School Districts Ride CABs to the Poorhouse

We don’t get much of this type of investigative reporting into school finances, so we cheer Dan Weikel of the Los Angeles Times for this piece on California school districts and their investment in capital appreciation bonds (CABs).

CABs are the kind of deal you get from the local leg-breaker when you have tapped out all your other sources of credit. They allow you to put off your first payment for years, in exchange for the exorbitant compounded interest they accumulate. Weikel found 200 school districts that borrowed $2.8 billion in CABs, which will end up costing $16.3 billion when they are due. The Times helpfully provided a database of the districts and what they owe individually.

This being California, not everyone thinks this debt is a bad thing. “It was well worth it,” said Jennifer Zaheer, president of the Palomar Council Parent Teachers Association. “In my son’s experience, there’s a big difference between using a trailer and having a new classroom.”

Zaheer’s son might be living in a trailer because he won’t be able to afford the property taxes, special assessments and local levies needed to pay off the CABs when he’s an adult.


One thought on “School Districts Ride CABs to the Poorhouse”

  1. Maybe you should be asking the question of why it took California so long to pass a new educational tax. Maybe if your beloved Governor Schwarzenegger hadn’t gutted education over two terms the bonds wouldn’t have been necessary. I know, the truth hurts, doesn’t it?

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