As school districts across the country seek to implement costly, large-scale technology projects, a growing number of them are asking voters for approval to go into debt to pay for that work, through the issuance of long-term bonds.
That strategy is standard practice in many areas of government, when public entities, such as school systems, need money to pay for special capital projects such as new construction or infrastructure upgrades. But districts鈥� attempts to use long-term bonds to underwrite major purchases of tablets and laptops, which have a limited shelf life, are coming under fire from both taxpayers and financial experts, who worry that school systems will still be paying off those costs long after the technology is obsolete.
鈥淵ou don鈥檛 debt-finance something where the term of the debt is going to extend beyond the life of the asset,鈥� said Bruce D. Baker, a professor of school finance at the Rutgers University Graduate School of Education in New Jersey. 鈥淵ou don鈥檛 want to be paying for it once it has outlived its usefulness.鈥�
New attention is being focused on this issue following criticism of the Los Angeles Unified School District鈥檚 plan to use money from long-term construction bond issues to fund a 1-to-1 iPad initiative that could ultimately cost nearly $1 billion. The first phase of the plan, a $50 million rollout, is the only aspect of the project that has been approved by the 650,000-student district鈥檚 board of education to date, said school system spokeswoman Shannon Haber. That money will come from long-term construction bonds approved in 2004 and 2005, Ms. Haber said. Additional money for the initiative could come from a $7 billion construction bond issue approved by voters in 2008.
But some, like architect Stuart Magruder, believe that money from the bond issues should not be used to purchase iPads.
Mr. Magruder sits on the district鈥檚 bond oversight committee, an advisory body providing guidance on how bond money should be spent. He worries the district will be paying off devices long after they need to be replaced. But he鈥檚 even more concerned that the bond issues were billed as a way to fund construction, not 1-to-1 computing, and that voters feel misled.
鈥淭here鈥檚 a public trust and credibility issue that鈥檚 massive,鈥� Mr. Magruder said. 鈥淧eople are saying they鈥檙e not going to be voting for a bond issue again and that鈥檚 terrifying.鈥�
Public Trust
Despite the criticism, districts large and small are still using long-term bonds to pay for computing devices, saying in some cases that it鈥檚 their only option for upgrading technology. Typically, a bond issue is a lump-sum amount that districts borrow through the sale of bonds. The taxpayers must vote to approve the bond sale, and then pay off the loan with interest through tax payments.
In the 3,000-student Woodward, Okla. school district, voters approved a $29 million construction bond earlier this month, with $2.8 million of it slated for technology. includes a 1-to-1 program for the district鈥檚 700 high school students, said Kyle B. Reynolds, the district鈥檚 deputy superintendent.
鈥淲e would not have been able to fund this without the bond issue,鈥� Mr. Reynolds said. 鈥淚 use a computer for my job every day and it鈥檚 a travesty that we鈥檙e not providing this technology to our kids.鈥�
Repayment Cycle
Though the life of the bond is 10 years, the money borrowed for technology purchases will be paid off in the first five years, to help ensure funds are not being spent on devices that may be outdated a decade from now, Mr. Reynolds said.
Other districts are taking a similar approach. Voters in the 16,500-student Ann Arbor, Mich., district approved in 2012 to be repaid over five years to pay for a variety of technology upgrades, including purchasing devices. The district deliberately structured the bond to be repaid over a shorter period of time, due to concerns about the life span of technology devices like tablets and laptops, said Liz Margolis, the school system鈥檚 spokeswoman.
鈥淭he tech bond allows us to keep as up-to-date as we possibly can in our district...and not having to spend operating dollars and classroom dollars,鈥� she said.
However, even a five-year repayment cycle may be too long a period of time, said Douglas Levin, the executive director of the State Educational Technology Directors Association, based in Glen Burnie, Md. 鈥淲ithin three to four years it is less expensive to replace the device than repair it,鈥� he said. 鈥淔or technology, the functionality and power of devices is not going to age well.鈥�
When devices do need to be replaced, a bond issue doesn鈥檛 provide continuing funds to do that, said Mr. Baker of Rutgers. Ongoing technology-refreshment cycles should be built into operating budgets, not financed by one-time bond issuances, which won鈥檛 help districts continue to support 1-to-1 programs down the line or replace devices, he argued.
Ms. Margolis, of the Ann Arbor system, acknowledged the district faces long-term funding questions. But she noted that the district鈥檚 options have been limited partly by cuts in state funding, amounting to reductions of nearly $70 million over the last five years.
In addition, districts in Michigan have limited means to raise funds for big projects, Ms. Margolis said. One way is through bonds. The other is through a 鈥渟inking fund"鈥攁 limited property-tax increase, considered more of a pay-as-you-go strategy. However, Michigan has strict limitations on the use of sinking-fund dollars and technology is not on the list.
This most recent issuance is the district鈥檚 third technology bond since 2004, and the community has been supportive, Ms. Margolis said.
鈥淲e鈥檝e been very open with our community,鈥� Ms. Margolis said, telling them, 鈥溾�榊ou will hear from us again in five years.鈥欌��
Voter Backlash
But not every community is supportive. In August, voters in the 8,000-student Lake Orion, Mich., district rejected , which would have paid in part for tech upgrades and new devices.
Burke Cueny, the president of Lake Orion鈥檚 Taxpayers Advisory Group, a local watchdog group, said voters were troubled by the debt being incurred and the fact that technology would be antiquated before it would be paid off.
鈥淭hese items are rapidly going out of style and becoming useless,鈥� he said. 鈥淚t was a major factor in defeating the bond issue.鈥�
Though Mr. Baker, of Rutgers, said he鈥檚 concerned about the use of a bond issue for technology purchases, he鈥檚 sympathetic toward districts who see no other way of upgrading the tools their students use.
Some state policies exacerbate pressure on districts by prohibiting or impeding the use of other, more stable, methods of funding, he said.
鈥淎 lot of [district officials] know this isn鈥檛 the right way to go, but they feel this sense of desperation and that鈥檚 not a good thing,鈥� he said. 鈥淧olicy constraints are encouraging bad financial planning.鈥�
David Neter, the chief business officer for the 153,000-student Wake County, N.C., school system, agrees. Voters in his district a $939 million bond issue that contains $60 million for technology. The debt on those technology expenditures will be paid off first, within a few years, he said.
He admitted that the bond strategy doesn鈥檛 account for how the district will cover costs of replacing technology over time. He said the district will try asking the county, which provides funding, to boost funding to cover those costs.
鈥淚t鈥檚 not ideal,鈥� Mr. Neter said. 鈥淚t leaves the question open as to what we are going to do in three to six years. It鈥檚 not a good long-term solution.鈥�
