McGeorge School of Law

Proposition 1D

Proposition 1D:
Kindergarten-University Public Education
Facilities Bond Act of 2006

By

Jonathan Lee
JD, McGeorge School of Law, University of the Pacific
to be conferred May, 2006
B.A., Political Science, University of California at Berkeley, 1997

 

Copyright © 2006 by University of the McGeorge School of Law


Table of Contents

I. Executive Summary
II. The Law
III. Drafting Issues
IV. Constitutional Issues
V. Public Policy Considerations
VI. Conclusion


I. Executive Summary

Proposition 1D, also known as the Kindergarten-University Public Education Facilities Bond Act of 2006, is the fourth of five measures on the November 2006 ballot designed to rebuild California’s infrastructure. Rachael Warecki, Bond Propositions a Package Deal, http://www.smdailyjournal.com/article_preview_print.php?id=63771 (accessed September 6, 2006). Proposition 1D is a ten billion four hundred sixteen million dollar ($10,416,000,000) bond that will provide funding to relieve public school overcrowding and to repair older schools. California Official Voter Information Guide, Text of Proposed Laws, Proposition 1D (Secretary of State, 2006) http://www.ss.ca.gov/elections/vig_06/general_06/pdf/proposition_1d/entire_prop1d.pdf (accessed September 10, 2006). Additionally, Proposition 1D seeks to improve earthquake safety and fund vocational educational facilities in pupropoblic schools. Proposition 1D also provides for funds to be used to repair and upgrade existing public college and university buildings and to build new classrooms to accommodate the growing student enrollment in California’s public colleges.

This measure will be funded through the sale of $10.4 billion in general obligation bonds. $7.3 billion of these bonds would be for K-12 school facilities and are to be divided as follows (in Millions):

  • Modernization projects: $3,300
  • New construction projects: $1,900
  • Severely overcrowded schools: $1,000
  • Charter schools facilities: $500
  • Career technical facilities: $500
  • Environment-friendly projects: $100
  • Joint-use projects: $29

The remaining $3.1 billion would be distributed to higher education as follows (in Millions):

  • Community Colleges: $1,507
  • University of California: $809
  • California State University: $690

Supporters of Proposition 1D view the measure as an investment in our children’s education. Money will be spent to make schools earthquake safe and to reduce overcrowding in our schools. Proposition 1D also requires that every dollar spent be strictly accounted for through the use of independent state and local audits. Being a part of the “Rebuild California Plan,” Proposition 1D is one important step in rebuilding California’s infrastructure and turning California’s economic fortunes around. Id.

Opponents of Proposition 1D view the measure as too big, short-sighted, more borrowing for the same problem, and simply too costly. While education is an important issue, it is not the only priority that California has to worry about. Californians should be very careful about burdening California with more debt and borrowing. Id.

II. The Law

A. Existing Law

1. Background

The Kindergarten-University Public Education Facilities Bond Act of 2006 is actually the third statewide bond package that was introduced to voters in California in the past four years for K-U public education. Since 2002, California voters have passed bond measures under this title name on two prior occasions. The first of these measures was presented to the voters in 2002 as Proposition 47.

2. Proposition 47

Proposition 47, also known as the Kindergarten-University Public Education Facilities Bond Act of 2002, was passed with 59% voter approval in the November 2002 election. Supporters of this proposition included the California PTA, California Teachers Association, California Taxpayers’ Association and the Chamber of Commerce. They argued that our state needed more classrooms and better schools without raising taxes. There was a need of over 13,000 new classrooms, and Proposition 47 would ensure that critically overcrowded districts got their fair share to build classrooms. In addition, proponents assured voters that strict accountability would protect funds from any form of misuse. League of Women Voters Education Fund, Proposition 47, http://www.smartvoter.org/2002/11/05/ca/state/prop/47/ (accessed September 16, 2006).

The passage of Proposition 47 allocated $13.05 billion in general obligation bonds for construction and renovation of K-12 school facilities and higher education facilities. Id. These funds were to be used to meet increasing enrollment demand and modernization needs over a four year period. Cal. Sen. Rules. Comm., Analysis of AB 16, at 8 (April 3, 2002). Proposition 47 also was designed to provide aid to school districts, county superintendents of schools, county boards of education, and higher public education institutions to modernize educational facilities. Cal. Assembly 16, 2001-2002 Reg. Sess. 29 (April 26, 2002). The state cost for passage of this measure was estimated to be about $26.2 billion over 30 years to pay off the principal and interest. Annually repayment would be $873 million. League of Women Voters Education Fund, Proposition 47, http://www.smartvoter.org/2002/11/05/ca/state/prop/47/ (accessed September 16, 2006).

