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StumbleSandoval’s plan: Can bond money be used to run schools?
Sandoval would tap construction funds for operational expenses
Friday, Jan. 15, 2010 | 2 a.m.
Brian Sandoval
Sun archives
- Why Sandoval revealed budget (1-14-2010)
- Governor candidate Brian Sandoval floats budget plan (1-13-2010)
Republican gubernatorial hopeful Brian Sandoval’s plans for filling the state’s budget gap include redirecting proceeds from the Clark County School District’s construction campaign to cover operational expenses.
School District officials say such a move would be a gross breach of trust with voters who approved the bond measure in the belief that the proceeds would be used solely to build campuses and fix older ones.
If the capital dollars were used for other purposes, federal tax penalties likely would be incurred by the individuals, businesses and organizations that invested in the bonds, experts say.
The Internal Revenue Service allows tax-exempt bonds to be sold for a limited number of purposes, school construction among them.
If the Legislature were to order the district to divert construction dollars elsewhere, “it’s likely the IRS would have a problem with that,” said attorney John Swendseid, who serves as bond counsel to the School District. “I’d imagine the bond buyers would also be very unhappy.”
How Sandoval planned to work around the tax status issue wasn’t clear Thursday. A spokeswoman for his campaign said Sandoval thinks there are dollars in the capital fund that could be used without violating the limits attached to bond proceeds.
In 1998 the district expected to raise $3.5 billion over 10 years for 72 new schools. Higher revenue from skyrocketing property values, coupled with better money management, gave the district a larger reserve of funding than had been expected. As a result, the district has built 96 schools and replaced 11 older campuses.
About $1.2 billion is held in the district’s capital reserves. Faced with declining enrollment and a flailing economy, the district last year decided to delay asking voters for additional funding for school construction, and instead is focusing on fixing existing facilities with the money it has.
In his plan to reduce the state’s deficit, Sandoval suggests the $110 million earmarked for class-size reduction in Clark County instead go to the state’s general fund. Tapping into the district’s capital account and using it to pay for operating expenses, salaries and programs would offset the cut.
His proposal would require changing state statute, which limits school districts to selling bonds for campus construction, renovations, replacement and repairs.
The bond money Sandoval is proposing to tap is committed, said Joyce Haldeman, associate superintendent of community and government relations for the Clark County School District. Not all of the projects have gone out to bid yet, but the public’s expectations are locked in, she said.
Sandoval’s plan “would require us to deliver very disappointing news to parents and teachers who are expecting much-needed upgrades to their schools,” Haldeman said.
Additionally, “it would jeopardize our ability to ever pass a future bond issue — because voters do recognize bait-and-switch tactics,” she said. “We’ve worked hard to preserve voter trust. This would disintegrate that.”
However, Patrick Gibbons, education policy analyst for the conservative Nevada Policy Research Institute, said he thinks many voters might actually support the switch.
“Instead of focusing on building more palatial schools that we don’t need at the moment, use the money for programs that might actually benefit and improve student achievement,” Gibbons said. “That would be the smart thing to do.”
Carole Vilardo, president of the Nevada Taxpayers Association, said she hasn’t seen enough detail to judge the relative merits of Sandoval’s proposal, but the summary released thus far does raise plenty of questions.
“Are these dollars that will somehow be paid back?” Vilardo said. “Is it a temporary loan, or something that’s just going to go by the wayside to cover a state shortfall?”
Clark County residents might support Sandoval’s proposal because it appears to fill a fiscal hole without reaching into their individual pockets, Vilardo said.
“Some people are going to be happy that it doesn’t require raising taxes,” she said. “I would think most voters would appreciate that.”
But the School District has contractual obligations with the people, businesses and organizations that bought the bonds, and violating those could mean risking a lawsuit, Vilardo said.
When the bonds were sold, the district essentially promised the buyers that nothing would be done to jeopardize the tax status, said Swendseid, whose firm consults with numerous municipalities on bond-related issues.
But if the Legislature orders those dollars diverted, “I don’t know that the School District can refuse, unless it can show it violates the bonds’ status,” Swendseid said. “I would sincerely hope that no one would ask it to do such a thing.”
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You gave up a Federal position for ...this?
Aren't bonds just a way of piling up debt so you can spend today and pay back with interest what is owed? Doesn't this mean you have increased the profits of those (mainly large institutions) who hold that debt? Doesn't this also mean you have, in effect, increased the costs to government of providing needed services?
