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Calls Grow for Action on School Bond Pay-to-Play

The state treasurer and L.A. County treasurer call for reform of a broken system. San Diego County’s treasurer-tax collector isn’t so sure.

There are growing calls statewide for legislators to take action to curb pay-to-play in school bond campaigns.

Bloomberg reported last week that State Treasurer Bill Lockyer, who has been vocal about reforming the state’s school bond system, is now calling for a rule that forbids companies that give money to bond campaigns to work on bond projects and to buy and sell the bonds.

He’s being joined by Los Angeles County Treasurer Mark Saladino, who has pledged to blacklist bond underwriting firms who donate to school bond campaigns from doing business with the county.

In San Diego County, a significant correlation exists between large donors to school bond campaigns and companies who later win contracts resulting from the bonds.

We found that the connection between giving and receiving wasn’t limited to financial firms, but also included everyone from architects to lawyers to construction firms.

Lockyer has sounded the alarm on bond campaigns before. He urged California Attorney General Kamala Harris earlier this year to examine a slew of recent school bond deals to see if they were legal.

Now, he wants to see statewide rules barring companies that fund or advise bond campaigns from also getting work, according to Bloomberg:

“The aroma emanating from the school-bond finance arena is not pleasant,”[Lockyer spokesman Tom] Dresslar said in a statement. “The whole system is due for a deep cleaning.”

In Los Angeles, Saladino isn’t waiting for the state Legislature to take action.

Saladino is informing dozens of bond underwriters that if they donate money or expertise to school districts running bond campaigns, they won’t be welcome when it comes time to sell the district’s bonds.

And Saladino wants other county treasurers to do the same. Saladino’s deputy Glenn Byers told Bloomberg: “If we had all or most of the treasurers in the 10 largest counties in the state, that’s effectively a statewide policy.”

But San Diego County Treasurer-Tax Collector Dan McAllister is skeptical of Saladino’s plan.

McAllister said he wants to see a comprehensive, statewide approach to tackling what he acknowledges is a serious problem. He said there have been past attempts to try and clean up school bonds, but they’ve been largely unsuccessful.

“We’ve talked about the need for comprehensive pay-to-play legislation for a long time,” McAllister said. “The California Association of County Treasurers and Tax Collectors has sponsored legislation again and again, and it’s never been successful.”

McAllister said different county treasurers have different levels of power to curb problems in the school bond world. Some treasurers, like Saladino, control all the bond borrowing in the county, and therefore have a lot of power to set the rules. But in other counties, the treasurer has little to do with school district debt issuance, he said.

In San Diego, for example, McAllister said he doesn’t oversee all the bonds sold in the county. And his office doesn’t necessarily get involved with all the school bond sales either, he said.

“I’m all for people entering the dialogue, but until there’s comprehensive reform in the form of a new state law, I would be dubious about this,” McAllister said. “Give us laws so we can implement and enforce them.”

McAllister said that policing school bonds is tricky from a practical point of view, too.

Saladino’s office will have to monitor every one of the school districts in Los Angeles County to ensure large donors aren’t winning contracts once bonds pass, he said — and that’s not going to be easy.

“That’s going to be a tremendous burden on elected officials,” he said.

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