School bond abuses: Ignoring the motive behind the scandals

Dec. 19, 2012

By Chris Reed

The California media are finally beginning to figure out that school bonds are being abused, with money being borrowed on horrible terms or with funds being spent on things that school bonds historically have never been spent on.

But even on the best education blogs, there has been no attempt to connect the dots on why this abuse is happening. Instead, even the guy who’s arguably the Golden State’s best education reporter is simply out to sea. On the EdSource website, John Fensterwald had a long and well-reported piece on the relatively new phenomenon of 30-year bonds being used to buy laptops and iPads that will last at most a few years. It’s full of lots of interesting new details, such as the fact that the textbooks that laptops and IPads usually replace are specifically banned from being paid for with 30-year bond funds.

But then there is this:

Is it legal to buy personal computers for students using school construction bonds? And if it’s legal, is it wise to pay interest long-term on devices with a short shelf life?

Last month, the Bond Oversight Committee for  Los Angeles Unified balked at endorsing Superintendent John Deasy’s plan to buy tablet computers with bonds intended primarily for building and renovating schools. In doing so, the Committee raised questions that other school districts also should be asking.

There’s no unqualified answer to the questions that the Bond Oversight Committee asked, and school districts like San Diego Unified and Riverside Unified have come to opposite conclusions. What all agree on, however, is that the state needs to provide legal clarity and, most importantly, dollars.

It is absolutely not true, not in a million years, that all school districts want “legal clarity” on this. It’s much easier to balance budgets when you shift operating costs to capital budgets. School boards don’t want to be told it’s not an option.

Which brings us to the motive question: Why would school board members be eager to do such dubious things with borrowed funds? Because the most powerful force in most school districts is the local teachers union — which wants above all else to preserve the “step” and “column” pay practices that give automatic raises for years on the job and unearned raises for meaningless graduate coursework. The result is that compensation now routinely eats up 90 percent or more of many school districts’ operating budgets, which means school boards are always desperate to free up operating funds lest their schools become Potemkin villages.

This is not a whiny, minor, pedantic point. When journalists cover financial scandals in the private sector, they hunt for motives. So why on Earth when they cover financial scandals in the public sector would they act as if there were no impure motives? As if the scandals were created by the white-collar bureaucratic version of the Immaculate Conception?

I don’t know. I really don’t.

I won’t even get into the other little flaw in the EdSource analysis. Namely, that the use of 30-year bonds to pay for routine maintenance is probably even more of a financial cancer than buying iPads with such borrowing.

8 comments

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  1. Hondo
    Hondo 19 December, 2012, 12:38

    The selfish short term interests of the teachers unions are astounding. I know they can understand the math behind these pensions and bonds. Borrow 100mil, pay back 1billion. They know this is utterly insane. They know they are destroying all future hope for this state. The greed of these people is off the scale.
    Hondo….

    Reply this comment
  2. us citizen
    us citizen 19 December, 2012, 12:57

    ditto

    Reply this comment
  3. jimmydeeoc
    jimmydeeoc 19 December, 2012, 13:56

    30 years? Most actuarial tables suggest that’s close to my use-by date. I may make it. Might not. It’ll be a close call….

    We’ve all heard of many proverbs (May the Lord hold you in the palm of his hand, etc.)

    21st century addition: “May you be the last one out before the house of cards completely collapses.”

    Reply this comment
  4. Sean Morham
    Sean Morham 19 December, 2012, 14:26

    The state as a matter if course takes on debt to pay for day-to day spending. This adds to the gross fiscal incompetence at the state level.
    The electorate keeps endorsing the past by continuing to elect these fools. The Feds do the same thing. A price will need to be paid. I suspect that some of the state and local “servants” (and/or their successors) will be paying (in the total picture) a small portion of the price, however severe it may be. Those paying the larger portion of the price will seek appropriate retribution, and will deal it out accordingly. A new era. “Peace, Love, Justice, No Mercy.”

    Reply this comment
  5. Rex the Wonder Dog!
    Rex the Wonder Dog! 19 December, 2012, 17:57

    The fact that CAB are even used at all shows how financially incompetent these school boards are.

    Even if used on buildings and long term capital projects instead of salary and day to day expenses, CAB are still a scam on the taxpayers.

    Reply this comment
  6. Rex the Wonder Dog!
    Rex the Wonder Dog! 19 December, 2012, 17:58

    I know they can understand the math behind these pensions and bonds. Borrow 100mil, pay back 1billion. They know this is utterly insane. They know they are destroying all future hope for this state. The greed of these people is off the scale.
    Hondo….
    ==
    Those are capital appreciation bonds, but you are on the money the incompetence using them is off the scale,

    Reply this comment
  7. SeeSaw
    SeeSaw 19 December, 2012, 19:51

    Teachers are in the class room, Hondo–not borrowing bonds and acting as actuaries for their own pensions.

    Reply this comment
  8. Bob Smith
    Bob Smith 19 December, 2012, 20:22

    Even if they did spend 30 year funds on proper capital projects they still don’t spend it well. Witness schools costing multiples of $100 million to build. I’m of the belief that this kind of capital spending is really compensation spending in disguise.

    Reply this comment

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