Change Brewing for New Jersey School Construction

Published June 1, 2006

Change is coming in the next few months for New Jersey’s Schools Construction Corporation (SCC), a troubled entity charged with overseeing the construction of educational facilities in the state’s poorest districts. How much change will actually happen remains unclear, thanks to a state budget “crisis” and potential taxpayer revolt.

In February 2006, Gov. Jon Corzine (D) appointed an Interagency Working Group to examine the state’s entire school construction program, including the SCC. In a March report the group recommended folding the SCC into what it is provisionally calling the “New Authority for Schools.”

The SCC traces its roots to a 1998 New Jersey Supreme Court order requiring the state to improve the physical condition of schools in 31 of the state’s poorest districts.

The corporation was created in 2002 by executive order of former governor James E. McGreevey. It began receiving considerable scrutiny in April 2005, when a state inspector general (IG) report detailed considerable waste and mismanagement by the corporation. The IG found, among other things, that the SCC had paid private contractors hundreds of millions of dollars beyond originally contracted amounts and had furnished money for projects that were not eligible for funding, such as new parking facilities and athletic fields.

Finishing the Job

Things worsened for the SCC in June 2005, when John F. Spencer, the entity’s chief executive officer, told the state’s General Assembly the corporation would be able to complete only about half of the 135 projects it had undertaken with the $6 billion allocated for them. Two months later, Spencer announced his resignation.

When the Interagency Working Group issued its first report to Corzine on March 15, 2006, the SCC remained in dire straits, with the working group estimating the corporation would fall short on the cost of current projects by between $300 and $400 million.

“The underlying theme to all of this is gross mismanagement,” said Gregg Edwards, president of the Center for Policy Research of New Jersey.

Finding Permanent Replacements

In its March report, the working group offered both short- and long-term fixes–not just to correct SCC mismanagement, but to overhaul the state’s entire school construction initiative.

In the short run, the group recommended the SCC continue to oversee the completion of work currently underway. To ensure the work is completed as efficiently as possible, the group said a permanent CEO would have to be found for the SCC quickly–it has not had one since Spencer’s resignation became effective in September of last year–and the corporation would have to be restructured to “create a management system that can effectively and efficiently implement the goals of the school construction program.”

In the long term, the working group said, a “New Authority for Schools” should be created, one “dedicated solely to the management of school construction with a governance and oversight board.” The new entity would be a division of the state’s Treasury Department and handle all new projects and funds.

Recommitting to Purpose

In addition to discussing the operations of the SCC and its successor, the working group emphasized the state was losing sight of the broader goals of school construction. It called for “major operational and programmatic changes … necessary to move forward with a school construction program” and said “a recommitment to the broader purpose beyond the building of schools, which includes revitalization of communities linked to their urban planning and economic growth, is necessary.”

In service of these broader goals, the working group recommended communities “incorporate the investment in new facilities into the framework of an urban plan.”

But finding money for new school construction and community revitalization might be difficult. In March, characterizing the state’s financial situation as a “crisis,” Corzine released a budget containing significant statewide spending cuts. And in April, voters statewide passed only 53 percent of school district budgets, the smallest percentage since 1994, suggesting they might be getting tired of escalating school spending.

Addressing the Future

Steven Lonegan, executive director of the New Jersey chapter of Americans for Prosperity, agreed the widespread budget defeats might be a sign of a taxpayer revolt, but said state policymakers have actually “taken the budget turnout as a message from voters that [state politicians] ‘have to take over for these districts.'”

Edwards suspected that despite the current tough budget talk, school construction would eventually get more funding.

“When [Corzine] thinks things are in better shape, they’ll go back to a lot of spending,” Edwards predicted.

On May 17, the working group published another report, summarizing its findings and recommending that more schools be restored as quickly as possible. At press time, the funding for that project appeared to be an ongoing source of debate.

Neal McCluskey ([email protected]) is a policy analyst at the Cato Institute’s Center for Educational Freedom.

For more information …

Working Group Report,

Schools Construction Corporation,

Americans for Prosperity New Jersey,

“Waste Plagues NJ School Construction,” by Neal McCluskey, School Reform News, October 2005,