We the People — Part 2

“Every step we take towards making the State our Caretaker of our lives, by that much we move toward making the State our Master.”
~Dwight D. Eisenhower

By Alden Benton

Several propositions on the California ballot involve bonds (borrowing) and taxation (paying).  Before you read further, please click on the link and watch this 5-minute video from Prager University: Video: Is America’s Tax System Fair?

The first measure on the California ballot is Proposition 51.

Proposition 51 asks California voters to approve $9 billion dollars of general obligation bonds for new construction and modernization of public K-12 public schools including Charter Schools and Vocational Education facilities.

California Community Colleges projects are also eligible for Proposition 51 funds.

A general obligation bond is a long-term debt paid from the state’s general fund.  Investors buy bonds and are paid interest.  The bonds sold under the authority of Proposition 51 will be repaid in 35 years.

According to the California Legislative Analyst, the cost to repay Proposition 51 bonds, based on an estimated 5 per cent interest rate, will be $17.6 billion dollars, including at least $8.6 billion in interest.  As a result, these bonds will cost California taxpayers $500 million per year.

Generally, bonds are used to finance large projects such as schools, dams, bridges, or prisons that are too costly fund on a one-time basis.

According to a January 2016 article in the San Francisco Chronicle, California has $400 billion dollars in debt and faces higher interest rates to finance its debt due to the state’s credit rating.  (Read the Article Here)  Any general obligation bond is backed by the credit of the state (the taxpayer).

Currently (Fiscal Year 2016), Californians are paying $2.4 billion per year to repay bonds previously passed for school facilities.  Proposition 51 will add another $0.5 billion to that debt for a total bond debt for school facilities of $2.9 billion annually.

Of the funds raised by Proposition 51 bonds, $3 billion is allocated for K-12 new construction and another $3 billion for modernization.  K-12 career technical education facilities would be allocated $500 million and K-12 Charter School facilities another $500 million.  California Community College projects are allocated $2 billion.

There are limitations on how the money is spent.  Proposition 51 money can be used for new construction only if there is not enough room for current students, or for projected students.  Buildings are not eligible for modernization unless they are at least 25 years old.

Proposition 51 money does not pay for all of the costs of a new construction or modernization project.  Local districts are responsible for 50 per cent of the cost of land and new construction projects for K-12 schools.  Additionally, local K-12 districts are responsible for 40 per cent of the costs of modernization projects.

For modernization of Charter Schools and Vocational Education facilities, the Proposition 51 funds will only cover 50 per cent of the costs.  Proposition 51 also caps grants for Technical Education modernization at $1.5 million and at $3 million for new construction.

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”
~H. L. Mencken


© 2016 A. L. Benton/Independence Creek Enterprises
All Rights Reserved
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