December 28, 2001

Commentary

Fake Accountability in Government Debt

By Jon Coupal

Here's a tough question: What's worse than government spending with no accountability? Answer: Government spending with fake accountability. At least when there is no pretense of accountability, citizens can simply assume they're being ripped off and go their merry way. Fake accountability is fraud - we are specifically told that our money is being spent wisely when it is not.

Let's take the example of local school bonds. In November of 2000, a coalition of dot.com billionaires and the usual "tax-them-until-they-bleed" crowd convinced the voters of California to reduce the 100-year-old two-thirds vote threshold for local school bonds down to 55 percent. Nowhere in their $32 million campaign did they explain that property owners - and only property owners - would be paying massive new property taxes as a result of lowering this threshold. ($6.5 billion worth of new property taxes will appear on the March ballot alone!) Instead, the entire campaign was focused on "better accountability."

So let's look at the so-called accountability that was promised to us with Proposition 39 and see if we got a bargain. First, Prop. 39 promised that the proceeds from any bonds would be subject to an independent audit. However, most audits were already required under existing law so this was merely a promise to give us something we already had. In any event, the word "audit" might sound good, but without definition, it is meaningless. The recent Los Angeles Unified School District Bond Proposition BB was sold as having "stringent" audit requirements, and yet they have managed to lose track of nearly one-fourth of that $2.4 billion. How do you lose over $500 million? Surely, it didn't fall behind the seat cushions.

School bond proponents also say that proposed school bond measures must carefully describe the projects for which the money will be spent. Not true. First, there are no standards regarding specificity. Indeed, a community college could simply say "a new campus" and still be in compliance with the new law. In addition, the specific dollar amounts of the bond proposal need not be set forth. One would assume the taxpayers would like to know - at least roughly - the specific dollar amounts for each list project. What good is a $10 million list of projects which includes "high school, gymnasium and lawnmower" where the district intends to spend $9 million on the lawnmower? Finally, even assuming a rigorous audit, there are no penalties for violating the requirements of where the money is going to be spent. What consequence would befall a superintendent who would spend all the bond proceeds for wholly frivolous purposes? None. He might as well be forced to write "I'm naughty" one hundred times on a blackboard.

Taxpayers need to be especially leery of so-called "citizen oversight committees." First, the same school board responsible for the bonds gets to pick the committee members. (Are the same cast of characters who are likely to screw up a bond proposal going to do any better in picking responsible citizens for oversight?) Second, a citizen oversight committee, while sounding beneficial, is only as good as the information given to it by the school district. Los Angeles Unified School District provides another example of how this is a meaningless accountability requirement. Shortly after Howard Jarvis Taxpayers Association withdrew its representatives on the Prop BB Oversight Committee to protest the inability to obtain current information, both major Los Angeles newspapers issued scathing stories of how the Citizen Oversight Committee had been lied to by the District. The failure of the oversight committee to receive meaningful financial data makes the so-called citizen oversight committees virtually worthless.

Finally, citizen oversight committees are never given veto power over expenditures. Because citizen oversight committees only have an advisory capacity, this makes them even less relevant than window dressing.

If there is no accountability in local school bonds, then why do the proponents of school bonds keep talking about accountability? For a very simple reason. If they didn't talk about accountability, they would have to talk about things that are real, like $6.5 billion in new property taxes or the fact that there is no correlation between bond measures that are successful and higher student scores.

Local school bonds have to be repaid over decades. While good school bonds are a legitimate way to finance needed capital projects for education, bad bonds are a disservice to children, parents, teachers and taxpayers - all of whom are entitled to as much real accountability as possible.

Jon Coupal is a recognized expert in California tax policy. He is an attorney and President of the Howard Jarvis Taxpayers Association . He can be reached through the HJTA website www.hjta.org.

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