Districts face questions in spending long-term bonds for short-lived technology

(Update: Please note corrections at the end of the article on points marked with an asterisk.)

Is it legal to buy personal computers for students using school construction bonds? And if it’s legal, is it wise to pay interest long-term on devices with a short shelf life?

Last month, the Bond Oversight Committee for  Los Angeles Unified balked at endorsing Superintendent John Deasy’s plan to buy tablet computers with bonds intended primarily for building and renovating schools. In doing so, the Committee raised questions that other school districts also should be asking.

There’s no unqualified answer to the questions that the Bond Oversight Committee asked, and school districts like San Diego Unified and Riverside Unified have come to opposite conclusions. What all agree on, however, is that the state needs to provide legal clarity and, most importantly, dollars.

Most districts don’t need convincing that technology is key to a 21st century classroom, but, with budgets remaining tight after years of cutbacks, they’re scratching their heads over ways to pay for it. And they’re questioning how the state can commit to computer-based standardized tests in two years, based on the new Common Core standards, without helping equip schools to administer the tests.

Deasy wants to use $17.5 million in previously approved construction bonds to buy 7,000 computers for students in 14 schools, upgrade schools’ Internet capacity, install management systems for the devices, and train personnel in how to maintain them. This would be a pilot program, step one in Deasy’s goal to spend upwards of $400 million for the district eventually to go fully digital.

He came one vote shy of getting the Bond Oversight Committee’s blessing; he needed eight votes on the 14-member committee but got seven. In a letter to Deasy, Committee Chairman Stephen English reassured him that the committee is sympathetic but wants more assurance that such a program is sustainable long-term.

Photo by Christy Tvarok Green

Photo by Christy Tvarok Green

“I believe the BOC will prove enthusiastic about this program, which the BOC has been advocating for several years. However, in order to fulfill its oversight responsibilities, the BOC will need to be confident that the program has a well-structured and realistic implementation plan,” he wrote.

Legal use but …

There’s no disagreement that school bond funds can be used to upgrade wiring, install wireless receivers and pay for computer management systems. Bonds can also be used to train system managers. But laptops, tablets and netbooks – devices that cost anywhere from $200 to $800 – are a different matter. Unless the financing is structured carefully, taxpayers could end up paying interest on 25- or 30-year bonds used to buy devices that only last a few years.

The average life of an asset, whether a building or furniture, should match the length of financing as a rule of thumb. If financed with a 25-year bond at, say, 4.5 percent interest, a $500 computer would accrue $1,000** in interest expense by the time it’s paid off.

But Tom Rubin, a consultant for the Bond Oversight Committee, cautions that the bond market is complex, and districts would have options to lower costs. They can make heavy principal payments in early years, lowering the interest expense. And they can take out bonds with maturity dates of three to seven years at a lower interest rate. Since short-term bonds require compressed payments, districts usually seek the flexibility from a mix of terms. The average length of maturity of bonds in Los Angeles Unified is 21 years.**

Rubin said that after a thorough review of state regulations and laws – including the education code; Proposition 39, which lowered the threshold for passing school bonds to 55 percent; and the fine print of Measure Q, the district’s bond initiative – both the general counsel and bond counsel for LA Unified agreed that it’s legal to buy iPads with construction bonds. The important distinction is that they’re assets, not operating expenses, said Rubin.

But, he added, several concerns have given the Bond Oversight Committee pause. How will the district pay for replacement computers: more bonds, its operating budget? And will the district have the staff to manage and repair the computers? The committee wants answers before recommending the pilot program. Although its vote is strictly advisory to the school board, so far Deasy has not pressed forward.

Then there’s the question of whether students can take the computers home with them – the district’s eventual intention. The bond counsel’s conclusion was no,** not if they’re purchased with construction bonds. And there are equity concerns that the Bond Oversight Committee would like addressed: Suppose students at home don’t have Internet connections needed to do schoolwork.

Outdated analogies

One problem is that law and interpretations of it haven’t kept up with technology. A state attorney general’s opinion from 1963 said that districts could use bond funds to stock a new school’s library but not to buy replacement volumes. In the 1990s, the attorney general’s office took the position that districts couldn’t use bond funding to buy textbooks. Two decades later the comparable question is, are netbooks more analogous to library books or textbooks? And, as learning shifts to the Internet and takes place 24/7, shouldn’t students be able to take home equipment that’s integral to learning? Rubin, English and others say it’s important for the attorney general and the Legislature to clarify the conditions under which districts can use bond money on technology.

