CA Proposition 2 will end up raising state taxes and already is raising local property taxes. That is why the Howard Jarvis Taxpayers Association opposes Proposition 2 and says, “Proposition 2 will increase our bond obligations by $10 billion, which will cost taxpayers an estimated $18 billion when repaid with interest. A bond works like a government credit card—paying off that credit card requires the government to spend more of your tax dollars! Vote NO on Prop. 2.”

“…school districts have to put local school bonds on the ballot. If approved by 55% of voters, these bonds will add new, extra charges to property tax bills. The borrowed money is paid back by raising property taxes. Higher property taxes raise the cost of housing and the cost of living, and not only for homeowners. Tenants will see higher rents and consumers will see higher prices as property owners deal with higher operating costs due to property tax increases. Tax hikes are one more burden on struggling Californians, on top of higher electricity bills, higher insurance costs and higher grocery bills…”

Prop 2 Cost Taxpayer $500 Million Per Year For 35 Years

Supporters also say that “state general obligation bonds are paid from existing state general funds.” What existing funds? The state of California is upside down by a quarter trillion dollars! Can you say, “higher taxes in our future?” When in fiscal distress, the state will have to pay bondholders first.

Prop. 2 would increase state debt and spending on interest. It would primarily benefit bureaucrats, special interests and politically-connected contractors and Prop. 2 would do little to resolve the existing inequities baked into the way the state doles out school facilities funds.

How much districts get is based on how much they can raise on their own through local bond measures — so the system sends more money per student to wealthier school districts with more assessed property value and less to poorer ones. Critics say it’s especially unfair to rural districts, which tend to have less property value and more trouble passing their own bonds.

That $500 Million A Year Has To Come From Somewhere.

The Legislative Analyst’s Office pegs Prop. 2’s payback cost at $17.5 billion dollars ($500 million a year from the general fund for 35 years.) It also noted state and local school districts commonly split construction costs roughly in half. Which means some districts “would see an increase in their local costs,” meaning more local bonds paid for by property tax increases.

Treasurer Fiona Ma’s website lists current bond indebtedness for the state at $71.4 billion, with another $26.2 billion authorized but not yet issued. According to the LAO, the state currently allocates $8 billion a year from the general fund to pay back those bonds. Prop. 2 would increase that to about $8.5 billion.

And the money for that $500 million a year has to come from somewhere. That means cutting other spending programs or raising taxes. That’s why many experts have long called bonds “delayed tax increases.”

The $500 Million Per Year That Proposition 2 Will Cost Taxpayers Is Only The Beginning.

Proposition 2 will cost taxpayers another $500 million per year for 35 years, money that will come out of the state’s General Fund before any current needs can be funded. This is added to the nearly $8 billion in principal and interest payments that the state is already paying annually for previous bonds.

The $500 million per year that Proposition 2 will cost taxpayers is only the beginning. In order to receive any of the Prop. 2 bond funds from the state, local school districts must provide a “local match” of up to 50%. This generally means school districts have to put local school bonds on the ballot. If approved by 55% of voters, these bonds will add new, extra charges to property tax bills. The borrowed money is paid back by raising property taxes.

Borrowed Money Is Paid Back By Raising Property Taxes.

Higher property taxes raise the cost of housing and the cost of living, and not only for homeowners. Tenants will see higher rents and consumers will see higher prices as property owners deal with higher operating costs due to property tax increases.

Tax hikes are one more burden on struggling Californians, on top of higher electricity bills, higher insurance costs and higher grocery bills. That’s another reason we must look very closely at proposals for new debt to see if the money will be well spent.

 Local school districts must provide a “local match” of up to 50%. This means more local bonds paid for by property tax increases.

As Orange County Fiscal Watchdog John Moorlach pointed out, proponents say, “Proposition 2 does not raise local property taxes.” This is false. If a school district decides to borrow funds, hoping to receive matching state funds, it must have its voters approve a ballot measure to raise real estate taxes to pay the local bonds off. That is a raise in local property taxes.

Supporters also say that “state general obligation bonds are paid from existing state general funds.” What existing funds? The state of California is upside down by a quarter trillion dollars! Can you say, “higher taxes in our future?” When in fiscal distress, the state will have to pay bondholders first.

In addition, advocates say that “without a state school bond, new homes will have to pay as much as $40,000 in new school fees.” Paying a higher development fee may be true, but homes are sold at market prices, so the developer incurs the cost, not all taxpayers in the area. So, this argument is a very weak and unsophisticated one.

Making this ballot measure even worse is the encouragement to use project labor agreements, requiring the use of construction firms that are unionized. Many studies have found that this could raise the cost of projects by as much as another 30 percent!

As A “Practical Matter,” Public Educational Systems “Need” Bonds To Come Up With Their Required Shares of Project Costs.

According to a recent Daily Bulletin article, “Prop. 2’s appearance on the Nov. 5 ballot and the prospect of securing state funds through it has spurred many districts to seek authorization for local bond issues..”

Districts, “…have to put up large chunks of money — called matches — in order to receive state dollars. The state typically pays half the cost of new buildings and 60% of renovations, according to the state Legislative Analyst’s Office.

As a practical matter, said Paula Ford, assistant superintendent of business services for Jurupa Unified School District in Riverside County, public educational systems need bonds to come up with their required shares of project costs.“There is not that type of money in a general fund budget,” Ford said, saying 85% of her district’s budget is committed to staffing.

“No district has those kinds of funds.”

The local bond measures, which need 55% of votes cast to pass, come at a time when enrollment is declining.