Prop 2 math test: should CA spend $18 billion on schools, but only get half that money back?
They say children are the future, and so are bond repayments. Californians already rejected a school construction measure in 2020. This November they may once again answer “no” to a tax hike for the next generation. Jon Coupal of the Howard Jarvis Taxpayers' Assn daylights the disturbing data on Prop 2 in the Orange County Register: Prop 2’s $10 billion bond plus interest equals $18 billion, the union prices are 25-30% above market rate, and school districts will tax homeowners to pay the matching fund requirement.
At the state level, politicians love debt because it gives them funding for their special projects or for rewarding their allies, yet they still are able to claim that they are not directly raising taxes. But under the category of “there’s no such thing as a free lunch,” all debt must be repaid at some point. And too much debt, be it servicing bond debt or paying pension obligations, crowds out the ability to meet current needs.
Moreover, while Californians still rank education as one of the state’s top priorities, they remain unwilling to write blank checks for bonds being pushed by special interests that include developers and the bond industry. In March of 2020, voters rejected, for the first time in decades, a statewide bond for school construction.
First, the school bond. AB 247 reflects typical credit card math by Sacramento politicians because it would borrow $10 billion from Wall Street and then make taxpayers pay it back plus interest. Depending on interest rates, the total cost to taxpayers could easily exceed $18 billion.
While no one disputes the need for adequate school facilities, the problem is that the state’s education establishment has failed to make the case for more capital spending in an era of declining enrollments. And this measure also presents a huge threat to homeowners. While it is true that the bond itself – plus interest, of course – will be repaid out of the state’s general fund, local school districts are required to provide matching funds except on very rare occasions. Those matching funds are generated by local bond measures which are repaid exclusively by property owners.
Another problem with AB 247 is the preference for school construction projects that employ a “project labor agreement.” This is a transparent payoff to the politically powerful construction trade unions. But for taxpayers, PLA’s can easily add 25% to 30% to construction costs as well as exclude responsible construction companies from competing for the business.
Read the whole thing here.
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