Monday, August 9, 2010

Liberalization of School Bond Requirements

The recent debate over a proposed bond issuance by the Guthrie School District has reminded me of my observations of ever-ongoing legislative efforts to liberalize the protocols and quality controls which govern the bond issuance process.

I believe these all-too-often successful efforts have been driven by special interests representing not just Oklahoma’s education establishment but the financial interests who derive significant short-term benefit from the issuance of massive amounts of debt without regard to long-term consequences.

Certain items in the Guthrie proposal bring to mind the concerns I have had about either the liberalization or the outright avoidance of these safeguards.

For example, one of these efforts has been to water down the capital-intensive requirements of the laws governing the issuance of bonds. These laws were designed to ensure that bond issuance (debt) only occurred for capital items such as brick and mortar structures which would last for many years and would still have value beyond the time when the debt was paid off. I do not believe it is wise to incur millions of dollars of debt for items which will be long liquidated while the taxpayer is still paying the debt and interest for those items. I believe that most people would never allow their personal budget to deteriorate to the point that they take out a bank loan to purchase groceries. It is certainly not right for government officials to do the same thing using other people’s money. I believe Oklahoma’s statutory guidelines provide an important policy of prudent financial governance and I have always voted against proposals which would reduce these requirements.

I am also very disturbed about the growing trend of Oklahoma school districts circumventing the requirements of the Oklahoma Constitution through a sort of legal shell game. The Oklahoma Constitution mandates that schools cannot take on an amount of debt in excess of 10 percent of the value of assessed property value of the residents of their districts. This important safeguard keeps schools from taking on more debt than is fiscally prudent.

However, Oklahoma schools are simply bypassing this important safeguard by setting up third party entities which can take on much more debt than fiscally prudent. The debt is essentially being laundered through these third party shell groups. Because the debt is likely to be secured by a riskier standard, the taxpayers are forced to pay significantly higher rates of interest.

Legislators attempted to give this practice the veneer of legal credibility with the passage of House Bil 1592 in 2009 (I was one of 19 Representatives to vote against it) but in all reality, only the people of Oklahoma can change the constitutional requirement.

If Oklahoma school districts want to take on additional debt, they should have the courage to ask voters to change the Constitution instead of using a third party for a bond issuance. In my view this is a dangerous shell game which will encumber the taxpayers with far too much debt. I believe that unless this trend is stopped, there will be a painful day of reckoning.

I am also opposed to the practice of logrolling expenditures for multiple public and private entities into one proposal. This practice has become infamous for incurring millions of dollars of spending in order to build a large enough political coalition to support a proposal. I very much dislike the unconstitutional legislative logrolling which occurs in the Legislature and fail to see how this issue is much different.

As a legislator, I am committed to voting against the ongoing attempts to change Oklahoma laws to enable these types of fiscally imprudent spending practices.

I also believe it is very important for school officials to limit bond proposals to capital items costing no more than the amount allowed by the Constitution where the sole beneficiary is the school district.

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