On Wednesday, the Senate Governance and Finance Committee, on a 5-0 vote, approved the measure, Assembly Bill 182, after its author, Assemblywoman Joan Buchanan, D-Alamo, softened its restrictions on the bonds.
The changes, however, did not placate school district representatives, who continued to oppose the measure, arguing that it will damage their ability to meet needs for new school construction and upgrading, especially in areas with relatively low levels of taxable property.
State Treasurer Bill Lockyer pushed for the legislation, arguing that the use of the CABs, as they have been dubbed, puts local taxpayers on the book for interest payments to bond buyers that may be 10 times or more of the original loan amounts.
The issue erupted when it was revealed that Poway Unified School District in San Diego County had issued $105 million in CABs that would cost taxpayers nearly a billion dollars because principal payments were being postponed for decades and the bonds wouldn't be fully retired for 40 years.
Since then, it's become known that hundreds of CABs have been approved. Lockyer calls them "long-term balloon debt" that should be abolished, but he told the committee that he accepts the political need to place some curbs on them, rather than erase them altogether.
"The logic defies me ... that poor people ought to be burdened with more debt to finance facilities," Lockyer said.
Among other provisions, the revised bill limits debt-to-principal ratios to 4-1 and their maturity date to 30 years.
PHOTO: A kindergarten teacher keeps an eye on her class at Greer Elementary School in Sacramento on Jan. 17, 2013. The Sacramento Bee/ Renée C. Byer