30-year borrowing – CalWatchdog.com

School bond problems go far beyond LAUSD purchase of iPads

Chris Reed — Tue, 03 Feb 2015 19:00:41 +0000

Gov. Jerry Brown’s skepticism about state assistance for local school districts’ construction projects appears to be primarily based on an intense disdain for adding more billions to what he likes to call the state’s “wall of debt.”

But a counter narrative is emerging that suggests the real problem is that all school districts are being unfairly tarred with skepticism over their bonds because of high-profile problems that Los Angeles Unified has had with its use of $1.3 billion in bond funds to buy iPads and laptops. George Skelton’s latest column — headlined “Don’t punish other districts for L.A. Unified’s problems” — makes this case.

However, those who pay attention to education issues (and/or Cal Watchdog) know that there are a wide range of scandals involving school bonds that go far beyond the controversial practice of using borrowed money to purchase short-lived technology. Here’s a short list:

Capital appreciation bonds

This is from a 2013 L.A. Times story:

Two hundred school districts across California have borrowed billions of dollars using a costly and risky form of financing that has saddled them with staggering debt, according to a Times analysis.

Schools and community colleges have turned increasingly to so-called capital appreciation bonds in the economic downturn, which depressed property values and made it harder for districts to raise money for new classrooms, auditoriums and sports facilities.

Unlike conventional shorter-term bonds that require payments to begin immediately, this type of borrowing lets districts postpone the start of payments for decades. Some districts are gambling the economic picture will improve in the decades ahead, with local tax collections increasingly enough to repay the notes.

CABs, as the bonds are known, allow schools to borrow large sums without violating state or locally imposed caps on property taxes, at least in the short term. But the lengthy delays in repayment increase interest expenses, in some cases to as much as 10 or 20 times the amount borrowed.

Shady bond firms

The Orange County Register, also in 2013, had a long analysis piece that pointed out how one Missouri firm orchestrated 60 dubious bond deals as a one-stop shop — coming up with the financial details, then helping market the proposals to voters. The story noted how this practice ignored state “laws, rules and guidelines”:

•It is illegal for California school officials to hire political consultants with public funds to help pass bond measures. Using the bank’s political consultants is not a legal way around that law, according to the state Office of Legislative Counsel.

•Finance experts advise school districts to sell bonds through public auctions to get the lowest interest rate and to employ independent financial advisers to review the details. Placentia-Yorba Linda, like most of Baum’s California school clients, did neither.

•State law requires that donated consulting work on an election be reported as an in-kind, or non-cash, political contribution. Baum did not disclose its consulting role on state campaign filings in three elections the Orange County Register reviewed.

Use of 30-year borrowing to pay for maintenance

School districts used to face tough rules on use of borrowed funds, including a requirement that school buses paid for with loans had to last at least 20 years. But as I wrote for Cal Watchdog in 2012, it’s now common for bond dollars to be used for …

… the most routine maintenance, such as painting and minor repairs. [San Diego Unified’s] 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.

What motivates bond maneuvers?

DeBeck and several education insiders have told me that the bond shenanigans are driven by political pressure to free up operating funds in the general budget — pressure from teacher unions seeking higher pay.

This theory is disputed by some school district superintendents. They depict their bond decisions as being driven by unpredictable state financing and say iPads are paid off quickly, not over 30 years.

However, the DeBeck theory is in keeping with recent attempts in districts around California to divert Local Control Funding Formula dollars from their intended use — to specifically help English-learner students — to teacher compensation.

iPad scandal latest in long line for L.A. Unified — but different

Chris Reed — Tue, 26 Aug 2014 15:00:30 +0000

The abrupt decision Monday by Los Angeles Unified Superintendent John Deasy to suspend the district’s $1 billion iPad program after reports that he manipulated the decision that led to Apple winning the big contract is hugely juicy. The program already had been under fire because it used 30-year borrowing to pay for short-lived electronics. The lack of input by schools and students in the initial decision also led to changes after the program’s first year.

But this in some ways is a sad day for the good guys. To a degree that many didn’t expect, Deasy has taken on the United Teachers Los Angeles, the union chapter that is so powerful that it dominates the broader strategic thinking of the California Teachers Association, the most powerful force in Sacramento. And it is the UTLA, not Deasy, that is primarily responsible for the long list of scandals and anti-student spectacles in Los Angeles Unified.

There could be 15 entries. But here’s the top three:

1. The Vergara case. In June, a Los Angeles Superior Court judge who analyzed the effect of teacher tenure laws on education in LAUSD’s struggling schools concluded that they resulted in treatment of minority students that was so unacceptable that it violated California constitutional guarantees of access to a quality education. The neediest students, Judge Rolf Treu held, usually had the weakest, least experienced teachers.

Minority mistreatment, as it turns out, is a theme …

2. The Mark Berndt debacle. The veteran white teacher at a 99 percent minority south Los Angeles elementary school was caught in 2011 feeding semen to his students, but the district had to pay him $40,000 to get him to resign — thanks to extraordinary job protections the UTLA demanded and won for teachers.

3. The L.A. Times’ expose — which came out two years before the Berndt scandal — of all the teachers who not only didn’t get fired but stayed on the job even after their depraved behavior was exposed.

Taunting a suicidal student? What’s the big deal?

The anecdotal lead on the first story in the expose was absolutely wrenching:

The eighth-grade boy held out his wrists for teacher Carlos Polanco to see.

He had just explained to Polanco and his history classmates at Virgil Middle School in Koreatown why he had been absent: He had been in the hospital after an attempt at suicide.

Polanco looked at the cuts and said they “were weak,” according to witness accounts in documents filed with the state. “Carve deeper next time,” he was said to have told the boy.

“Look,” Polanco allegedly said, “you can’t even kill yourself.”

The boy’s classmates joined in, with one advising how to cut a main artery, according to the witnesses.

“See,” Polanco was quoted as saying, “even he knows how to commit suicide better than you.”

The kicker: Polanco was a UTLA official, not just a member. And, after he got a vigorous defense from the UTLA, Polanco received only trivial punishment from LAUSD.

A teacher taunting a suicidal child is no big deal in a district run by a teachers union, you see.

iPads in LAUSD just small part of CA school bond scandals

Chris Reed — Mon, 17 Feb 2014 14:15:51 +0000

The GOP assemblyman who’s upset about the misuse of 25-year borrowing to pay for hundreds of millions of dollars worth of iPads in Los Angeles Unified has an unfortunately narrow perspective on the problem. But at least Assemblyman Curt Hagman, R-Chino Hills, is on the right track. If he regularly read Cal Watchdog, though, he would know that what’s going on in Los Angeles schools is going on everywhere in California, and that the scam goes far beyond short-lived electronics:

“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.’”

Now multi-decade borrowing pays for routine maintenance, graffiti removal, painting and much more. This is, of course, crazy. But it’s so California.

The CTA will stomp on challenge to its hegemony

Good luck to Hagman. Here’s a prediction: At the committee hearing on Hagman’s bill, no Democratic lawmaker will even ask a question of a witness who supports it. The CTA will swat this down like it swatted away the attempts to streamline the firing of classroom sexual predators.

The rest of us? We should know our place.

Rule No. 1 of Golden State politics.

“The key to figuring out how California works is understanding that by far the most powerful forces in state politics are the California Teachers Association and the California Federation of Teachers and the 500,000 people they represent and collect dues from.”