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March 2020
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President's Corner
Students walking on college campus.
Since the primary election season in California is in our rear view mirror, it is always interesting to analyze the results. The local and state propositions give a much better indication of the mood of the electorate than the results of the elected offices. Our state seems to have more than their share of propositions which make it difficult sometimes to separate the important initiatives from the insignificant. Of course, the Golden State leads the country in truly absurd propositions such as, “Should we prohibit toxic waste in our drinking water” (passed in 1986) or the whimsical “Should a police officer get to walk his beat with a ventriloquist’s dummy” (passed in 1993).

This year, our state legislator doubled down on the relatively good economy and fat state reserves by proposing a $15 billion school bond unfortunately named Proposition 13. For those people who did not live in the state back in 1978, the original Proposition 13 was a rebellion against the high property taxes paid by homeowners. This initiative, passed by almost 63% of the voters, limited property tax increases to 1% per year and capped the annual increases of assessed value of the property to 2% annually. This so-called “taxpayer revolt” forever changed the way California funds the government for schools, housing, social services, and infrastructure.

But back to the new Proposition 13. For 20 years, Californians have routinely supported school bonds, but 54% of the electorate voted down this bond measure. Did we suddenly become anti-education? I don’t think so. $15 billion is a lot of money, but it was not the total bill that would have to be repaid by taxpayers. Interest has to be paid to the bondholders to entice them to invest. Based on an estimated 3% yield, the total principal plus interest will be close to $30 billion. That is a lot of money on top of the $80 billion allotted to schools in the state 2020 budget. And, as I’ve heard from many people over the past several weeks, “What about the lottery money that is supposed to go to the schools?”

The proposition stated the funds will be used to upgrade facilities, but no details were given. These lack of details left me with, “So what exactly are we paying for?” Sure, many schools up and down the state are old, but many have been rebuilt in the last several years. Others just need to be remodeled or “freshened up.” The University of California and Cal State University systems are included in this bond package, but they earn tuition fees from the students, as well as many of them going into other industries such as healthcare and real estate to supplement their revenue. Additionally, several others (UCLA and Cal Berkeley, to name two) have healthy endowments they can tap into.

The other peculiarity of this proposition was the bond term. Generally, government bond terms do not exceed 30 years, yet this initiative asked for a 35-year term. There is no stated justification for the increase in the term. The effect of this seemingly innocuous change will cost taxpayers an extra 16% in interest. Coincidentally, a local school bond on my ballot was also for a 35-year term, again with no explanation.

With the high taxes, high housing prices, and high cost of living, Californians have gotten savvy in what expenditures of their tax dollars are most important to them. They want, expect, and deserve meaningful details from elected officials in order for them to make informed decisions. But I’ll admit I feel safer in San Francisco knowing a ventriloquist’s dummy is looking out for my safety.
 
David M. Green

President/CEO
dgreen@1stnorcalcu.org
(925) 335-3802
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