New York’s School Bond Boondoggle

3+3 Reasons for Saying “No” to Proposal 3



This Election Day, Nov. 4, New Yorkers will be asked to approve Proposal 3, which will allow the state to borrow another $2 billion in the form of general obligation bonds. The money is supposed to go to school districts to buy electronic tablets, such as iPads, and other computers; expand high-speed and wireless Internet capacity; install “high-tech security features”; and build new classrooms for pre-kindergarten programs.

The language voters will see on their ballot under “Proposal 3, A Proposition” is laced with Madison Avenue marketing spin, starting with the title (“Smart Schools Bond Act of 2014”) and including highly debatable promises that the $2 billion will “equalize opportunities for children to learn” and lead to “high-quality” pre-K.[1] The ballot language doesn’t say that the $2 billion will cost New York taxpayers about $500 million more once you figure in the interest. Annual debt service payments will add roughly $135 million to $165 million to the state budget for the next 15 to 20 years.[2]

Here are three reasons to think long and hard before supporting Proposal 3:

1. New York’s debt burden is already enormous.

When you add up all the loans state and local governments are paying back already, it comes out to more than $17,000 for every woman, man and child in New York. That’s the highest total in the nation.[3]

Besides that, New York State will come closer to hitting its “debt limit” if Proposal 3 passes. Meanwhile, Albany still has to fill the funding gaps in long-term capital plans for basic infrastructure like mass transit, roads and bridges.  

 2. Schools didn’t even ask for this money

When it comes to demanding more from taxpayers, New York’s school boards, teachers’ unions and allied lobbying groups aren’t exactly shy. Their requests go into the billions every year. Yet none of these organizations identified technology purchases as a priority before the “Smart Schools” borrowing scheme popped up in Gov. Cuomo’s State of the State speech in January.

The state Board of Regents, which annually sends the Governor a huge wish list, only wanted technology spending boosted this year by just $1 million–a microscopic 0.05 percent of the amount sought by Proposal 3.

3.     The bond issue will force schools to spend more for purposes the new borrowing won’t cover.

If schools tap into the Proposal 3 pot, they’ll need to raise and spend more local tax money every year on computer support services—like new staff or outside vendors to run the systems, answer users’ questions and fix problems. Those nifty new high-tech “smartboards,” tablets, laptops and desktop terminals will be wasted unless districts also invest in tech-based curricula and teacher training.

Schools that choose to build pre-K classrooms will need to raise their annual budgets to hire staff for these programs. “High tech security features” will have to be monitored and maintained by new security personnel.

All this, at a time when many schools are cutting student activities and enrichment programs so they can keep paying for expensive teacher contracts while staying under the property tax cap.

And here are three more reasons why Proposal 3 is a bad idea:

4.     Albany already funds the purposes that would be covered by the bonding.

Over the past five years, the state has given school districts nearly $200 million in aid for computer hardware and technology—enough to purchase hundreds of thousands of iPad tablets or laptop computers. What’s more, the vast majority of school districts, even in the remote North Country, already can hook up to existing high-speed Internet lines. The problem is that some districts can’t afford to pay the monthly bill for premium connections, which Proposal 3 won’t cover. As for classroom space, the state spends $2.7 billion a year—more than the entire bond issue will raise just once—on building aid to underwrite a large share of capital construction costs for most districts. The “SAFE Act” of 2013 provided additional building aid for school security improvements.

In the construction category, Proposal 3 cash could be used only to “accommodate pre-kindergarten programs and provide instructional space to replace transportable classroom units.” But that will be of little use to most schools – which can’t afford to establish pre-K programs and have not had to resort to using portable classrooms. In fact, in most districts, K-12 enrollment is falling.

5.     The classroom technology purchased with Proposal 3 bond funds will be outdated before the debt is paid off.

States and local governments legally cannot issue bonds unless the money will be paid back within the “probable life” (sometimes also called “useful life”) of the assets and purchases they will finance.

Typical useful life estimates for computer hardware purchased by government agencies, colleges and universities range from as little as two years for tablet computers to five years for desktop computers. Likewise, the IRS allows regular taxpayers to write off the cost of “computers and peripherals” over five years. Yet, to help justify long-term bonding for this purpose, Governor Cuomo and the state Legislature wrote Proposal 3 to assume that iPads, laptops and other devices paid for with bond funds will last eight years.

Bottom line: taxpayers will still be paying principal and interest on the loans for years after the computers purchased with the money are obsolete.

6.     Binge-spending on technology has a poor track record.

The Los Angeles Unified School District recently undertook its own initiative to expand the use and availability of personal computer technology in the classroom. Designed to put an iPad in the hands of every student by 2016, the program was abruptly suspended in August. The first phase of the effort saw hardware go missingstudents accessing inappropriate content and allegations of ethical misconduct.

Stolen hardware appears to be a common problem with school technology programs, with taxpayers on the hook for replacing devices that can cost more than $700 each.

[1] The full Proposal 3 language can be downloaded from this useful online state Board of Elections ballot guide.

[2] The amount of debt service and total interest payments depend on average duration of bonds and interest rate, which in turn will reflect a weighted average of the useful life of the projects financed with the bond. The estimates here assume an interest rate of 3.12 percent and an average bond of 15 to 20 years.

[3] Data for total debt outstanding from Census Bureau 2011 State and Local Government Finances. Includes debt of state and local public authorities.Even using a more limited measure of state government debt only, the state comptroller’s office reported in January 2013: “New York’s State-Funded debt to Personal Income ratio, the State-Funded debt per capita ratio, the State-Funded debt service to All Funds revenues ratio and the State-Funded debt as a percentage of GSP are all significantly above peer and national medians.”

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