Never-Ending School Bonds

Over budget and behind schedule is state's school-building motto

Only one of the six new schools scheduled to open this fall in San Diego actually met the deadline for the first day of school. San Diego voters approved a $1.51 billion local bond measure in 1998 and were promised 13 new schools and three rebuilt schools. Most of these schools are behind schedule and over budget.

San Diego’s experience is representative of the overall school construction process in California. Children continue to languish in deteriorating or overcrowded classrooms, but not because of a lack of money. In the past decade, California voters have approved nearly $100 billion in school construction bonds at the state and local level. The state still has more than $3 billion in school construction funds that have not been spent from the last school bond initiative. Yet, with Proposition 1D, voters are being asked to approve another $10.4 billion (costing taxpayers $20.3 billion with interest) for school construction.

Unfortunately for children and taxpayers, the complex regulatory process, coupled with mismanagement at the district level, makes building a school an excruciatingly slow process in California. And the longer it takes to build a school the more it costs. Just ask San Diego.

San Diego’s new schools have been much more expensive than anticipated. Normal Heights Elementary, the only new school to open in 2006, cost $53 million, nearly $5.2 million more than the original cost projection. Similarly, when Cherokee Point and Herbert Ibarra elementary schools were planned in 1998, they were expected to cost about $30 million each for land acquisition, architectural design and construction. To date, Herbert Ibarra has cost $48 million and Cherokee Point about $35 million.

Not every school built in California suffers from delays and cost overruns. Innovative public-private partnerships can help speed the delivery of new schools. In San Diego County lease-leaseback arrangements where a school district purchases land and then leases it to a developer for at least $1 per year have resulted in projects being built on time and without large cost overruns. In this process, the developer finances the construction of the school upfront and subsequently leases the facility back to the school district over a period of time. As a result, the developer assumes the risk, manages the cost and has very strong incentives to build the schools on time and on budget. The projects have up-front price-caps and the developer cannot low-bid the project and then make up the difference through costly change-orders, which plague government projects, later.

San Marcos Unified used the lease-leaseback method to build Mission Hills High School for $73.5 million, and Fallbrook Union Elementary used it for three modernization projects worth $13 million. These projects were all built on time and without cost overruns.

In contrast to the price caps, Proposition 1D offers no accountability measures for school districts that use bond money inefficiently and districts face no repercussions for going millions over budget. Only districts with cases of outright theft and fraud are held accountable. The Orange County Register reports that just six of the 19 school districts that have passed construction bonds since 1990 are “delivering nearly everything” they promised voters.

Before approving the creation of more than $20 billion in new debt, Californians should ask the legislature to revisit the school construction process. Gov. Arnold Schwarzenegger and lawmakers have increased education spending by over 17 percent over the last two years and yet didn’t think any of that money should go to these construction projects. Regulations should be streamlined, districts should have incentives to utilize the cost-saving benefits of public-private partnerships, and the work should be performance-based to ensure that schools are built on time and on budget.

The money is for school projects is there – $100 billion in school construction bonds over the last 10 years alone. We don’t need Proposition 1D; we need effective management, proper priorities and accountability.

If you hire a contractor and he finishes the project late and way over budget, would you hire him again? And again? And again? At some point taxpayers have to tell lawmakers they won’t get anymore bond money until they build the projects they’ve promised and have proven they’ll spend our money wisely and responsibly. A little accountability doesn’t seem like much to ask in return for $100 billion.

Lisa Snell is director of education at Reason Foundation, a free market think tank based in Los Angeles. An archive of Snell’s work is here. Reason’s education research and commentary is here and Reason’s California-specific research and commentary is here.