Cost of Student Success Act catches schools by surprise

Special Reports

One of Oregon's largest districts has "sought legal counsel"

North Marion Intermediate School, as seen May 2019 on Google Maps.

AURORA, Ore. (KOIN) — School districts across Oregon that are already undergoing bond work are facing price increases upwards of six figures now that the Student Success Act has taken effect. The new charges are coming as a shock to many in the educational community.

The Student Success Act passed the Oregon Legislature last spring. It took effect January 1 of this year. It is supposed to raise $1 billion per year for education by levying a .57% tax on gross receipts for businesses with $1 million or more in sales.

The North Marion School District in Aurora passed a $42.2 million bond in 2017. Construction is underway as of spring 2019, but last week the district received a change order for more than $180,000 from its contractor, Todd Construction, according to Linda Murray, the district’s business manager.

Murray told KOIN 6 News the increase in cost is due to Todd Construction having to cover the cost of the new tax.

It could have been worse: Since North Marion is already mid-construction, the cost increase is only being applied to work done after the first of the year, Murray said.

The extra money will have to come from somewhere, Murray said, though it’s not clear yet where the belt will tighten. Murray added that construction costs won’t be the only increases for the district. Everything from transportation to toilet paper could get more expensive.

“I don’t believe it was anticipated in the passing of the Student Success Act,” said Alex Pulaski, director of communications for the Oregon School Boards Association. “It’s safe to say it’s a surprise.”

According to Pulaski, 39 school bond measures passed in Oregon since 2017. He isn’t sure how many of those will be impacted, since it is up to individual contracting firms to decide if they want to pass the costs along.

KOIN 6 News reached out to the Salem-Keizer School District, which passed $619.7 million bond in 2018, the third largest K-12 bond in Oregon history. A spokesperson wrote that they have not experienced an increase in costs yet, but “have sought legal counsel around this as a preventative measure, and we’ve shared with our contractors that we’re not entertaining any change orders at this time.”

Dozens of schools in the Salem-Keizer School District are getting improvements as part of the third-largest bond in state history (Hannah Ray Lambert/August 2019)

A spokesperson for Portland Public Schools told KOIN 6 News in an email that it’s “hard to know the exact impact yet,” but “we asked our largest contractors to give us an estimate of the potential cost and as a result we prepared for that.”

Pulaski stressed that, although the costs are surprising, they are not enormous in the world of school bonds.

“Over the past few years statewide we’ve seen a lot of districts that have passed bonds have run into sticker shock … because the construction industry is so hot in this state,” he said.

The OSBA is also not pondering any “fix” to the legislation.

“The Student Success Act is going to have an enormous positive impact on our schools overall,” Pulaski said.

Aaron Fiedler, communications director for the House Majority Office called the Act a “historic investment in Oregon’s public schools,” in an email to KOIN 6 News Monday.

“We are proud of this legislation and look forward to seeing it fully implemented. As you know, construction costs fluctuate wildly due to much bigger considerations (availability of workers, tariffs and trade wars, other costs of materials, etc.), and we’re confident that contractors and districts will be able to figure it out, just like they do with every other contingency,” Fiedler wrote.

The Act passed the Oregon legislature last year along party lines. Republicans voted against the bill, arguing in part that they believed it to be a hidden sales tax.

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