A Material Breach of Contract
Misusing school bonds...
[by Jon Coupal] 8/10/05

In their 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.

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 matching funds.

Regrettably, the board seems headed down the opposite road by giving serious consideration to a policy mandating so-called "Project 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 or renovated.

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

Jon Coupal is an attorney and President of the Howard Jarvis Taxpayers Association.

copyright 2005 Howard Jarvis Taxpayers association

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