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

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].