3. Proposition 55

Proposition 55, the Kindergarten-University Public Education Facilities Bond Act of 2004, was presented to California voters as the second part of the school revitalization project. This act provided for $12.3 billion to fund necessary education facilities to relieve overcrowding and to repair older schools. Funds were to be targeted to areas of greatest need and be regulated according to strict accountability measures. Assuming the bond would be paid over a thirty year time span, the cost of the bond would be over $24.7 billion to pay off the principal and interest. This would amount to $823 million per year. Legislative Analyst, California Primary Election: Proposition 55, http://primary2004.ss.ca.gov/propositions/prop55-analysis.html (accessed September 16, 2006).

Proposition 55 passed by a 50.8% to 49.2% margin. Supporters of the measure included the California Teachers Association, California Taxpayers’ Association, Californians for Accountability and Better Schools, California State PTA, California Chamber of Commerce, and the Board of Governors for the California Community College System. These supporters stressed that Proposition 55 would fix old outdated classrooms, build new local schools, and repair facilities that needed maintenance. Independent audits and cost controls specifically spelled out in the measure were included to provide accountability requirements that would protect the people from misuse of funds or waste. League of Women Voters for Education Fund, Proposition 55, < http://smartvoter.org/2004/03/02/ca/state/prop/55/> (accessed September 16, 2006).

4. The Impacts of Proposition 47 and Proposition 55

It has been several years since both Proposition 47 and Proposition 55 have passed. Proponents of these bonds claimed that these measures would address California’s serious problems of classroom overcrowding and modernization. Both bonds have required that California incur a debt that is to be paid over the next thirty years. If these bonds have been unsuccessful in reducing classroom overcrowding and modernizing schools, can we afford to overlap even more debt to fund another similar proposition? The statistics on these two areas provide mixed answers as to how successful these bonds have been.

Pupil-teacher ratio in public school districts is an indicator of classroom overcrowding. In recent years the student teacher ratio has reached a high of 24.1 students per teacher California Department of Education, Educational Demographics Unit – CBEDS, Pupil-Teacher Ratio in Public School Districts, http://www.ed-data.k12.ca.us/Navigation/fsTwoPanel.asp?bottom=%2Fprofile%2Easp%3Flevel%3D04%26reportNumber%3D16 (accessed October 8, 2006). In the 2001-02 school year, that average had dropped to 20.6 students per teacher. Id. In 2002-03, the ratio grew to 20.7 students per teacher. Id. The ratio reached a highpoint of the past five years in the 2003-04 and 2004-05 school years when the ratio peaked at 21.2 students per teacher. Id. In the 2005-06 school year, that ratio saw a decline falling back down to 21.0. Id. Based on this information, not only did classroom overcrowding not decrease after the passage of Propositions 47 and 55, it actually got worse during this time period. While factors such as inflation and students entering the system might have influenced these statistics, this increase of student teacher ratio can be quite telling.

Modernization of our schools is measured most often through looking at the total number of computers in the classrooms and how many students there are per computer. California Department of Education, Educational Demographics Unit –CBEDS; CDE Handbook of Education Information (Fact book), Technology by School Type in Public Schools, http://www.ed-data.k12.ca.us/Navigation/fsTwoPanel.asp?bottom=%2Fprofile%2Easp%3Flevel%3D04%26reportNumber%3D16 (accessed October 8, 2006). In 2001-02, the total number of computers in our K-12 schools were 1,074,841 with an average of 5.7 students per computer. Id . The number of computers grew to 1,181,649 total computers statewide in our schools in the following school year with an average of 5.3 students per computer. Id . In 2003-04, the number of computers in the classrooms grew to 1,262,880, with 5.0 students per computer. Id. In 2004-05, the last documented year on this subject, the number of computers in our K-12 schools reached a high of 1,320,454 with a low of 4.8 students per computer. Id. Based on these statistics, it appears that the bond measures did have a positive impact on modernization in schools.

B. Proposition 1D

The Kindergarten-University Public Education Facilities Bond Act of 2006 is the most recent incarnation of this statewide bond issue. This time, a total of $10.4 billion is to be used to aid both K-12 and higher education facilities. The costs of the bond would be about $20.3 billion for principal and interest. The annual payment due would be $680 million a year. Id.

1. K-12 Facilities

For K-12 facilities, $7.3 billion of the bond would be used for seven distinct objectives. Legislative Analyst’s Office, Proposition 1D, http://www.lao.ca.gov/ballot/2006/1D_11_2006.htm (accessed September, 16, 2006).

