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Monday, December 10, 2012

Other People's Money

When I got my administration licenses, the first thing the professor told us on the  first day of "School Finance" class was "you are spending other people's money".  Dr. Y., the professor, was adamant about being frivolous and carefree with money that was not ours.  A classically educated man, raised by a blue collar father, Dr. Y. knew the value of the dollar, and the value of it for his constituents as well.  He assumed that people would be careful with others' money as they earned it and they presumably wanted it spent in a manner that would help the school.  It was apparent that he considered it dishonorable to be reckless with others' hard earned wealth.  Apparently, not everyone has those same sentiments:

"More than 200 school districts across California are taking a second look at the high price of the debt they've taken on using risky financial arrangements. Collectively, the districts have borrowed billions in loans that defer payments for years — leaving many districts owing far more than they borrowed.

In 2010, officials at the West Contra Costa School District, just east of San Francisco, were in a bind. The district needed $2.5 million to help secure a federally subsidized $25 million loan to build a badly needed elementary school. ... In the West Contra Costa Schools' case, that $2.5 million bond will cost the district a whopping $34 million to repay."

There are many things wrong with the current paradigm.  Firstly, the money for property tax is taken by force, from everyone in the district, whether they believe in public education, have children in the public schools, or desire to fund the public education leviathan at all.  Behavior from government is solemnly accepted even when that behavior by an individual would get them jailed.  If I were to put a gun to your ribs and force money from you, would you accept my explanation that it is going toward education?  Secondly, the lack of wisdom in giving people the power to spend other people's money is obvious:

"Ramsey (the school board president) says it was a good deal, because his district is getting a brand-new $25 million school. "You'd take that any day," he says. "Why would you leave $25 million on the table? You would never leave $25 million on the table." 

So this is the reasoning.  The $25 million, is something you'd NEVER leave on the table, no matter what the cost.  The economic ignorance is bewildering.  It's as if the money just showed up - no consideration as to where it came from, how to pay it back, or rates of interest.  The reasoning gets worse: 

"Perhaps the best example of the CAB issue is suburban San Diego's Poway Unified School District, which borrowed a little more than $100 million. But "debt service will be almost $1 billion," Lockyer says. "So, over nine times amount of the borrowing. There are worse ones, but that's pretty bad." The superintendent of the Poway School District, John Collins, wasn't available for comment. But he recently defended his district's use of capital appreciation bonds in an interview with San Diego's KPBS Investigative Newsource. "Poway has done nothing different than every other district in the state of California," Collins told the program."

Forget the $1 billion, that's water under the bridge - chump change.  The rationale, the justification, the defense of this behavior is that, well, everybody else is doing it, therefore it is OK.  Where are we that a $1 billion bill in tax dollars and a logically fallacious defense of this action can even happen?  I tell the young people that they are living in a fantasy world if they think the adults in their lives have a cogent, logical, economically sound approach to life.  Articles like these (unfortunately) prove my point.

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