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School Bond Money Can Be — and Is — Used on Employee Salaries

In 2000, California voters made it easier to pass school bonds, but they included a caveat: The money can’t be spent on employee salaries. So it may come as a surprise to learn school districts statewide have been freely — and legally — spending bond money on employee salaries and benefits for more than a decade.

In 2000, California voters made a trade-off in order to help schools.

They made it easier to pass school bonds, and in exchange, they included a caveat to safeguard the funds: The money can’t be spent on employee salaries.

That way, the thinking went, taxes approved for school construction actually paid for facility repairs and upgrades, not employee paychecks or other routine costs.

A ballot summary by the California attorney general said the new law lowering local voter approval requirements for school bonds from two-thirds to 55 percent, “Prohibits use of bond proceeds for salaries or operating expenses.”

Prop39

So, it may come as a surprise to learn school districts statewide have been freely — and legally — spending bond money on employee salaries and benefits for more than a decade.

That’s because an opinion issued in 2004 by then-Attorney General Bill Lockyer said the prohibition does not include employees who oversee and administer the bond program. “Administrative oversight work is an integral part of the construction process,” Lockyer reasoned.

He continued:

AGopinion-no.-04-110

Since then, school districts have spent bond money — which is borrowed and paid back with interest sometimes decades later — on employee salaries, as well as staff benefits like pensions and insurance for health care, unemployment and workers’ compensation if they’re working on the bond program.

San Diego Unified’s Proposition S and Z bond measures in 2008 and 2012 both said there would be “no money for administrators,” but further down, the ballot language had this disclaimer: “Proceeds of the bonds may be used to pay or reimburse the District for the cost of District staff when performing work on or necessary and incidental to the bond projects.”

“Most people don’t read all that,” said Michael Turnipseed, president of the nonprofit California League of Bond Oversight Committees. “Everybody states there will be no salaries going for administration. Some say teachers and administrators. It’s a big selling point, but that’s not true. But all the election people put it in because it sounds good.”

Just how much bond money a district should spend on employee costs is left to each district, and public records show the amount varies.

In any given year, some districts spend less than 2 percent of bond money on employee salaries and benefits, while others spend close to 20 percent.

San Diego Unified School District is usually in the middle of the pack, district budget records show.

The district spent more than $62 million on salaries and benefits using the bond account from 2008 to 2016, or 5 percent of the $1.2 billion spent total. Annually, the amount has ranged from a high of 7.4 percent, to a low of 3.5 percent in 2015.

The bulk of the money has gone toward what’s called capital outlay, or money spent repairing, upgrading and acquiring buildings, land and equipment.

San Diego Unified officials project they’ll spend another $15 million in bond dollars on employee salaries and benefits this year, or 5 percent of all building fund spending.

Expenses to manage a bond program “are not only legal; they are integral to ensuring effective and efficient completion of school modernization and renovation projects,” San Diego Unified’s Facilities Planning and Construction division said in a statement.

Grossmont Union High School District finds itself on the lower end, reporting just 1.6 percent of all building funds for the last nine years have gone toward employee salaries and benefits, or $6.75 million out of $428.4 million.

“The Grossmont District is extremely efficient in its use of bond funds for salaries and benefits to administer its bond construction program,” district spokeswoman Catherine Martin wrote in an email.

Both districts spent proportionately less than the state’s largest public school system, Los Angeles Unified School District.

Los Angeles Unified reported spending $714.8 million out of $7.9 billion in bond dollars on employee salaries and benefits from 2008 to 2016, or 9 percent. For each of the last four years, bond money spent on salaries and benefits exceeded 15 percent, topping 19.9 percent last fiscal year, records show.

 

Spending habits at Los Angeles Unified are different, in part, because of the sheer volume of work being done, and also because the district has brought more construction oversight work in-house as the bond program has shifted “from a focus on new construction to modernization of existing facilities,” according to district spokeswoman Elvia Perez.

Ten years ago about 44 percent of the district’s bond management team were consultants, Perez said in an email, and, “Today, that figure is approximately 12 percent.” Smaller districts may stick with a higher portion of outside managers.

Still, Turnipseed said if administration costs reach “20 percent of the whole project, I’d really be concerned.”

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