What school bonds pay for: From San Diego to Burlingame, the crime is what’s legal

September 24, 2012 - By admin

Sept. 24, 2012

By Chris Reed

Dan Walters had a good column over the weekend about the staggering political expedience we’re seeing throughout California. But after spending many hours researching a $2.8 billion school bond being pushed by the San Diego Unified School District, I’m now certain that there’s yet another massive scam unfolding in California: a systematic attack by school districts on the integrity of general obligation bonds.

I wrote about my findings as they relate to San Diego city schools here. The short version is that the old principle that bonds should only be spent on long-term capital improvements has given way to an anything-goes approach that uses borrowed funds paid back over 30 years to pay for what should be regular school expenses. Why? To make sure there is enough money in the operating fund to pay for teachers’ salaries and benefits.

How is this possible? The old days in which rules were so tough that the California Education Code said bond funds could only be used for school buses if they lasted 20 years have given way to this fuzzy consensus about OK uses for borrowed funds:

“The construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities.”

That is from guidance the California School Boards Association gives local districts.

In San Diego, where compensation eats up 93 percent of the operating budget, that means bond funds are being used or could soon be used for laptops, iPads and the most routine maintenance, such as painting and minor repairs. Proposition Z, on the November ballot, also includes repair funds for schools that just opened five years ago.

John DeBeck, a San Diego school board member from 1990-2010, told me using bond funds to supplant operating funds has gotten far more brazen in recent years. He said that bonds could easily be written to make the supplanting of general fund spending with bond fund spending impossible, but that such language was increasingly rare. DeBeck also said bond trickery used to be more likely from district staff, but now it was likely to be cooked up by staff in cahoots with trustees.

It reminds me of what a school finance investigator told me in 1996. He said fraud in which schools and entire districts lie about their average daily attendance was rampant. ADA is the basic formula by which schools get money from the state. He told me — and a school principal in San Bernardino confirmed — that this lying wasn’t just about who came to school. It was about how they were classified. Schools get more for troubled students than normal students.

Why was it tolerated and widespread? The school finance investigator said that was because school officials viewed it as a victimless crime.

Bond scam

The school bond scam is another version of that. Using funds that aren’t repaid until 2042 to buy an iPad that may last three years is insane, but it’s a “victimless crime” as far as the scammers are concerned.

Back to my theory that mass fleecing is going on with school bonds. I am now going to use Google to find another school bond on a local ballot in California. I bet it’s full of the same vague glop as San Diego Unified’s.

OK, the Burlingame Elementary School District pops up. (Really, I didn’t rig my Google search to come up with the district where the CTA is headquartered.) It reads:

“Measure D: “To maintain excellent local schools by modernizing science labs, upgrading instructional technology/computers, adding classrooms/reopening an existing school to reduce current overcrowding, upgrading classrooms to meet current safety codes, renovating heating and electrical systems to save money, shall Burlingame Elementary School District issue $56,000,000 of bonds that cannot be taken by the State, at legal rates, to renovate, construct, acquire local neighborhood schools, sites, equipment, and facilities with independent audits, citizens’ oversight, and no money for admnistrators?”

LOL. Bingo. 30-year borrowing for computers that last two years. 30-year borrowing for basic repairs. No guarantees that the funds will not be used to supplant regular operating budget responsibilities.

As one would expect, the official yes on Prop. D website doesn’t include specifics of any kind that would counter concerns that this was just another scam to allow teachers to keep getting automatic step and column increases in pay.

Greed

Now here’s the wrinkle: In the CTA’s backyard, it appears they are particularly greedy:

“Voters in the affluent district have also signed off on two recent parcel tax measures. Unlike bond money, proceeds from a parcel tax can go toward teacher compensation. In 2010, voters renewed a 10-year, $180-per-parcel levy. The following year they approved Measure E, a four-year, $76-per-parcel tax.”

Whole story here.

Dan Walters’ column closed by noting that state Treasurer Bill Lockyer was interested in statewide legislation that would prevent school districts from floating horrible bonds in which only the interest is paid back for decades, reacting to a scandal discovered when Poway Unified was found to have borrowed $105 million that would ultimately cost $981 million.

But will Lockyer go after the way more common bond scam of using 30-year borrowing to pay for tablet computers and routine repairs?

Nah. That would require courage. The California Teachers Association is the king, and it’s good to be the king. Going after the CTA’s “puke politics” is beyond the guy who once took on Gray Davis’ “puke politics.” California’s alleged political maverick picks his spots in displaying his maverick qualities, and the CTA scares him as much as it does everyone else in his party.

