In November, Californians will vote on Proposition 47, the Kindergarten – University Public Education Facilities Bond Act, which authorizes the state to issue $13.05 billion in general obligation bonds for the construction, renovation and modernization of public school facilities.

The measure, which requires a 55 percent majority vote to pass, would allocate $496 million to the CSU to fund major capital outlay projects at each of the 23 CSU campuses.

“(Proposition 47) is critical to the future of the CSU if we are going to expand our capacity, and renovate and modernize our classrooms,” said CSU Chancellor Charles Reed. “Every campus benefits from Proposition 47.”

Of the $20.6 million to be given to Sacramento State, $18.6 million will be used to renovate its utility infrastructure, replace two 40-year-old boilers, replace and up size sewer lines, and change heating and air conditioning units. Another $2 million will go toward lab renovations for various departments and improvements in classrooms.

Each project is subject to at least one audit upon completion and mandatory annual audits will monitor the bond funds. “All bond funds are now subject to stricter accountability measures,” said Al Lundeen, spokesman for Yes on 47 for Accountability and Better Schools. “The money cannot be spent on bureaucracy or overhead.”

The principal and interest costs of the bonds will be repaid by General Fund revenues, which mostly come from state income and sales taxes, over a 30-year period. The measure would not increase or create new taxes.

The CSU Board of Trustees approved a resolution supporting the measure in May.

“More than half of CSU facilities, including science, computer and research laboratories, are more than 28 years old,” said Deborah S. Farar, chair of the CSU Board of Trustees. “In addition, more facilities are critically needed at all CSU campuses to accommodate skyrocketing enrollment.”

The CSU system, currently at its highest enrollment ever, expects a 4 to 5 percent population growth each year, with an additional 130,000 students by the end of the decade.

The state legislature recently approved a list of CSU capital outlay projects, presented Board of Trustees, to be funded by Proposition 47, the first part of a $25 million bond measure passed by the legislature earlier this year. If the November measure passes, a second bond measure of $12.3 billion will appear on the ballot in March 2004, allocating $690 million to the CSU.

Reed said that the outlook for the CSU would be disastrous if neither of these measures passes. Proposition 47 alone meets only half of the entire system’s construction needs.

The CSU has looked to voter-approved general obligation bonds to fund capital outlay projects since the late 1980s. Unlike local school districts and community colleges, the CSU and UC systems cannot turn to local bonds for this type of funding.

“We don’t have any other tools,” said Karen Yelverton Zamarripa, Assistant Vice Chancellor of Governmental Affairs for the CSU. “If 47 fails, we’ll have a heck of a time figuring out how to build and complete projects.”

Though opponents of Proposition 47 agree that public schools do face a shortage in school facilities, they argue that issuing bonds despite high state debt is bad fiscal policy.

“There are many voters who confuse bond measures with free money,” said state Sen. Tom McClintock to the Associated Press. “The fact is that bonds are the most expensive way to finance any government project.”

At the current interest rate of 5.25 percent, the cost of the measure would be $26.2 billion to pay both the principal ($13.05 billion) and interest ($13.15 billion). Adjusted for inflation the real cost would be around $16.3 billion.

Sen. Jack Scott, however, argues that a bond measure is the most feasible way to pay for major state construction projects, just as business owners take out loans for construction.

“A pay-as-you-go process would be almost impossible,” Scott said. “(The bond) is a process that makes sense.”

Lundeen argues that now is the best time to invest in the tax-free bonds, because interest rates are at a 30-year low.

California currently leads the nation in its bond debt of almost $27 billion, followed by New York, Texas, and Pennsylvania. According to last December’s report from State Treasurer Phil Angelides, about 60 percent of the bond debt has funded education programs.

The report showed California’s current debt service as a percentage of general fund revenues to be within credit analyst recommendations of 5 percent or less.

If California’s debt service increased to five percent in several years, it would be able to issue $63 billion in bonds by 2010.

Bond rating agencies have reduced California’s credit rating to be one of the lowest in the nation, due to last year’s energy crisis.