March, 1996

Proposition 203 Supplemental Proposition
Public Education Facilities
Bond Act of 1996


Public education in California consists of two distinct systems. One system includes local school districts that provides elementary and secondary (kindergarten through 12th grade) education to about 5.3 million students. The other system (commonly referred to as "higher education") includes local community colleges, the California State Universities, the University of California, and the Hastings College of the Law. This higher education system provides a wide range of education programs beyond the kindergarten through 12th grade (K-12) level.

K-12 Schools

The state, through the State School Building Lease-Purchase Program, provides much of the money for school districts to buy land and to construct, reconstruct, or modernize school buildings in the K-12 system. In order to receive money under this program, school districts must meet certain eligibility requirements.

Under other related programs, the state also provides money to (1) remove hazardous asbestos from school buildings, (2) purchase portable classrooms, (3) repair and renovate child care facilities that provide care for school-aged children before and after school hours and during summer vacation, and (4) purchase and install air conditioning equipment and insulation materials in eligible year-round schools.

Since 1986, the voters have approved $6.8 billion in state general obligation bonds to fund these K-12 school facilities programs. As of January 1996, there was about $60 million remaining from these funds.

In addition to obtaining money from the state, local school districts raise funds for school buildings in three main ways:

K-12 School Building Needs. There is no district-by-district estimate on the future demand for school facilities. The state Department of Finance estimates that the number of students attending K-12 schools statewide will increase by about 600,000 over the next five years. Given this projected growth, several billions of dollars will be needed statewide for new school facilities over the next five years. Additional funds will be needed for reconstruction or modernization of existing school facilities, including air conditioning for schools that operate year-round.

As of May 1995, applications submitted by school districts for state funding of land and new school buildings totaled approximately $5.3 billion. In addition, applications for state funding to reconstruct or modernize school buildings, purchase portable classrooms, remove hazardous asbestos from schools, and provide air conditioning for year-round schools totaled approximately $1.8 billion.

Higher Education

California's system of public higher education includes 139 campuses serving about 1.8 million students:

The state provides money to support these institutions of public higher education. This support covers both ongoing operating and capital improvement costs. In addition to state funds, these institutions also receive widely varying amounts of nonstate funds for both support and capital improvements.

Since 1986, the voters have approved nearly $2.4 billion in general obligation bonds for capital improvements at public higher education campuses. As of January 1996, there was about $14 million remaining from these funds. In addition, since 1986 the Governor and the Legislature have provided about $2.4 billion for public higher education facilities from lease-payment bonds.

Higher Education Building Needs.Each year the institutions of higher education prepare five-year capital outlay plans, in which they identify projects that they believe should be funded over the next five years. The most recent five-year plans identify a total of $6.6 billion in projects for the period 1996-97 through 2000-01.


This measure authorizes the state to sell $3 billion in general obligation bonds for K-12 schools ($2.025 billion) and higher education facilities ($0.975 billion).

General obligation bonds are backed by the state, meaning that the state is obligated to pay the principal and interest costs on these bonds. General Fund revenues would be used to pay these costs. These revenues come primarily from state personal and corporate income taxes and sales taxes.

K-12 School Facilities

The $2.025 billion for K-12 schools would be used as shown in Figure 1.

Figure 1
Uses of $2.025 Billion for K-12 Schools

At Least $960 Million to: Up to $900 Million for: Up to $100 Million to:Up to $40 Million for:Up to $25 Million for:

As the figure shows, almost one-half of the funds (at least $960 million) would be used to build new schools. The measure also allows up to $1.065 billion to be used for a wide variety of school capital outlay purposes.

The $2.025 billion for K-12 schools would be distributed to eligible school districts by the State Allocation Board. The board is a seven-member body composed of four members of the Legislature, two directors of state departments, and the Superintendent of Public Instruction.

State School Building Aid Program.This measure would allow $40 million in unsold bonds previously approved for the State School Building Aid Program to instead be sold for the State School Building Lease-Purchase Program. (Under the aid program, the state lends bond funds to school districts for school construction and the districts pay back the loan plus interest over a period of up to 30 years. However, there has not been activity in the aid program for many years. This is because since 1976 the state has funded school facilities under the lease-purchase program.)

In addition, this measure would transfer any remaining funds (about $15 million) from prior sales of bonds under the aid program to the lease-purchase program.

Higher Education Facilities

The measure includes $975 million to construct new buildings, alter existing buildings, and purchase equipment for use in these buildings for California's public higher education system. The Governor and the Legislature would decide the specific projects to be funded by the bond monies.

Fiscal Effect

For general obligation bonds, the state makes principal and interest payments from the state's General Fund typically over a period of about 25 years. If the $3 billion in bonds authorized by this measure plus the $40 million in unsold bonds transferred from the School Building Aid Program are sold at an interest rate of 5.5 percent, the cost over the period would be about $5.21 billion to pay off both the principal ($3.04 billion) and interest ($2.17 billion). The average payment for principal and interest would be about $208 million per year.

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