I hope everyone who reads this takes a close look at school bonds in their own backyards. I bet they are as pathetic as those in San Diego Unified and Burlingame Elementary. As far as the CTA is concerned, any crime that benefits the CTA is a victimless crime. If you do so and find anything juicy, please share it with me at: [email protected].

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Comments(6)
  1. Rex the Wonder Dog! says:

    Every school district floats new bonds every two years, it is part of their strategy to fleece taxpayers while lining their own pockets.

  2. John Galt says:

    Local voters who recenhtly read Chaffey Joint Union High School District’s Prop “P” literature for a bond measure funding high school facilities in the Ontario, Montclair and Rancho Cucamonga area find no specific project list and costs, nor a total funding amount. The only reference to the bond’s cost is an estimated tax levy of $19.94 per $100,000 of assessed property value. It is quite difficult for voters to actually discover Prop “P” is actually authorizing $845,000,000 in bonds to be issued. Since critical facts and figures aren’t being communictaed to voters, one can only conclude the board is deceiving voters. Not a good way to obtain approval for a loan, is it? Additionally, this is an excessively large amount of funds to be placed in the hands of local school board members, who are often voted in because they’re active soccer moms and soccer coach dads with kids in the schools, or, retired teachers and principals known by the voters. Charter schools anyone?

  3. Wayne Lusvardi says:

    To Chris Reed
    I am not an expert on school parcel taxes but I fought a parcel tax meant to fund a loss of librarians, music and art teachers, and others in my community in 2009. Here is my understanding of how school parcel taxes work:

    A school construction bond financed with a parcel tax requires only 55% voter approval.

    A school parcel tax to fund annual operating expenses or supplemental programs (music, arts, librarians, bus drivers, etc.) requires 66% voter approval.

    Parcel taxes are NOT deducted from the state’s allocation of school funding under Proposition 98. So parcel taxes add to the local school budget. This is unlike redevelopment monies that were shifted to fund local public schools in 2010, which reduced the amount of state funding on a pro rata basis (dollar for dollar).

    Unlike property taxes, parcel taxes are not deductible for state and federal income tax purposes.

    Parcel taxes are not capitalized into property values. What I mean here is that a parcel tax is a flat tax per property owner unlike property taxes that are ad valorum (based on a tax rate on the property’s assessed value). This results in poor property owners paying the same annual tax as those with high valued properties.

    Under Prop 218, a school parcel tax that does not underwrite a school construction bond could be put back on the ballot and repealed.

    The biggest potential threat right now is not a wave of parcel tax initiatives spreading across the state but the formation of regional “Strategic Action Plan” under Prop 31 on the ballot for November. This could conceivably mandate that for a local school district to get its full share of property taxes for schools that it must form a regional “Strategic Action Plan” with other school districts. This could entail a mandate to share school property taxes between rich school districts in the suburbs (Palo Alto or San Marino) with poorer school districts (L.A. Unified or Oakland).

    The intent of Prop 31 is to allow the formation of a new layer of local government that could petition the state legislature to adopt their own welfare rules, environmental compliance requirements, etc. But that is not how it may end up. What is more likely to happen is that the legislature will use coercive powers that come with revenue sharing and disbursements to mandate that suburban school districts share their school property tax allocation with big city school districts. If such should transpire, then wealthy suburban school districts might want to push for future local parcel taxes to offset what they lost due to tax sharing under Prop 31.

    Links:
    http://www.ballotpedia.org/wiki/index.php/Parcel_tax
    http://www.orrick.com/fileupload/259.pdf

  4. Rex the Wonder Dog! says:

    Since critical facts and figures aren’t being communictaed to voters, one can only conclude the board is deceiving voters
    ==
    No, the troughies would try to rip us off, I dont believe it, say it aint so ;)

  5. phil says:

    Measure B in Mill Valley is an operating budget parcel tax. Anyone mention what a scam it is after people just passed a massive bond last year for the replacement of perfectly fine schools is shot down by the school board, teachers union, and the rest of Mill Valley’s liberal crowd. I never realized just how psycho liberals are until you mention you might not agree with what they want you to pay for.

  6. C-Lion says:

    Here is my retirement plan – move to a smaller state where the government is still controllable.
    CA’s governments, at every level, behave as though there is no tomorrow AND that the bills, conveniently, will come due AFTER they’re gotten their goodies.
    Speaking as a state native, you can keep your G-D “great weather.”

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