First, $3.3 billion would be allocated for the purposes of modernization. This modernization would include providing children with the latest technology to prepare for jobs of the future. The wiring of classrooms and updating of computer equipment would be among the features included here. Yes on 1D Facts Sheet, <http://www.yeson1d.com/documents/1Dfactsheetonltrhd.pdf> (accessed September 16, 2006). Districts would be required to pay 40% of project costs, unless they qualify for state hardship funding. Legislative Analyst’s Office, Proposition 1D, http://www.lao.ca.gov/ballot/2006/1D_11_2006.htm (accessed September, 16, 2006).

Second, $1.9 billion would be allocated for new construction. These moneys would cover various costs associated with building new facilities, including site acquisition, project design, engineering, construction, and inspection. Retrofitting facilities for earthquake safety would account for $200 million of the moneys. Districts would be required to pay 50% of new construction and earthquake-safety projects. Proposition 1D, Text of Proposed Laws, §101012 (a) (1).

Third, relief grants for overcrowded schools would account for $1 billion. Approximately 1,800 schools would be eligible for funding under the program’s guidelines for “overcrowding.” This makes up 20% of all schools. School districts would use these monies to replace portable classrooms with newly constructed permanent classrooms. Districts would be required to pay 50% of the project’s costs. Id. at §101012 (a) (7).

Fourth, $500 million would be allocated for career technical education facilities. This portion of the measure distributes money to high schools and local agencies that have career technical programs. These grants would be allocated on a per square foot basis, with a ceiling of $3 million for each construction project, and $1.5 million for each modernization project. Half of all the school districts, about 500, would be eligible for these new construction and modernization grants. Twenty-five local agencies would also be eligible for money for modernization. For both types of grants, local contributions are required to be 50%. Id. at §101012 (a) (4).

Fifth, $500 million would be devoted to the construction and modernization of charter school facilities. Charter schools are public schools that are exempt from certain state requirements in exchange for adhering to a local or state approved charter. Local contributions for these moneys would be 50%. Id. at §101012 (a) (2). At the local level, school districts typically meet most of their matching requirement and other construction needs by issuing local general obligation bonds. These local bonds can be authorized with the approval of 55% of the voters in the district. The bonds are repaid using local property tax revenue. Legislative Analyst’s Office, Proposition 1D, http://www.lao.ca.gov/ballot/2006/1D_11_2006.htm (accessed October 20, 2006).

Sixth, $100 million has been set aside for environment friendly projects. If a district, for example, includes designs and materials that promote efficient use of energy and water, the maximum use of natural lighting, and use of recycled materials, that district would be eligible to receive a grant in their funding. Again a matching requirement of 50% would be needed in local contributions. Proposition 1D at §101012 (a) (8).

Seventh, monies would be available for constructing new facilities and reconfiguring existing facilities for a joint-use purpose. $29 million has been allocated for this purpose in Proposition 1D. These types of purposes include gymnasiums, libraries, child care facilities, and teacher preparation facilities that are located at a school but are used for joint school/community or K-12/higher education purposes. Local matching requirement for this portion of the proposition would be 50%. Id. at §101012 (a) (6)

2. Higher Education Facilities

The remaining $3.1 billion of Proposition 1D is devoted to higher education facilities. This is broken down to $1.5 billion allocated to California Community Colleges. Id. at 10134 (a). Another $890 million would be used by the University of California. Id. at 101041 (a). The remaining $690 million are earmarked for California State Universities. Id. at 101042 (a).

III. Drafting Issues

There appear to be no major drafting issues regarding Proposition 1D. The text of Proposition 1D states exactly what it is intended to do. The measure is designed to create a general obligation bond in the amount of $10.4 billion for the purposes addressing issues with K-U education facilities. Legislative Analyst’s Office, Proposition 1D, http://www.lao.ca.gov/ballot/2006/1D_11_2006.htm (accessed September, 16, 2006).

One potential issue that may arise is the spending provisions for higher education facilities. While funding for projects for K-12 facilities has been specifically spelled out, there are no similar specific plans laid out for the $3.1 billion given to higher education.

Proposition 1D calls for the Governor and Legislature to “select specific projects to be funded by the bond monies.” Legislative Analyst Office, Proposition 1D, http://www.lao.ca.gov/ballot/2006/1D_11_2006.htm (accessed October 10, 2006). The text of the bond itself more specifically lays this process out by stating that spending of the $3.1 billion be authorized by the Higher Education Facilities Finance Committee. Proposition 1D, Text of Proposed Laws, §101002 (b). This committee consists of the Governor, the Controller, the Treasurer, the Director of Finance, the President of the University of California, the Chancellor of the California State University, and the Chancellor of the California Community Colleges, or their designees. California Education Code §67353. The Treasurer serves as chairperson to the committee. Id. Thus those with a stake in receiving funding are on the very committee that allocates funding. Conflict of interest issues would seem to naturally arise.

