned parents and citizens for redress.

In times of economic hardship, state legislatures and local taxpayers are often reluctant to reduce education budgets for staff and programs or to raise taxes in order to maintain and improve the physical environment of schools. However, even in the economic boom times of the 1990s, many state legislatures and even the U.S. Congress missed a key opportunity to invest surplus revenues in school infrastructure. Now, as national and state economies recover, a new opportunity to focus attention and funding on school infrastructure may be at hand.

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