Meanwhile, districts are going their own way. Using authority from a 2008 bond measure, San Diego Unified financed 77,790 netbooks for $38.6 million and 21,507 iPads for $9 million. Within a few years, every student from third grade on will have a computer in the state’s second-largest district. There is no policy restricting home use in the current pilot program, said Bernie Rhinerson, the district’s chief of staff and district relations.

But Riverside Unified, a district that has been aggressive in deploying technology and expanding online learning, has chosen not to use bond money to buy portable computers. “The question for me is how do you justify [using money intended for capital improvements] for a lifetime of two or three years?” asked Superintendent Rick Miller, adding that $200 netbooks don’t rise to the threshold requiring them to be inventoried.

By using grants, discretionary money at the school site and unrestricted textbook money, Riverside Unified, with 42,000 students, has managed to buy 18,000 devices. Using bond money would be risky, Miller said. “All is OK until someone challenges it [the use of bonds] and then things go haywire. I want to avoid that situation.”

How the state can help

School districts in other states don’t have to resort to long-term borrowing to buy computers; they have sufficient money in their operating budgets, Miller said. He suggests ways that the state can aid California’s cash-strapped districts:

Parcel taxes: They generate additional operating money for districts and make more sense than bonds for funding inexpensive computers. But parcel taxes require a two-thirds majority for passage. More districts might consider them if the threshold for passage were lowered to 55 percent – the same as for school construction bonds. Early next year the Legislature, with a supermajority of Democrats, may vote to put the issue before voters in 2014.

Tax credits for parents: Riverside Unified has a policy of allowing students to bring their own computers to class. Miller said the Legislature should consider tax credits to encourage more families to buy their own computers, reducing the need for the district to fund them.

State bond issue: Superintendent of Public Instruction Tom Torlakson is advocating placing a state school construction bond on the ballot in 2014, though he hasn’t yet said for how much and for what purpose. Miller said that funding technology needs of districts should be the first priority – ahead of building new classrooms and schools. “Solve the technology infrastructure problem first,” Miller said.

Torlakson doesn’t need to be convinced that school technology is important. In August, a 48-member Education Technology Task Force released a 35-page memo endorsing a broad expansion of online learning and assessments. Among its recommendations, it called on the state to “ensure that every student has access to at least one Internet connected device for learning any time, any place.” The report, however, did not discuss how to pay for them.

Update: Several points in the article, as indicated by asterisks, were inaccurate. The interest on a 25 year bond at 4.5 percent interest would be  $337.93 on a typical bond amortization used by Los Angeles Unified and most districts. The $1,000 interest cited would be for those districts that unwisely financed with a capital appreciation bond with compound interest. 2. The current average length of maturity for Los Angeles Unified’s construction bonds is 12.3 years. The district, when possible, finances with shorter term debt. The 21-year average cited in the story refers to one series of bonds that the district floated.  3. It is unclear whether students legally can take to their homes computers purchased with school bonds, and districts would like the Legislature to clarify the issue. At this point, Los Angeles Unified’s bond counsel has not taken a position on the matter.


Filed under: Curriculum, Reforms, School Finance, Technology

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10 Responses to “Districts face questions in spending long-term bonds for short-lived technology”

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  1. George Buzzetti on Aug 29, 2013 at 3:45 pm08/29/2013 3:45 pm

    • 000

    Rubin, as usual, is spinning you again. The question really is equipment and that is what they are legally. No equipment is supposed to be bought with school construction bond money unless it will last for 10 years as those bonds are for long term investment not for general operating expenses of the general fund which day to day expenses of the district are. I-Pads are a general fund educational issue, will not last 10 years, as wi-fi and internet connections do, and therefore are not long term asset investment as construction and the infrastructure for internet connections are. And General Counsel, Holmquist, always gives bad legal advice and in fact constantly breaks the law concerning bonds, child abuse and termination and false charges of teachers and employees not including the things his office lets go on to parents and students. I personally, after sending a CORE-CA letter that we would be at a public meeting to record, audio and video, the meeting as is our legal right. In the letter were the laws allowing us to do this and the laws they could be prosecuted with if they tried to stop the recording. We were met with 9 LAUSDPD, a canine unit, Earl Perkins, Asst. Superintendent and Greg McNair, #2 legal counsel in the general counsels office. They proceeded to stop the recording and we went outside and recorded the conversation in which McNair told us that LAUSD could do anything it wanted to and could make up anything they want to. I pulled out my press pass and asked him if he cared about the constitutional rights of the press and he basically stated he did not care. Later that day after a call to Latino press they allowed that reporter to video the meeting we were refused. This is LAUSD at the top. Totally corrupt and I am sure provable as a RICO organization.

