For Immediate Release
August 18, 2016
California Policy Center
Contact: Will Swaim
SACRAMENTO — It’s rare that a think-tank study produces real reform, but it happened today when Gov. Jerry Brown signed into law a bill designed to stop school officials before they recklessly spend again.
Assembly Bill 2116 began one year ago with a July 2015 California Policy Center study.
“For the Kids: California voters must become wary of borrowing billions from wealthy investors for educational construction,” by CPC researcher Kevin Dayton, tracked passage over 14 years of more than 900 California school bonds worth $146.1 billion.
Inspired by that CPC study, Rep. James Gallagher (R-Sacramento Valley) drafted a bill to limit the ability of school districts to take on debt through new bonds – even authorizing county auditors to stop spending if bond “funds are not being spent appropriately.”
“I am pleased that the governor saw the need to increase oversight of school bonds,” Gallagher said in a press release. “Borrowing for bonds has exploded in the last decade, and it is more important than ever that school construction bond funds be fiscally sound and their financing mechanisms transparent.”
In addition to waste and abuse in the management of those school bonds, Dayton found another problem: the surge in school bond debt has produced a massive “wealth shift” upward – from taxpayers of relatively modest means to “wealthy investors who buy state and local government bonds as a relatively safe investment that generates tax-exempt income through interest payments.”
Gallagher’s bill implements California Policy Center recommendations to kill one of the most pernicious municipal finance practices. The new law limits the ability of bond advisers to exaggerate property values when calculating the taxpayer burden.
“We dedicated tremendous resources to producing this study, and we were naturally pleased to see Rep. Gallagher act on it with such energy,” said Ed Ring, CPC’s president. “We’re especially delighted that the state’s school kids have been placed ahead of the interests of consultants, government unions, politicians and Wall Street banking interests.”
“It’s great to see intellectual research and analysis turn into practical improvements in law,” said Dayton.
ABOUT ANALYST KEVIN DAYTON
Kevin Dayton is a policy analyst for the California Policy Center, an influential writer, and the author of frequent postings about generally unreported California state and local policy issues on the California Policy Center’s Prosperity Forum and Union Watch, as well as on his own website LaborIssuesSolutions.com. Dayton is a 1992 graduate of Yale University. Follow him on Twitter at @DaytonPubPolicy.
ABOUT THE CALIFORNIA POLICY CENTER
The California Policy Center is a non-partisan public policy think tank providing information that elevates the public dialogue on vital issues facing Californians, with the goal of helping to foster constructive progress towards more equitable and sustainable management of California’s public institutions. Learn more at CaliforniaPolicyCenter.org.