Will school finance scams be addressed? One of two at best

Dec. 9, 2012

By Chris Reed

The push is on to gut Proposition 13, with the nominal rationale being the urgent need to help public education by making it easier to pass parcel taxes. But will the Democratic lawmakers behind this first do anything about two huge education finance scandals? I explore this topic here.

The first is one that got international attention earlier this year after revelations that the Poway Unified School District had borrowed $105 million using capital appreciation bonds (CABs) at a long-term cost of $981 million. Why are CABs so insanely expensive? Because the interest on them builds for 20 years before the district contractually can begin to pay them off. …. 200 California school districts … have used these bonds. ….

[The less-known] second school-finance scandal [is] the increasing practice of districts all over the state of using 30-year “construction bond” borrowing to pay for routine maintenance, short-lived electronics and other needs that are supposed to be paid for by the operating budget [such as] San Diego Unified buying nearly 100,000 laptops and iPads with bonds that won’t be fully repaid until 2039.

“There are restrictions in current statutes,” [state Sen. Mark] Leno said. If 30-year bonds are being spent this way, “they’re not being used as they should. … That’s not a formula that’s sustainable.”

However, state Superintendent of Public Instruction Tom Torlakson said in an interview last month that he considered this use of bond funds understandable because of school budget woes.

On the first scam, I believe that state Treasurer Bill Lockyer’s outrage will lead to constructive change. But Torlakson’s response will be the norm, I predict, in how Democratic elected officials respond to bond insanity no. 2.

Never forget that the overriding goal of the most powerful people in Sacramento — the teachers unions — is preserving the automatic raises that teachers get for 15 of their first 20 years on the job. Few if any California Democrats will stand up to the teachers unions. The few who do are demonized and marginalized.

The result: School districts using 30-year borrowing to pay for graffiti removal will be adjudged to be just fine. Gotta keep those automatic raises coming for teachers.

4 comments

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  1. Reed's predictions are correct
    Reed's predictions are correct 9 December, 2012, 16:40

    It’s likely that the governor will end up signing the bill to be sponsored by the California Association of County Treasurers and Tax Collectors that restricts the sale of Capital Appreciation Bonds (CABs). Prop 39 (passed in 2000) allows bond proceeds to be used for furniture and equipment. There is NO WAY that will be repealed anytime soon. The masses want rich property owners to help the skools.

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  2. Dave Everett
    Dave Everett 10 December, 2012, 11:02

    Big Labor also restricts the construction on these school bonds to discriminate against non-union workers. It raises the cost of construction 13-15% as shown at http://buildmoreschools.com/. An example of this would be the recent bond at Riverside Community College District. Speaking with two of the RCCD Trustees recently, they said that they used to get between 25-30 bids for construction. With the union discriminatory deals (known as Project Labor Agreements or Community Benefit Agreements) they get only 4 or 5 bids. Do you think that increases cost? Learn more at http://www.TheTruthAboutPLAs.com

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  3. SeeSaw
    SeeSaw 10 December, 2012, 19:23

    Who is pushing to overturn Prop. 13? Nobody I know. You must be getting very hard-up for subject matter.

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