Legislation aimed at curbing California school districts' use of bonds that have extended repayment periods and high costs stalled in the Senate Education Committee on Wednesday after school officials mounted a heavy lobbying campaign against it.
The committee, without a vote, postponed action on the measure, Assembly Bill 182, to give its author, Assemblywoman Joan Buchanan, D-Alamo, an opportunity to seek a compromise acceptable to the school officials.
The measure was sparked by revelations that many school districts had issued capital appreciation bonds, dubbed CABs, at the behest of bond lenders, without revealing their terms before seeking voter approval.
The bonds have maturity periods stretching into several decades rather than the more common 20 years, requiring districts to pay lenders several times the bonds' original face values by postponing principal repayment. They are analogous to widely criticized interest-only home mortgages.
State Treasurer Bill Lockyer has made curbing CABs a crusade and told the committee that many of the bonds have been "one-on-one private deals" with lenders, rather than sold via competitive bidding.
However, school districts mounted a strong lobbying campaign on the bill after it passed the Assembly by a 75-0 vote. School officials told the committee that while some reforms may be needed, as written the bill goes too far in limiting their options for financing needed school improvements.
Several senators on the committee who are listed as the bill's co-authors responded to the criticism by urging a postponement of action. "This is big policy ... and we do need to get this right," Sen. Mark Wyland, R-Escondido, said.
PHOTO: A Greer Elementary School teacher keeps an eye on her kindergarten class in Sacramento on Jan. 17, 2013. The Sacramento Bee/Renée C. Byer