  2. navigio on Apr 22, 2013 at 9:08 am04/22/2013 9:08 am

    • 000

    Has there been any clarification on the use of facilities bond monies for technology? Especially with the supposed inclusion of funding from common core technology? I guess it clearly still won’t ever cover teachers though..

  3. DADSGETNDOWN on Dec 22, 2012 at 2:39 pm12/22/2012 2:39 pm

    • 000

    I have 7 Children. 29,26,23,22,20,18,13.
    All but the youngest have graduated High School good GPA’s, 3.8 or better. All have been and or are still in college.
    With the way things are these days, kids, internet, budgets, low grades and learning levels.
    For things like ipads, ipods, computers and whole slew of other things, these things are worse than useless and unnecessary.
    They are bad all the way around. And then we want to talk about budgets, and grants and loans, and teachers taking pay cuts ?
    When this money can be MUCH better spent ON ESSENTIALS, technology is NOT essential. It is how ever MUCH to expensive and worse, dangerous.
    Oh my I can’t do that, or I don’t know how to do that because I don’t have a computer. You mean think ?, a computer does not think for you. Though it does make you dumb.

  4. Jeff Camp on Dec 18, 2012 at 11:42 pm12/18/2012 11:42 pm

    • 000

    It is a tragedy of school finance (well, public finance) that it is so deeply difficult to save up a pot of money in order to self-finance important investments. Technology for learning is a really, really important investment. Schools cannot long be allowed to lack the tools, equipment and services of the digital age. Students are knowledge workers, and they need the stuff of today’s knowledge work.

    I want to speak out in support of the incredible work that I’ve seen in San Diego which, yes, was enabled through a bond measure that included technology. This district has made some great breakthroughs and steady progress in the practical work of equipping teachers, students, families, and neighborhoods with the hardware, software, professional development and support systems to empower very meaningful innovation. Their rollout plan spans five years, and they are now halfway through. It could not have happened without both grant support and bond money.

  5. el on Dec 18, 2012 at 3:03 pm12/18/2012 3:03 pm

    • 000

    Sonja wrote:

    “Another problem with ipads is that Apple only allows certain texts to be purchased through their Apple store.”

    You can put books on an Apple device without using the Apple Store in many ways:

    1. PDF
    2. the free Kindle App
    3. the iBooks App
    4. Internet webpages

    In addition, it is relatively straightforward to make your own app and register it in the Apple Store, and it can be free.

    I’ve participated in creating content that can be displayed on an iPad or iPhone (or any handheld) using all of 1-4. Any website can host the resulting file, and there are free ways to create .pdf, .mobi, and .epub files.

  6. Eric Premack on Dec 18, 2012 at 12:03 pm12/18/2012 12:03 pm

    • 000

    The practice of using long-term bonds to finance technology is just the tip of the iceberg. The real biggie is the practice of deferring day-to-day maintenance, letting the maintenance problems fester, then selling bonds to pay for these deferred maintenance costs. It has the effect of turning operational costs into capital ones. Anecdotal evidence suggests that this practice is increasing, especially because the state has suspended the usual facilities maintenance set-aside requirements (generally around 2 percent of general fund) for the past several years. As districts stop spending on maintenance, the deferred maintenance backlog will increase, and accelerate this trend.

  7. navigio on Dec 18, 2012 at 11:40 am12/18/2012 11:40 am

    • 000

    My personal take is that facilities bonds are mostly a scam. Its true we do get some facilities upgrades and even new schools out of them (and yes, they are needed), but the price we pay for that is nearly unacceptable (I even see it as a factor in reduced operating funding, especially for dedicated taxes such as parcel taxes). In addition, virtually no bond I’ve followed closely has escaped corruption. If we fall back to facilities bonds as a source of funding for technology, we may likely then end up throwing the technology baby out with the bond corruption bathwater when these begin to be rejected in growing numbers. That could become a real problem given technology access is an equity issue in my mind.

  8. Richard Moore on Dec 18, 2012 at 11:38 am12/18/2012 11:38 am

    • 000

    Once again California asks: What can we do to spend our money INSTEAD OF BUILDING AND STAFFING LIBRARIES?