This is just a different way of paying public money to increase private profit and is thus, effectively, a tax increase per unit of service. You get more service but at a higher cost.
The next time Patrick R. Gibbons posts one of his anti-education rants on these pages, remember, he's an "expert" and he's smart! (And, he gets PAID to POST.)
"Instead of focusing on building more palatial schools that we don't need at the moment, use the money for programs that might actually benefit and improve student achievement," Gibbons said. "That would be the smart thing to do."
Patrick, Patrick. You simply MUST come out of your tank and see the real world! Have you seen some of the old, decaying schools in Las Vegas?
Not the new ones that have been built in the last 3-4 years for the "boom" student population, but the many that are quite a bit older and need some upgrading to be cost efficient just to keep open, if nothing else.
PALATIAL? Please, Pat. Not hardly!
But the BIG QUESTION here, is it LEGAL to take BOND $$$ FOR BUILDING and put it in the GENERAL FUND?
I would think a couple of smarties like Brian Sandoval and Pat Gibbons would know the answer is NO.
What a ma-roon.
You Politicos just GOTTA find a way to promise "happy times" and "free money for all", as long as you can paint it as "somebody else's nickel".
For once in your lives, can't you just get outta FANTASY land.
THERE AIN'T NO MONEY, AND WE AIN'T WANTIN' TO TAX OR 'BORROW' OUR WAY OUT, CALIFORNIA and FEDERAL GOVERNMENT STYLE.
If we don't have it, then don't spend it.
Talk about IMPORTANT things like
WHAT'S YOUR POSITION ON E-VERIFY...?
What about all the money we spend on services, education, healthcare, prisons for ILLEGAL ALIENS and their ANCHOR-BABY offspring...
Yesterday he wanted to tax state employees because he did not believe in defecit spending. Today he wants to use capital bond money for operations. Interesting. At least he is flexible.
wizardofOz,
How much money, as calculated from a credible source, is being spent on those brown people you hate versus total spending?
Assuming growth remains flat, the Public system still needs to be maintained, the physical plants.
What if we (casinos) do what Dave Hickey suggests and shift the worker kids to private schools at the casino/resorts? Company schools for a company town.
Then, in theory, the CCSD will have far less burden, and can reduce class sizes too.
Even better, more of us should attempt homeschooling, however that would imply that lenders were able/willing (honest) to make loans to sole proprietors/micro business start ups....
I know, call me a dreamer...
Let's see: cheat the bond-holders. cause the IRS to come down on Nevada. Disrupt any future attempt to borrow money. OK it's now clear. Another GOPer trying to destroy Nevada. Maybe Gibbons/Sandoval should move to alaska. I hear there is a governership open there. And, as global warming increases, they can deal with it first hand [even if they don't believe in it.] At least our state isn't melting and falling into the sea. But the real problem will arise when the casinos refuse to hire the high schoiol grads from the state because they aren't up to the necessary education level. The ultimate coup de grace - you betcha!
Sounds like he wants to "cook the books". Maybe it's time government was responsible and lived within its means, like most of us are trying to do during this recession, rather than running up more debt to pass on. Cut spending, raise taxes, or both -- just quit with the unaffordable debt and sleazy accounting gimmicks (you're starting to act like DC!)
Point is he's studying ways to get us out of this economical Armageddon. Boy, anybody running for office that wants to try make a difference better have tough skin as evidenced by the geniuses in this blog. Since 2006, as a result of Democrat control in Nevada, we have been left on a path much as our neighbor, California. A state with not years but decades of poor leadership by the majority Democratic Party. Now we find ourselves going down the same exact path as bankrupt California. Now someone has to fix the messes left behind. It's time to throw out the people to got us here as clearly they screwed up. We need to start supporting people who have the courage to take on a role that not many people for one wants, and two, that can actually make a difference for the good of Nevada.
@archibald25
Sandoval's plan released earlier this week included both the 4 percent cut to state worker and teacher pay, as well as replacing the Clark County class size reduction money with the school construction money. Just want to clear the record. http://www.lasvegassun.com/news/2010/jan...
Please send Kevlar vest and helmet please.....
david curtis
green party candidate for governor NV
(you know, a third party, the one(s) you never get to actually READ about)
Maybe this coming Thursday:)
Sounds like the plan that was used before they had to bail out the peso in Mexico a number of years back. I still don't see why he won't post his birth certificate on the web like Obama did? I think I'll call into the Lou Dobbs show.