The ABCs of Maryland’s IAC: Breaking Down the State’s School Construction Funding Process

Maryland’s growing demand for new and modernized school facilities has placed renewed attention on how school construction is funded and managed across the state. At the center of this system is the Interagency Commission on School Construction (IAC), a state agency responsible for overseeing the allocation of funding for school construction and renovation projects in partnership with local governments and school systems.

Established in 1971 and restructured most recently in 2023, the IAC now operates as an independent agency of the state government. Over the past several years, its responsibilities have grown, shifting from the Board of Public Works to a dedicated agency tasked with evaluating, approving, and funding construction requests from Maryland’s 24 local education agencies (LEAs).

With a staff of 44 employees and 9 commission members, including gubernatorial and legislative appointees, as well as state department heads, the IAC administers several large-scale funding programs. These include the Capital Improvement Program (CIP) and the Built to Learn (BTL) Act, among others.

The IAC’s FY26 operating budget totals $96 million, while capital allocations for school construction projects are just under $825 million, split among several major initiatives:

• Built to Learn Act: $371M
• Capital Improvement Program: $300M
• Healthy School Facility Fund: $90M
• Other programs including safety grants and aging school support: ~$64M

“The multifaceted challenges of modern construction projects require proactive and adept leadership,” said Alex Donahue, IAC Executive Director, earlier this year while presenting to state budget committees.

How Is State Funding Determined?

For the two largest programs, BTL and CIP, the state uses a standardized formula to determine the portion of costs it will cover. These formulas are based on:

• Student enrollment projections
• Gross area baselines (GAB) to determine how much square footage per student is eligible for funding
• Current construction costs per square foot ($416 for building only; $495 for building plus site development)

The state also applies a cost-share percentage, updated every two years, that varies by jurisdiction. This share is determined using several local economic indicators, including:

• Median income
• Enrollment growth
• Poverty rates
• Existing school debt burdens

The result is a sliding scale of responsibility. In some wealthier counties, local governments carry more of the financial burden, while less affluent jurisdictions may receive a higher proportion of state assistance.

However, many LEAs are finding it harder to keep up.

Are Resources Keeping Pace?

School construction costs have soared in the last decade. The cost per square foot has doubled since FY13, yet the CIP’s annual allocation remains virtually unchanged: $349 million in FY13 vs. $300 million in FY25.

Donahue warned lawmakers in early 2025 that “the financial gaps LEAs are facing might be the greatest the agency has ever seen.” He noted that delays and funding cuts in the legislative budget process are forcing the IAC to approve fewer projects and extend construction timelines.

Moreover, The Blueprint for Maryland’s Future, a sweeping education reform law, is adding even more pressure to the IAC's budget by mandating capital improvements without fully funding them in the existing formulas.

In some wealthier counties, governments have been able to “forward fund” school construction projects to avoid delays while awaiting state reimbursement—though that reimbursement is not always guaranteed. Less-resourced areas don’t have that flexibility, potentially leading to prolonged deficiencies in school infrastructure.

Despite the hurdles, Donahue said the IAC remains committed to “finding unique and customizable solutions for different jurisdictions” and ensuring equitable access to safe and modern learning environments.

The FY27 budget deliberations will be critical in determining how Maryland balances educational mandates with available resources. Without increased investment, both the state and local school systems may struggle to meet growing demand.

Originally reported by Conduit Street.