    Remember what Edison so wisely said:

    Books will soon be obsolete in the schools…. Our school system will be completely changed in 10 years. — Thomas Edison, speaking about motion pictures in 1913.

    Is there a research link between laptops and quality education? NO.

    Is there a research link between school libraries and quality education? YES. (lrs.org)

    But, Deasy, the man with the fake PhD, says let’s do it — and his followers trot along behind.

    Meanwhile, California has the lowest level of school library service in the nation.

  9. Sonja on Dec 18, 2012 at 11:15 am12/18/2012 11:15 am

    • 000

    Businesses “offer deals” to schools or dump old product as “charitable donations” regarding tech hardware and it’s usually outdated junk that they wouldn’t be able to sell anyway. They get a tax write-off and the district is stuck paying for maintenance and updates. There is no simple answer to getting our school children tech-ready, but taking “equipment” home should not be an option. I never took lab equipment home – I used it at the school with supervision. Kids could end up selling ipads on ebay and claim loss for all we know if allowed to take items home.

    All the tech in the world will not improve basic skills. If a student cannot read, write or think critically – it doesn’t matter if s/he has an ipad or not. A professor I know who teaches graduate-level psychology at Pepperdine mentioned seeing a serious decline over the last 10 years in ability of graduate students to write a basic topic sentence properly…much less expect a decent term paper of more than two or three pages from them.

    Another problem with ipads is that Apple only allows certain texts to be purchased through their Apple store. They are limiting product availability and ensuring market share for them. Limiting choices in education is not an option.

    Until we get business interests out of education and start pushing for a return to basics, our children will end up like the populace in the comedy movie “Idiocracy”. Fancy gadgets, bells and whistles will not make up for good teaching.

    The testing industry is killing any joy of learning. Bring back PE, Arts: Music, Theater and more hands-on vocational skills classes. Those help more with critical thinking as well. Everyone is looking for a one-size-fits-all, quick-fix and it just isn’t out there. We need more dedicated teachers and more serious commitment to parent involvement from school administrators. We’ve been sidelined and only called upon to “sign-off” on compliance paperwork when it suits a district’s purpose.

    Until we’re involved with the decision-making process about education (including union contract negotiations) and not called AFTER decisions have been made – then I’ll believe that school districts have the best interests of our children in mind. Until then – it will continue to be about business (charter foundations) and other moneyed interests who have their fists in our public education funding cookie-jar for personal profits.

  10. el on Dec 18, 2012 at 9:43 am12/18/2012 9:43 am

    • 000

    I have seen the pitch for using bonds to buy computers, and typically it’s been related to this funding trough we’ve been in, where there *isn’t* enough money in the operating budget for computers or heck, really even for the day to day expenses schools have. The idea being that you relieve your general fund – this one time only! to get through to 2015 (or 2024 or 2060 or… ) or whenever it is that funding returns.

    Obviously, here there be dragons. And the bond consultants, who are paid based on a percentage of the amount borrowed, and who don’t own property in the district boundary, maybe aren’t the best advisors on some of these considerations. You can see how people get sucked down the path, though.

    Computers have to be viewed as an ongoing expense and as consumable, and as most likely costing more than paper textbooks (even before you count the extra staff needed to keep everything humming). The value is in expanded learning opportunities, not in any cost savings.

    The issue of devices requiring an internet connection for the kids to do homework is a very significant one. And it’s not just for kids who don’t have internet at home – it also affects kids who currently squirrel out time in their day by doing their homework on a bus, in a car, on the sidelines during a game or practice, etc etc.

    I would also caution any district adopting devices to go slowly rather than one big rollout. This is a discipline where the private sector can be a good model, and the number of people required to support a system of thousands of devices that tolerates 0 downtime is substantial. The experience in Huntsville, AL (http://blog.al.com/breaking/2012/09/glitches_in_schools_digital_in.html) surprised me only in that people were surprised that it didn’t all just work by magic.

    Finally, the notion that kids bringing their own computers will save money is probably mistaken. Managing software installations and dealing with the problems that will occur on just that one computer that is different from the others will create more staff headaches, especially if the kids are not themselves knowledgeable users able to do routine maintenance etc. You’ll end up with school staff trying to figure out why Becky’s computer is locking up every time she tries to open a required spreadsheet etc. It’s not impossible, but I suspect it will mostly cause hard to track cost-shifting from hardware to staff hours.

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