According to the text of Proposition 1D, the Higher Education Facilities Finance Committee is allowed to issue bonds “only to the extent necessary” to fund apportionments allocated by the Legislature in the annual Budget Act. Id. at §101035. The committee shall use that legislative direction to “determine whether or not it is “necessary or desirable” to issue bonds in order to “carry out the purposes described.” Id. Thus, the limitations built into each year’s apportionment in the Budget Act, creates a check on unbridled spending power that potentially could have been wield by the committee.

IV. Constitutional Issues

A. Federal Constitution

Proposition 1D does not raise any federal constitutional issues.

B. State Constitution

As a public finance initiative measure, Proposition 1D must avoid two major state constitutional hurdles. First, Proposition 1D is a General Obligation Bond Proceeds Fund which requires its terms to conform with the public finance requirements in Article XVI of the California Constitution. Second, the initiative measure must fall within the guidelines set forth in the single subject rule which requires that all parts of the proposed legislation be reasonably germane to one another. Proposition 1D appears to be free of any state constitutional problems from either of these hurdles.

1. Public Finance

In California, bond financing is used as a type of long-term borrowing that the state uses to finance major capital outlay projects such as roads, educational facilities, prisons, parks, and essentially all other infrastructure related projects. Legislative Analyst Office, Bond Financing, http://ca.lwv.org/lwvc/edfund/elections/2006nov/bonds.html (accessed September 17, 2006). Bonds are used in these cases because these large projects are difficult to pay at once, the facilities in question provide services over many years, and different taxpayers benefit from the services those facilities provide. Id.

California typically sells three types of bonds. First there are budget related bonds. These bonds are issued specifically to pay off the budget deficit. Id. Proposition 57, which was passed in March 2004, is an example of this kind of bond. Id. Second, there are traditional revenue bonds. These finance capital projects but do not get their support from the General Fund. Id. They are paid off from revenue generated from the specific project they are financing. Id. Toll fees on bridges such as the San Francisco Bay Bridge serves as an example. Id. Third, there are General Fund-supported funds. These are paid off from the General Fund. Id . Of these general funds, there are general obligation bonds which have guaranteed repayment, and lease-revenue bonds, which are not guaranteed and are paid at a higher interest rate. Id.

Proposition 1D is a General Fund-supported bond. Article XVI of the California Constitution allows the Legislature to create a “General Obligation Proceeds Fund” in the treasury, and provides for the funds of the sale of the bonds to be paid back into the fund. Cal. Const. art. XVI, § 1.5. The California Constitution requires the preparation, issuance, and sale of bonds to be submitted to the electorate through the form of a bond act or statute. Cal. Const. art. XVI, § 2.

Proposition 1D originated in the Legislature as AB 58 and was authored by Speaker of the Assembly Fabian Nunez. AB 58 was later reviewed by the Assembly Committee on Education where it was decided that funding the $10.4 billion required in this measure would be through a General Obligation Proceeds Fund. Assembly Committee on Education, AB 58 http://www.aroundthecapitol.com/billtrack/analysis.html?file=ab_58_cfa_20060110_113531_asm_comm.html (accessed September 16, 2006). AB 58 later was named Proposition 1D on the November 2006 ballot, giving the electorate a chance to determine if this bond act will pass or fail.

Proposition 1D conforms to all the public finance requirements set forth in the California Constitution.

2. Single-Subject Rule

Any initiative presented to the voters of California must pass what is known as the single subject rule. Any initiative measure “embracing more than one subject may not be submitted to the electors or have any effect.” Cal. Const. art. II, § 8(d). The single subject rule makes initiatives simpler and easier to understand. Complex initiatives dealing with multiple unrelated subject areas, threaten to place voters in the unenviable position of having to decide whether one issue on a particular measure outweighs another in a single vote. The single subject rule eases that type of confusion by focusing decisions on one single subject of inquiry at a time.

The California Supreme Court has defined the test for identifying whether an initiative deals with only a single subject. Brosnahan v. Brown, 32 Cal. 3d 236, 241 (1982). The Court does this by examining separate parts of an initiative and determining whether they are reasonably germane to each other. Id. Provisions of an initiative must be “reasonably related to a common theme or purpose.” Id. If a law does not have that common theme or purpose, that law violates the single subject rule and cannot be enacted. Senate v. Jones, 21 Cal. 4th 1142 (1999).

