Proposition 13: Bonds for Schools and Colleges
One of the ways state government supports public education is by providing money to build and repair school and college buildings. This money usually comes from bonds.
Prop 13 would allow the state to sell $15 billion in new bonds to help build and repair schools, including:
- $9 billion for preschools and K-12 schools
- $6 billion for public universities and community colleges
Schools could use this money to make buildings safer, to construct new buildings, or to increase the amount of student housing. Prop 13 would also increase the amount of money local school districts could raise by selling their own bonds. Districts with less money could also apply for more help from the state to pay for construction projects.
California provides public education to 9.2 million students, from pre-school to community colleges and four year universities. Traditionally, the state provides money to school districts for the capital costs of building and renovations/modernization. This is generally done with the sale of general obligation bonds that are paid off over a long period of time from the General Fund of the state. School districts must raise money to qualify for state funding. This is often done by issuing local bonds that must be approved by voters in the district. For K-12 school districts the state covers a share of the cost of each approved project. The districts pay for the rest of the project, frequently by selling local bonds. There are rules for determining which proposals receive bond money. There are also rules limiting the amount of indebtedness local districts can issue with their own general obligation school bonds. Those rules are based on the assessed property value within the districts. In 2013 the UC and CSU systems were allowed to issue bonds directly with no voter approval required. Bond indebtedness is to be paid back from funding received by the state.
California’s public schools serve more than 6 million K-12 students at 10,000-plus schools in more than 300,000 classrooms—70% of which are more than 25 years old. Schools have closed or missed class days because broken pipes had left them no source of running water or because broken septic tanks shut down bathrooms. Some schools have been found to have harmful mold or asbestos, or lead in pipes. Smaller school districts with low property values have problems issuing local school bond measures needed to qualify for state matching funds so maintenance and upgrading is delayed or not performed. Higher education campuses have many buildings that are 30 - 50 years old. The campuses suffer from delayed maintenance, safety, infrastructure, and modernization needs. There is a need for additional dormitory space to meet anticipated increases in student population and to deal with an issue of homeless students.
School Bond History
From 2006 until 2016 there were no statewide bond issues for education. The $9 billion Prop 51 passed in 2016 did not include colleges and universities. Approximately $7.8 billion in bonding authority, mostly from Prop 51 remains but the state has received applications nearly in excess of the bond amount.
Proposition 13 is a Bit Different from other School Bond Measures
The provisions of this proposition are a bit different from past bond issue propositions. This one reflects concerns that small, less well off school districts are unable to raise the funds needed to qualify for state assistance. It also reflects concerns about housing shortages, both within communities and on college campuses. For the first time ever, preschool facilities can receive funding from a bond issue.
In response to concerns that the current system favors larger and more wealthy K-12 school districts in obtaining funds, Proposition 13 would make changes to the funding process and eligibility as follows:
- the rules for processing applications for funding
-the first come, first served application processing system for K-12 districts would be replaced, creating a system of prioritization for projects, and offering aid to small districts.
-establishes priorities for which applications to process first. First priority is for projects related to health and safety renovations. The second priority is school districts requesting financial hardship assistance.
-reserves up to 10% of the $5.2 billion designated for renovation projects for school districts with 2,500 students or less.
- the rules for local funding requirements:
• uses a sliding scale for the required matching funds. Under the current system, the state’s share of project costs was 50% of new construction and 60% of renovation. For districts with less capacity to raise matching funds and with higher numbers of low income students, foster youth, and English learners, the state’s share would be 5% higher than current system allows.
• allows school districts to increase the amount of local bond issues. This is done by increasing the limits for elementary and high school districts from 1.25 percent to 2 percent of the assessed property value and for unified school districts from 2.5 percent to 4 percent. (Note: this is not doubling the capacity)
• expands financial hardship threshold to allow qualified districts to receive up to 100% of state grants. The current threshold is $5 million; this proposition would set it at $15 million.
• places limits on school district imposed developer fees. Prop 13 would prohibit fees on construction of new multi-family structures near major transit stops and reduce the allowable developer fees on other such structures by 20%.
This proposition would further require all districts that apply for matching funds to establish a five year facilities master plan. There is a process for small school districts to apply for technical assistance to assist with the planning, site acquisition, pre-construction, construction, and closeout of a project. Grants for project management are available for eligible districts. There is some criticism of the proposition. The processing and sliding scale of matching funds formulas provide more money to small, less well off districts, but it will not fully compensate for the low assessed property values upon which financing is based in those districts.
College and University Systems
The UC and CSU systems have not been included in a statewide bond issue since 2006. During the intervening years general state funding decreased. Maintenance and capital improvements were deferred. In 2013 the systems were allowed to issue their own bonds to be paid back by ancillary revenue sources like parking structures and dorms or general revenue including state general revenue funds. Proposition 13 would require both the UC and CSU systems to adopt a 5 -year affordable student housing plan as a condition for funding. Priority “is given to projects
that address fire and life safety issues, seismic deficiencies, and critical deferred maintenance issues.
The state would spend about $740 million per year for the next 35 years to repay the bonds. The effect on local governments would depend on the choices that school districts and universities make about building repairs and new buildings.