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AB1554 is a rider bill that was
tacked on to AB 2756, which was supposed to lower the interest rate on
WCCUSD's $25.25 million state loan, saving the district more than $600,000
a year or $6 million over the life of the loan.
Now that the state budget has passed,
Legislators will be quickly reviewing rider bills for passage that will
make it possible to implement the budget. Following is an explanation of
AB 1554 and our position on it. Please pass this information on to
your friends and communication circles!
On June 21, 2004, Governor Schwarzenegger signed into law
AB 2756, the bill which refinances the West Contra Costa Unified School
District (WCCUSD) state bail-out loan it has held since 1991. The refinancing
of the loan will save the district hundreds of thousands of dollars annually
in interest payments. The recently proposed AB 1554 will take away the
money the district is due to receive from the passage of AB 2756 - money
that could be used to fund critical educational programs.
As with the budget deals the Governor made with the State
Prison Guards Union and local governments, AB 1554 is an attempt to borrow
against California's future to fulfill his campaign promise to balance
the budget this year. AB 1554 creates a system in which the California
Infrastructure and Economic Development Bank (I-Bank) takes control of
the state's bailout loan program for financially troubled school districts.
The I-Bank is a conglomerate of banks that loan the State of California
money. By immediately taking over the existing loans, the I-Bank will pay
roughly $150 million into the state general fund (GF), thus helping Schwarzenegger
balance the budget. This new policy, however, has far-reaching consequences
for financially troubled school districts like WCCUSD.
Under the I-Bank system, interest rates are variable and
the state guarantees payment of the loans to the I-Bank. The state makes
the loan payment for the districts to the I-Bank, and then takes the money
out of the districts' Proposition 98 apportioned funds. The amount of the
payments will change from year to year because of the variable interest
rate. The ramifications of this system are that districts will not know
from year to year how much actual Prop. 98 money they will receive - even
if they can accurately project the expected state-wide, constitutionally-mandated
funding for Prop. 98. Districts with loans, therefore, may not be able
to adequately fund certain programs. A district with a bailout loan could
receive significantly less Prop. 98 funds from one year to the next based
on the variable interest rate.
AB 1554 requires that Oakland Unified School District
(OUSD), Vallejo City Unified School District (VCUSD) and WCCUSD, convert
their debt to lease-financing loans with the I-Bank. These districts have
been singled out in AB 1554 because their current loans are at low interest
rates, and the state will make money from the I-Bank by converting the
debt to a higher variable rate. In the case of WCCUSD, the current
interest rate is low because of the refinancing resulting from AB 2756.
AB 2756 refinanced WCCUD's loan at 1.5%. The current variable rate is about
4.5%. The 3% difference totals nearly $300,000 annually. The language of
AB 1554 reads that the $300,000 WCCUSD should receive as a result of AB
2756 will be taken out of the district's Prop. 98 money. This is money
the Governor and lawmakers promised the district. This is money that could
fund programs such as music and sports. This is money the district desperately
needs. As with the deal the Governor made with the California Teachers
Association to suspend full funding of Prop. 98, AB 1554 attempts to balance
the state budget on the backs of California's children.
AB 1554 makes private banking a partner in the education
of the state's children. It also requires school districts to use their
own property to secure the loans. The California Supreme Court ruled that
it is the state's sole responsibility to educate students. As such, it
is unethical to involve a third party in the education of our children
- especially a partner who stands to benefit financially from the underfunding
of the state's public schools. The $300,000 that WCCUSD will lose because
of AB 1554 does not go back into the General Fund, it goes into the pockets
of the banking industry. Not only does the I-Bank make money off the interest
of the loans, it also charges the districts fees for transferring the loans
over from the GF to the I-Bank - money that will come out of the Prop.
98 funds for California's neediest districts.
AB 1554 is a trailer bill on the recently approved state
budget. This means that this bill is scheduled to be passed soon after
the budget becomes official. March 4 Education asks that you contact your
state representatives and local school boards to tell them that AB 1554
cannot become law. School districts across the state are in financial trouble
because public education in California is underfunded. Governor Schwarzenegger
must not be allowed to take from our children in order to meet his campaign
promises.
Summary of March 4 Education
position on AB 1554
March 4 Education opposes AB 1554 because:
AB 1554 borrows against California's future in an attempt
to balance the budget this year. Governor Schwarzenegger is balancing the
budget on the backs of California's children in order to meet a campaign
promise.
AB 1554 negatively impacts some of California's neediest
school districts, including OUSD, VCUD and WCCUSD at a time when public
education is underfunded.
AB 1554 takes away money from WCCUSD that it is supposed
to receive as a result of AB 2756, which refinanced their State bail-out
loan.
AB 1554 makes private banking a partner with the State in
the education of California's children, even though the California Supreme
Court ruled it is the State's sole responsibility to educate students.
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