Specter of school bonds is haunting Californians

Every few years in November, moviegoers are treated to another James Bond film filled with deception, mystery and mayhem. Judging by the previews, the upcoming installment, “Spectre,” will be no exception. But as more voters are learning, Agent 007 isn’t the only Bond to wreak havoc during election season. In California, education bonds have buried taxpayers in $200 billion of debt to bondholders through 2055.

Now, a report from the California Policy Center explains the consequences of this bond debt and reveals the playbook used to pass these dangerous schemes. Like a rigged game of high-stakes poker, taxpayers may have a seat at the table, but for years haven’t stood a chance against the politicians, construction companies and investors colluding for political and financial gain. By shining a light on this vested interest problem, citing cautionary tales and outlining recommendations for reform, this report offers Californians the tools to fight back.

In 2000, passage of Proposition 39 ushered in a new era of borrowing. The measure lowered the required threshold for passage of local education bonds from two-thirds to 55 percent. Since then, 80 percent of these bonds – 911 out of 1,147 proposed – have passed, totaling $110.4 billion in debt. Previously, these bonds had just a 50-50 chance of winning approval.

With this lower threshold, school districts have become more aggressive in pursuing construction projects. Combined with vague language and suppressed information (for example, projections of assessed property valuation and school enrollment are not easily accessible), voters are served a poisonous bond-measure cocktail, resulting in $200 billion of bond debt for California.

The case of Poway Unified School District is instructive. In 2008, the district asked voters to authorize borrowing $179 million to finance capital improvements, and the measure passed with 63.9 percent support. Today, thanks to controversial debt-financing practices that resulted in ballooning interest, property owners face $1.27 billion in debt service through 2051 – all thanks to a $179 million bond measure that garnered less than two-thirds support. Although district voters held school board members accountable for their actions, the burden on taxpayers cannot be undone.

Elsewhere, districts have claimed that Proposition 39’s ambiguous language gives them free rein to spend construction bond dollars. The Los Angeles Unified School District’s failed technology program provides a recent example. The LAUSD purchased iPads with proceeds from several construction bonds approved before the gadgets were even invented, leaving future generations on the hook for technology that may not even be around for them.

According to California Policy Center’s report, new tablets aren’t the only problem. Districts have spent construction bond proceeds on everything from new furniture to operating expenses.

To prevent these debacles down the road, the report outlines several recommendations for the California Legislature and executive branch. Accountability could be increased by barring inappropriate or excessive spending of bond proceeds. Additionally, voters should be educated on the fiscal ramifications of each bond measure. And if schools can essentially lobby for new bonds, then robust public information campaigns should be conducted to educate taxpayers. Furthermore, limiting conflicts of interests in contracting on bond construction projects would serve to root out corruption.

Now is the time for Californians to demand accountability and refuse to allow vested bond interests to remain in the shadows. Without reform, California’s financial well-being will continue its downward spiral, burdening future generations and failing to address the shortcomings in the state’s public education system. Unlike a story on the silver screen, this sinister plot is unfolding in the Golden State in real time. It’s up to taxpayers to stop the real-life bond villains before it’s too late.

Ed Ring is the executive director of the California Policy Center.