For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction

By Kevin Dayton, Special to Elk Grove News | July 22, 2015 | Executive Summary Few Californians realize how much debt they’ve im...


By Kevin Dayton, Special to Elk Grove News | July 22, 2015 |

Executive Summary

Few Californians realize how much debt they’ve imposed on future generations with their votes for bond measures meant to fund the construction of new and modernized school facilities.

From 2001 to 2014, California voters considered 1147 ballot measures proposed by K-12 school districts and community college districts to borrow money for construction via bond sales. Voters approved 911 of these bond measures, giving 642 school and college districts authority to borrow a total of $110.4 billion.

California voters also approved three statewide ballot measures during that time to authorize the state to borrow $35.8 billion. That money has supplemented local borrowing for construction projects at school and college districts, and the state has spent all but $195 million of it.

That’s a total of $146.1 billion authorized during the last 14 years for state and local educational districts to obtain and spend on construction projects. All of it has been borrowed or will be borrowed from wealthy investors, who buy state and local government bonds as a relatively safe investment that generates tax-exempt income through interest payments.

Current and future generations of Californians are already committed to paying these investors about $200 billion in principal and interest — a number that will grow as school and college districts continue to borrow by selling bonds already authorized by voters but not yet sold.

And more borrowing is coming.

In 2016 California voters may be asked to authorize the state to borrow as much as $9 billion for school construction. More than 100 school and college districts may ask voters to approve borrowing a total of several billion more dollars. Officials at the country’s second largest school district, the Los Angeles Unified School District, claim they need more than $40 billion for additional construction and plan to ask voters to approve borrowing several billion in 2016.

It is time to be wary. The California Policy Center believes that most Californians are unaware and uninformed about this relentless borrowing and the amount of debt already accumulated to pay for school construction. Most voters cannot explain how a bond measure works and do not get enough information to make an educated decision about the wisdom of a bond measure.

California voters who want to learn more before voting will have difficulty finding relevant information. Where does an ordinary Californian find out how much money a school or college district has already been authorized to borrow from past bond measures, or the principal and interest owed from past bond sales that still needs to be repaid, or the projected changes in assessed property valuation and how they affect tax and debt limits, or the past and projected student enrollment? The state does not offer a clearinghouse of information for the public to research and compare data about bond measures and bond debt for educational districts. Much of the information available about debt finance for educational districts is oriented toward interests of bond investors rather than people who pay the debt.

Californians who recognize a need for their own local educational districts to refrain from accumulating additional debt have significant obstacles to overcome. State law gives supporters of bond measures a systematic strategic advantage when local districts develop bond measures and put them before voters for approval. Campaigns to support bond measures are funded and even managed by financial and construction industry interests that will profit after passage. And after voters approve a bond measure, educational districts are tempted to take advantage of ambiguities in state law and use bond proceeds for items and activities not typically regarded by the public as construction.

To help to fix these deficiencies, this report encourages the California legislature and the executive branch to adopt five sets of recommendations:

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An analyst with the California Policy Center, Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and a policy analyst for the California Policy Center. Dayton is the author of frequent postings about generally unreported California state and local policy issues at on the California Policy Center’s Prosperity Forum and Union Watch, as well as well as on his own website LaborIssuesSolutions.com. Follow him on Twitter at @DaytonPubPolicy.


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2 comments

Just a taxpayer said...

Of course we're going to get bombarded by ads to support the bond measures--paid for by the development lobby, because if the bonds fail, the developers will be on the hook to pay higher development fees for new home construction. God forbid the developers should have to pay for the impacts they are creating!

Anonymous said...

Need more homes like we need a hole in our heads.

Why are all those new houses and high density low income housing projects being built during the fourth year of a severe drought?


Now we can only water our lawn once a week and use our drip system three days per week.

http://www.waterresources.saccounty.net/scwa/Pages/default.aspx


We suffer just so those developers can build more homes and high density low income housing projects that use more of our precious water.

Real forward thinking there Elk Grove.

This place is going to look like a browned out desert wasteland with those water restrictions.


Elk Grove, land of the brown lawn and dead trees.

Elk Grove Thirsty, NOT Elk Grove Thriving!

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