New Jersey's Schools Development Authority and its chief executive officer, Lizette Delgado-Polanco, may not be well known to most state residents.

But state taxpayers are funding the group, charged with building new schools in some of New Jersey's poorest areas, with at least $1 billion a year. And as a result, the state's debt load of $46 billion could grow as the authority seeks approval to issue new debt to fund its operations.

But questions about the management decisions of Delgado-Polanco, a veteran union leader who is also the vice chairwoman of the Democratic State Committee, have put the authority in the crosshairs of the Legislature and the authority's own board.

UPDATE:Schools Development Authority could face scrutiny from NJ legislative oversight committee

The board's audit of hiring and a push to abolish the authority came on the heels of a NorthJersey.com and USA TODAY NETWORK New Jersey report detailing a restructuring led by Delgado-Polanco.

The authority first drew widespread attention last year with the hiring of Al Alvarez as its chief of staff after he had been accused of sexually assaulting a woman during Gov. Phil Murphy's 2017 campaign. Alvarez has denied the accusation and testified he had a "consensual" relationship with the woman, Katie Brennan, now an administration housing official.

Delgado-Polanco, Murphy's 51-year-old choice to lead the authority, earns $225,000 a year as the CEO, one of the highest salaries in state government. She sat with the Network for a 90-minute interview but the governor's office would not allow any of what she said to go on the record.

Coming Thursday on NorthJersey.com: A look at Schools Development Authority CEO Lizette Delgado-Polanco's rise to power in Gov. Phil Murphy's administration.

For the authority, created from the ashes of an earlier school construction scandal, the charges of patronage leveled at Delgado-Polanco could not come at a more critical time in its existence. It is out of money for new projects and plans to seek billions of dollars more in bonding authority that must be approved by the very political forces casting a critical eye on the agency and, possibly, by voters wary of adding debt to New Jersey's already-strained finances.

New Jersey already spends more than $4 billion a year paying down its $46 billion in debt, according to treasury documents.

No matter what, the state must fulfill a Constitutional mandate to build new schools in the state's poorest districts. Whether that is carried out under Delgado-Polanco — or by the authority as it stands today — is less certain.

"We're in a bad spot," Senate President Stephen Sweeney, who is leading the push for the authority to be abolished and folded into the Economic Development Authority, said in an interview.

History of mismanagement

It's also a somewhat familiar spot.

The authority was created in 2007 to carry out the mission of the former Schools Construction Corp., which had been established in 2002 to overhaul schools to comply with a state Supreme Court order that all public school students must receive a "thorough and efficient" education.

But the schools corporation, which had been part of the Economic Development Authority, squandered much of its $6 billion authorized spending and failed to finish about half the projects it had planned. The corporation was abolished and reconstituted as the Schools Development Authority, an independent authority under the Treasury Department. Sweeney co-sponsored the legislation creating the authority, but recently said it has "outlived its usefulness."

The SDA, as it is commonly known, secured $12.5 billion in bonding authority in 2008, representing one of the largest school construction programs in the country, according to its latest annual report. Its active projects are valued at about $2 billion, according to the authority's website.

In addition to building schools in SDA districts, the authority provides grants to hundreds of other regular districts to "address health and safety issues and other critical needs."

The 31 SDA districts stretching from Paterson to Millville have a "surprising" number of schools that were built in the early 1900s or otherwise need to be replaced or upgraded, authority board chairman Rob Nixon said. Many people who don't live in those districts would be "really shocked and disgusted" by the conditions of the schools, he said, but the authority must secure new funding authorization to replace them.

Because of a 2008 Constitutional amendment designed to restrict the state's authority to incur new debt without voter approval, it isn't settled whether new funding for the authority needs to be approved by the Legislature and governor, like a typical bill, or if it would need to be voted on in a referendum.

Theresa Luhm of the Education Law Center, which successfully fought the Abbott v. Burke Supreme Court case on school funding, said new bonding authorization "absolutely does not need to be approved by voters." Luhm cited a 2008 legal opinion from the Office of Legislative Services that says the Supreme Court "has assigned special prominence to the role" authority bonds "play in meeting the obligation imposed by the education clause" of the Constitution.

Sweeney, the Senate president, said the larger concern is the state's financial health to support the SDA's mandate. Last year, for example, Murphy halved a $1 billion education bond because, he said in a veto message, the state's debt service was on track to surpass $4 billion in 2019. Voters approved that $500 million.

The SDA's debt which taxpayers shoulder represents a quarter of what the state pays annually out of the budget toward debt service, according to the latest treasury report. In the 2018 fiscal year, the state spent $918 million on school construction; in 2019 it budgeted for $1.07 billion, according to treasury documents.

A new round of bonding authorization would add more debt borne by taxpayers in a state ranked among the worst for its finances.

"Who’s going to lend us $4 billion or $5 billion?" said Sweeney, D-Gloucester. "That’s the problem. I don’t know where we’re going to get it from."

'We're collateral damage'

The restructuring was designed with the authority's bonding re-authorization in mind, but it has instead become a liability for Delgado-Polanco.

It included laying off 26 workers, the authority has said, and hiring about three dozen new people, some of whom had personal or professional connections to Delgado-Polanco. They included a second cousin who had been accused of sexual harassment in a previous public job, the mother of her grandchild, a friend of her daughter's and former employees of the carpenters union or the Service Employees International Union, where Delgado-Polanco was state director.

Some of the new workers appear to have little to no history in their fields, but the authority has refused to provide job descriptions.

The authority has said the new hires are "highly qualified" and that many of them were brought on in external affairs roles to support the mission to secure new funding. But the restructuring and the recent negative attention on it has sown resentment among current employees as well as those who were laid off.

One longtime authority worker, who spoke on the condition of anonymity for fear of retribution, called the restructuring "absolutely unfair" because some people were hired at higher salaries but less experience than veterans. And with the threat of the authority being abolished, that worker said, many employees fear for their future.

"We feel that we're collateral damage because we do good work here," the authority worker said. "We may be out of a job now. I have trouble sleeping at night."

The authority has not said how much in bond authorization it may seek or when, but executives have indicated the urgency of being able to secure billions more.

"If we don’t have the funding, I don’t know what we’re going to do," Manuel DaSilva, an authority vice president, said at a recent board meeting.

Nixon, the board chairman, acknowledged that he is "frustrated to some degree" about the reorganization but overall the authority is worthy of praise and many employees are "doing great work," he said.

"When you strip away everything that’s going on on the personnel side of it, I think we’re probably the most successful, if not the most successful, state authority there is. Which is why you don’t hear about us," Nixon said. "I think it’s really unfortunate that we’re getting off the point of what we’re trying to do. But clearly we’ve got to be doing a better job."

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