Die Another Day: Bonds like Prop 13 are a burden for tomorrow

The conventional wisdom about Proposition 13 — the only ballot measure before California voters in the March 3 election — is that the $15 billion construction bond benefitting public schools, state universities and community colleges is of relatively little importance to the average voter. While there are concerns that local districts will have to raise property taxes on homes and businesses to come up with the money to receive state matching funds from the bonds, even anti-tax watchdogs concede it’s likely to pass.

But an argument can be that it should be seen in a different context — as the latest sign of a reckless effort to let K-12 school districts use 30- or 35-year borrowing to pay for routine costs, thus freeing up general fund revenue to pay for ballooning pension costs and new teacher pay raises. 

The bulk of the bond — $9 billion — would go to K-12 public schools. But only $3.8 billion of that would have to be spent on building new schools and facilities, leaving $5.2 billion to be spent on what news accounts describe as “safety and modernization upgrades.” A little-noted section of Proposition 13 would also increase by 60% the cap on the amount of general obligation bonds that can be issued by school districts. (The cap is based on a formula tied to assessed property value within a district’s borders.)

In 20th-century California, concerns that long-term borrowing might be abused by districts were kept in check by strict standards that such borrowing could only be used to pay for long-lived capital-improvement projects or for school buses which were expected to last 20 years.

But this century, school boards dominated by local teachers unions have obliterated these standards — especially after the Great Recession began in late 2007, causing a sharp drop in K-12 state funding. John de Beck, a San Diego Unified Trustee from 1990 to 2010, told me that toward the end of his time in office, there was a constant hunt by district officials for novel new uses of school bonds. This is now common across California. The most basic maintenance in many districts — painting, fixing broken windows, repairing bathroom fixtures — is routinely paid for with borrowed money, shifting the cost to taxpayers of the future. The ballot language of a pending Fresno school bond spells this out, noting its proceeds will be used to “repair and equip classrooms and school facilities upgrade electrical, water and technology infrastructure.”

In 2013, Los Angeles Unified showed just how far a district could go when the school board approved a $1.3 billion plan to give every student, teacher and administrator a free iPad paid for with borrowed money. The project ultimately collapsed because of scandals over how the procurement contract was awarded and the failure of a contractor to install educational software on the iPads. But the rationale that buying iPads was akin to “modernizing” district facilities — and the wisdom of using long-term borrowing to pay for electronic devices with two- or three-year life spans — was barely challenged. 

A 2017 Public Policy Institute of California report found that using bond funds for routine maintenance and “modernization” — specifically the purchase of short-lived computers — had become the new normal. The PPIC also reported that voters approved such local bonds at higher rates than ever.

In 2016 — the last time a statewide school bond was on the ballot — voters gave their blessing to a record $25.8 billion in local and state borrowing for K-12 districts.

The bad news for Californians is that the financial pressure on school boards is likely to lead to even more irresponsible use of long-term borrowing for short-term needs. The 2014 bailout of the California State Teachers’ Retirement System — which phases in increased contributions from districts, the state and teachers from 2014 through the 2020-21 school year — will result in increasing annual contributions to CalSTRS from nearly $6 billion to $11 billion. But districts’ contributions have increased by a far greater percentage than teachers and the state, going up more than 130% over the seven-year span. The result is that even with state K-12 education spending at record highs — having gone from $67 billion in 2014-15 to $102 billion this school year — many districts feel as squeezed as during the recession. In an analysis of this development last May, the Los Angeles Times noted that “there may be no greater paradox in California government.” 

But it’s more than a paradox. It’s a huge incentive for districts to use borrowed money even more recklessly — especially if Proposition 13 is approved next Tuesday.

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Chris Reed is a contributing editor to California Policy Center, and an editorial writer and columnist for The San Diego Union-Tribune. You can follow him on Twitter @chrisreed99.