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Lingering debt of $1 billion and beyond tends to be associated with federal, state or municipal governments. Taxpayers should not be surprised, however, when a school district incurs a debt of more than $1 billion. In 2008, voters in the Poway Unified School District (PUSD) in San Diego County approved $179 million in bonds for capital improvements. This came at a time when the housing slump hurt property tax revenues, so the district, which serves some 33,000 students, turned to CABs, capital appreciation bonds. The district pays nothing for 20 years as interest compounds, but the bonds must be repaid in the 20 years thereafter. As Ed Ring of the California Policy Center notes, interest has now jacked up the debt to $1.27 billion through 2051.
“I think it’s a classic example of the fiscal irresponsibility and failed leadership of our board,” local parent John Riley, told reporters. “It’s a bond that kicks the can down the road and forces future generations to pay for today’s needs.” Poway city councilwoman Merrill Boyack protested, “We were all kept in the dark while they signed bonds mortgaging our future, our children’s future, and our grandchildren’s future.” Angry locals even threw up a website titled “Thanks a Billion.” In similar style, the Escondido Union High School District used CABs to finance $81 million in bonds and will repay $519 million, more than half a billion dollars and a full 6.4 times the principle. As Mr. Ring notes, voters may hold board members accountable but “the burden on taxpayers cannot be undone.”
The massive debt, meanwhile, did not prompt the PUSD to trim the bureaucratic fat. In fact, last year the district rewarded superintendent John Collins with a raise of $63,000, bringing his base pay to $297,735 and his total compensation to $386,000. Superintendents do not have to face the voters but they always get the big bucks, whatever their record of performance. The same is true of the entire government K-12 system, where the money keeps coming despite mediocrity achievement and widespread financial irresponsibility.