Proposition 1D’s title, the Kindergarten-University Public Education Facilities Bond Act of 2006, fairly succinctly states the overall purpose of the measure. All of the provisions of Proposition 1D are directed at providing funds for construction, repair, and renovation of educational facilities. These subjects all are reasonably related to this purpose, and most likely will be considered reasonably germane per the standards set forth in Jones.

V. Public Policy Considerations

A. Proponents

Supporters of Proposition 1D have multiple reasons for supporting the measure. Some supporters believe that this bond is a way to help the “half a million children born in California each year and the 6.5 million students already in our public school system.” Barbara Kerr, President of the California Teachers Association, <http://www.yeson1d.com/peoplesaying.html> (accessed September 16, 2006). Proposition 1D is a “crucial investment” that will reduce overcrowding and make school buildings earthquake safe. Id. That investment is the key to California’s future. Proposition 1D will promote a strong educational system which is necessary to grow our economy and create good-paying jobs. Only a strong education can arm our youth with skills necessary to succeed in the workforce and make us competitive in a global economy. Allan Zaremberg, President of the California Chamber of Commerce, http://www.yeson1d.com/peoplesaying.html (accessed September 16, 2006).

Another appealing aspect to Proposition 1D is its strict accountability measures. The independent auditing system prevents waste and misuse that has plagued other projects in the past. Brenda Davis, President of the California State PTA, http://www.yeson1d.com/peoplesaying.html (accessed September 16, 2006).

Proposition 1D is a bipartisan effort supported by a coalition of parents, teachers, and businesses. Barbara Boxer, U.S. Senator, http://www.yeson1d.com/peoplesaying.html (accessed September 16, 2006). Its actual impact on the economy is relatively small, as its monetary amount represents less than 7/10 of one percent of the state’s annual budget. Haggling over our children’s future on that amount would be a dangerous choice. Larry McCarthy, California Taxpayers Association, http://www.yeson1d.com/peoplesaying.html (accessed September 16, 2006).

B. Opponents

Opposition to Proposition 1D mainly comes from taxpayer protection groups throughout California. They see multiple issues which plague Proposition 1D and should be reasons to vote against this measure. First, they assert that Proposition 1D is unfair. The matching of 50% of funds that is required of local districts on all the construction projects will not help the most needy districts. Those districts that are shortest on money need money for building and renovation the most. This proposition does nothing to help them. Thomas N. Hudson, Executive Director of California Taxpayer Protection Committee (email on file with the McGeorge School of Law, University of the Pacific, Capital Center for Government Law and Policy).

Second, opponents of Proposition 1D claim that the distribution formulas used in deciding what districts receive the most aid is highly partisan. Democrat districts in the San Francisco Bay Area and Los Angeles, including many urban districts that are suffering from declining enrollment, get a majority of the bond funds as they have in the past. By contrast, faster growing, mostly Republican districts, will not receive funding at all. This is despite the fact that they will still have to pay taxes to pay off this bond. Opponents contend that this unfair distribution is done by design, and not by chance. Id.

Third, opponents wonder, when is enough, enough? Currently the state budget provides for over $11,400 on average per student annually. Why isn’t this amount enough to deal with our educational problems? Id.

Fourth, opponents contend that California’s current budget is completely out of balance. What state services will be cut to pay the annual debt service on this bond? This can be done by only by raising taxes or cutting services. If that were a feasible solution, why not do that instead of investing in this type of bond measure at all? Id.

Fifth, bond measures are historically the most expensive way to pay for school construction and maintenance. Opponents assert that borrowing for repairs that will need to be repaired again long before the debt is paid off is a bad policy. This type of borrowing should not be used for programs that have little or no demonstrable benefit to the future generations. Additionally, other bond measures have allowed school districts to use money on expenses like administration, janitorial services, landscaping, etc. Those should be reserved for current school budgets, not based on bonds. Id.

Overall, this bond contains no real reforms to the problems every school bond has been plagued by in the past. Opponents believe legislators need to come up with a plan that actually makes reforms, and does not just throw more money at the problem, with no real end in sight. Id.

VI. Conclusion

On November 2006, voters will determine whether they want to enact the Kindergarten-University Public Education Facilities Bond Act. With $10.4 billion at stake, voters must consider carefully the pros and cons of approving this bond. Are the potential benefits of decreasing overcrowding and modernizing our schools worth the debt we would incur? Whichever way one may decide, the impacts of that decision could affect Californians for years to come.