FREQUENTLY ASKED QUESTIONS

Proposition 55:

The K-University Facilities Bond Act of 2004


"California students are being asked to meet higher expectations for learning,
while too many of them attend schools in deplorable conditions.  Our kids deserve better."
--Jack O'Connell, State Superintendent of Public Instruction

 

Didn't we just approve a similar Bond Act?

In 2001, the California Legislature approved AB 16, authored by former Assembly Speaker Bob Hertzberg, which proposed placing before voters two separate statewide ballot measures to fund capital outlay projects for the state's public schools, K-University.  Proposition 47, the first of these measures was approved by the voters (57% to 41%) on the November 5, 2002 General Election ballot.

Proposition 55 is the second half of the 2002-04 School Bond package.

Projects funded by Proposition 47 are now being completed.  However a backlog of work remains to improve energy efficiency, to modernize older buildings so that computers and labs are up-to-date, and to provide instructional equipment for already constructed facilities.  Renovations also need to be completed at existing facilities to bring them up to current safety standards.

Proposition 55 will ensure continuation of this vital work.

 

How much money will be invested in public education, if voters approve the Bond Act?

Proposition 55 authorizes the sale of General Obligation bonds in the amount of $12.3 billion, which will be allocated as follows:

   K-12:  $10 billion

   Higher Education:  $2.3 billion

If Proposition 55 is passed, California State University, Northridge will receive in excess of $50.5 million for equipment (to complete the Engineering Renovation Project, begun with Proposition 47 monies), for construction (to replace Science 1, the 4th oldest instructional building on the campus), and for planning/working drawings/design for its Performing Arts Center.

 

Couldn't these projects be postponed?

Many construction projects at the University of California, the California State University and community college campuses have, in fact, been deferred and delayed during the past decade.  The aging process of existing facilities has continued, and buildings are becoming less useful and less safe.

By 2010, enrollment at the 9 campuses of the University of California is expected to increase by 64,000; at the 23 California State University campuses by 148,000; and at the 108 California Community Colleges by 550,000.

The state's K-12 public schools are projected to grow by 3000,000 students by 2010.  There are currently 8,000 individual public schools in California, with a student population exceeding 6 million--the equivalent of the population of Indiana, the 13th largest state.  According to the National Education Association, California ranks third in the nation in having the most overcrowded classrooms.

Schools are getting older, not younger, and it will only get more expensive if projects are delayed.  Proposition 55 enables the state to address both the immediate and long-term needs of its public schools in an uninterrupted, timely, and prudent way.

 

How much will it cost taxpayers?

If the $12.3 billion in bonds authorized by this Proposition are sold at an interest rate of 5.25% (the current rate for this type of bond) and repaid over 30 years, the cost over the period would be about $24.7 billion to pay off both the principal and the interest.  The average payment for principal and interest would be about $823 million per year.

Debt Service Ratio:  The level of General Fund debt payments stated as a percentage of state revenues is referred to as the state's Debt Service Ratio.  Both the Legislative Analyst, the non-partisan fiscal advisory arm of the Legislature, and the Department of Finance, the Governor's fiscal advisory agency, have stated that 6% is a prudent Debt Service Ratio.

The ration currently stands at about 3.3% and is expected to increase to 4.6 in 2004-05, and further to a peak of 4.9 in 2005-6, as currently authorized bonds are sold.

If Proposition 55 is approved, the ratio would increase to about 5.3% in 2006-07 and decline thereafter.

At the current time, there are two statewide bond measures on the March ballot--Proposition 55 and Proposition 57, the Governor's $15 billion Debt Financing Bond.  Information regarding the effect of the latter bond, if approved by voters, on the Debt Service Ratio is not yet available.  Estimates are that passage of both bonds will put the ratio at 6 - 6.2%.  [Note:  Prop. 57 would become effective only if Prop. 58--the Balanced Budget Act--is also approved by voters.]

 

Why don't we pay for buildings through the state budget?

Only a very small percentage of the state budget is discretionary.  The bulk is committed to existing programs--such as prisons, roads, hospitals, health and social services programs, operating expenses for education, and energy.  If capital programs were funded by the state General Fund, there wouldn't be money for anything else.

 

Who determines which projects will be funded by the Bond Act?

Each of the higher education systems has a very rigorous and open process in place for reviewing and approving projects that will be funded by a bond act.  Projects proposed by The California State University system, for example, go through local campus review, Chancellor's Office scrutiny, and review and final approval by the system's Board of Trustees.  The Office of the Legislative Analyst, the California Department of Finance, and the Legislature are also involved in the review of projects.

 

Will passage of Proposition 55 raise my property taxes?

No.  The debt on statewide bond acts is paid from the State General Fund.

Only the debt on local bond measures is paid by increasing property taxes.

 

How will California's economy benefit?

The Bond Act will provide jobs for workers in the construction and related industries, and the ultimate product--an educated work force at the forefront of innovation and discovery, which is key to attracting business and industry to California.

According to the Eleventh Annual Business Climate Survey, compiled by the California Business Roundtable, "the shortage of qualified employees is the most significant cost driver for California businesses.  The business community understands that education is the key to building a prosperous California."

The Roundtable, in addition to ranking education as the most important policy priority for California's future growth, notes that "Sixty percent of the state's K-12, and over 50% of the state's higher education facilities are over 30 years old--forcing the students of our high tech economy to learn in facilities with crumbling walls, inadequate wiring, poor ventilation and overcrowded classrooms."

As indicated above, over a million additional students will be attending California's public educational institutions by the end of the decade.  Proposition 55 will help ensure that these students will not suffer educationally due to the lack of equipment--or because existing equipment is so outmoded it's of little practical use.  A well-educated and well-prepared workforce is critical to the state's ability to compete successfully in the global market.

 

Will any of the money from the Bond Act be used for salaries or other administrative expenses?

No.  All of the revenue derived from sale of the General Obligation bonds that Proposition 55 would authorize will be used solely for construction, renovation, and repair of school facilities.

 

What happens if voters do not approve the Bond Act?

It will be another two years before another Bond Act will be placed before voters.  By then, the backlog of essential facility improvement projects will have grown even larger, and the physical deterioration of our schools will have continued unabated.  We will face the perverse circumstance of providing computers, books, more teachers, and an improved teaching workforce for schools without high technology wiring, without enough classrooms, and without a physical environment that supports effective learning.

 

Who supports Proposition 47?

As of January 6, 2004, 387 statewide and local organizations and individuals have endorsed Proposition 55.  Key supporters include the California Chamber of Commerce, California State PTA, California Taxpayers Association, California Teachers Association, League of Women Voters of California, and the Congress of California Seniors.

 

Who opposes Proposition 55?

There is no known organized opposition at this time.

 

Arguments Against Proposition 55:

The state is facing an unprecedented fiscal crisis and cannot afford to increase its debt.  General Obligation bonds should not be used for capital construction project funding.  A more fiscally prudent approach would be to adopt a pay-as-you-go policy:  Construction of schools, roads, bridges, and other infrastructure needs from the state General Fund, when money is available and specifically set aside for these purposes.

For more information, and a non-partisan analysis of Proposition 55 and the three other ballot measures that will be on the March 2 ballot, please visit the website of the Legislative Analyst:  http://www.lao.ca.gov/initiatives/qryPropositions_by_election_3-2004.asp

 

 

 

 Summary of Proposition 55

 How Can I Help?

 History of Facilities Bond Acts in California

 Voter Registration Information

 

 

This page last updated: January 9, 2004

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