Material Breach of Contract
Misusing school bonds...
[by Jon Coupal] 8/10/05
rush to collect cash from taxpayers, school districts around
the state have been using Proposition 39 to ram through bonds
with an easily attainable 55% vote. While replacing the traditional
two-thirds vote for bonds that are repaid exclusively by property
owners, Prop. 39 also compelled the districts to establish
a citizen oversight committee to monitor spending of bond proceeds.
Coupal is an attorney and president of the Howard Jarvis
Taxpayers Association -- California's largest taxpayer
organization with offices in Los Angeles and Sacramento.
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Unfortunately, the bond committees were added to the package
as a public relations ploy designed to make bond passage easier,
while giving the oversight committees no real power. Now that
Prop. 39 has been in effect for nearly five years, we see that
most of these committees are shills for the district officials
who appoint them.
Most, but not all. A few of the committees have
shown real backbone and have used the "bully pulpit" to
alert the press and the community when bond funds are misused.
One such committee
has been monitoring the Sacramento Unified School District and
warning of the potential mismanagement of bonds funds that so
many work so hard to provide.
The Sacramento school board is on the verge of breaking an implicit,
but very important, contract with the voters and they are stunned
to find their own bond oversight committee in opposition.
In 1999, Sacramento voters approved -- by more than a two-thirds
margin -- Measure E, a bond proposal generating $195 million
for school construction. Three years later, in 2002, voters approved
Measure I providing school construction with an additional infusion
of $225 million.
In the campaigns leading up to approval by the voters, the district
promised that taxpayer dollars would be spent wisely and efficiently.
A detailed list of projects was identified with specific dollar
amounts for each project.
Now, everyone knows that bond measures are typically oversold
to voters. At some subconscious level, voters probably expect
this. They really don't believe for example, that approving a
bond measure will suddenly transform a failing school district
into a stellar one. But voters recognize the need for safe, modern
school facilities and are usually willing to give local school
boards the benefit of the doubt as well as some degree of flexibility
in addressing priorities. But material representations by a school
board made about a bond measure should be honored.
To be clear, we are not talking about promises which could not
be kept for reasons beyond the control of the Sacramento Board.
For example, the unexpected cost increases of steel and other
building materials means that the district will not be able to
build all the promised projects with the revenue available from
the two bond measures.
But this is all the more reason why they should be very judicious
with the $190 million they have left in bond proceeds and state
Regrettably, the board seems headed down the
opposite road by giving serious consideration to a policy mandating
Stabilization Agreements" or PSAs. These agreements require
that ALL work done on building and renovating schools be performed
by union labor.
PSAs are justified on grounds that they bring labor peace and
a higher quality of work. But often times, and especially as
it applies to Sacramento, the opposition is true. First, the
district's own independent bond oversight committee (BOC) has
found that no significant labor issues are present in the District's
building program. Indeed, the BOC notes that the District has
freely used both union and non-union contractors with great success.
Moreover, the adoption of PSAs reduces competition and thus
increases the costs of building and repairing our school buildings.
Two recent studies on PSAs (also known as PLAs, for Project Labor
Agreements) dealing specifically with school construction in
Connecticut and Massachusetts, found substantial cost increases
resulted from a pro-PLA policy. This is consistent with a host
of other studies, some from California, compelling the same conclusion.
Why would this or any school board rush headlong into a policy
decision that could easily increase the cost of school construction
by 15% to 30%? It certainly doesn't require much thought to realize
that increasing the costs will mean fewer schools being built
The answer may be in labor's support for some of the school
board candidates. For now, we will leave that allegation to others
to investigate. Taxpayers are more concerned with the negative
policy implications of PSAs, of which there are several: higher
costs, less competition and less flexibility for the school district
are more than sufficient reasons to reject the proposed policy.
But beyond the fact that PSAs are simply bad, there is the issue
of trust between the voters and the Board. Surely, it must be
recognized that the adoption of a pro-PSA policy will have a
significant impact on how our bond dollars are spent. And yet,
Sacramento voters in 1999 and 2001 had no way of knowing that
the Board would take an action effectively discounting the value
of the bond dollars being spent.
For a district that may have to approach the voters with another
bond proposal in the future, a loss of credibility could inflict
the greatest toll. To that end, education in Sacramento would
not be well served. CRO
is an attorney and President of the Howard Jarvis Taxpayers
2005 Howard Jarvis Taxpayers association