Tag Archive for Social Impact Bonds

Latest Scheme for Career Technical Education: School Districts Borrowing Money with “Social Impact Bonds” – Unions on Board

On March 19, 2013, California State Senate Pro Tem Darrell Steinberg led a press conference to promote Senate Bill 594 (California Career Pathways Investment, also known as the High School Dropout Reduction & Workforce Development Bond Act of 2013) meant to encourage partnerships among school districts, corporations, and unions for career technical education in California K-12 schools and community college districts.

Senator Steinberg also promoted this bill on March 22 at Redevelopment Forum: Revitalizing our Neighborhoods in a Post-Redevelopment Era, hosted by the San Diego Foundation. SB 894 is apparently a serious initiative.

It establishes an unfunded mandate for K-12 school districts and community college districts to create a new pool of money called a “Career Pathways Investment Trust Fund.” These districts can borrow money for the program by selling “Social Impact Bonds” (a concept promoted by the “progressive” Center for American Progress) for which investors can earn “Career Pathways Investment Credits.” This will be overseen by a new state government board called the “California Career Pathways Investment Committee.” The appointments of the Assembly Speaker and Senate Rules Committee to this committee will likely be union officials.

Senate Bill 594 exemplifies the foolishness of governance in the California State Legislature:

  • bizarre and incomprehensible financing schemes
  • borrowing money (with interest) without consideration of cumulative debt service
  • unfunded state mandates
  • forcing the state’s local governments to create and manage another pool of money
  • inviting more corruption at local governments
  • creating another state government board
  • tax breaks to corporations for ambiguous purposes
  • intrusion of corporations and unions into the public school system
  • brilliant suggestions that freed-up funds from a few cuts in the state budget can be transferred to pay for it
  • lack of concrete evidence that there is a problem (in fact, testimony during the press conference suggested the big problem is a lack of jobs, not lack of training)
  • government solutions for something that could be handled by the free market if there was real demand

When Governor Schwarzenegger promoted his Career Technical Education initiative in 2007, he considered it worthy enough to propose paying for it out of the general fund through the annual state budget. His efforts were not deemed worthy of mention at the SB 594 press conference.

Here’s my March 20, 2013 article in www.UnionWatch.org about the press conference and Senate Bill 594: Businesses Can Make a “Social Impact Bond” with Unions – www.UnionWatch.org – March 20, 2013.

The Sacramento Bee posted an article on March 21, 2013 about Senate Bill 594, Steinberg Pushes Privately Funded Career Training Program, which quotes me as a skeptic:

But skeptics wonder how the career readiness programs would be funded.

“They need to stop coming up with new funds and new schemes paid for by borrowed money,” said Kevin Dayton, head of the consulting firm called Labor Issues Solutions. “New things like this are just a big distraction. If they want to do career education they should fund it in the general budget.”

I posted these comments under the article:

Do you want your K-12 school district or community college district to establish a “Career Pathways Investment Trust Fund” and oversee yet another pool of money? It’s a mandate.

Let’s create another state government board: the “California Career Pathways Investment Committee!” The appointments of the Assembly Speaker and Senate Pro Tem will certainly be union officials.

Do you want your K-12 school district or community college district to sell “Social Impact Bonds?” Who will pay the interest on these bonds? Who will make the money on the interest?

“Career Pathways Investment Credits” – how about just focusing on an efficient, responsible government with a simple tax structure?

As another comment indicated, “the State has funding for apprentices (it contributes about 5% of the cost to train an apprentice – the rest coming from employers)…”

I also mentioned this in my comment:

One is led to believe Senate Bill 594 is needed because California businesses can’t find skilled workers. But notice the nurses’ association representative says the problem is that trained nurses can’t find jobs in California and therefore need to move out-of-state. And is there really a shortage of skilled construction workers in California right now? Are there no longer 20%-30% unemployment rates in the building trades? Or is SB 594 for training disadvantaged union workers to build the California High-Speed Rail under the Project Labor Agreement?

Los Angeles Times columnist George Skelton wrote positively about the general concept of encouraging career technical education (he avoids the politically correct phrase and simply calls it “shop”), but his column (Reinvigorating ‘Career Tech’ a Worthy Goal – Los Angeles Times – March 20, 2013) also reveals that the supporters don’t understanding the funding scheme:

Steinberg’s legislation is a bit convoluted — at least the financing part — and needs much work…Steinberg is suggesting several financing methods, including tax credits and foundation grants. But the main money source involves bonds. The state would sell “workforce development bonds” — say, for $1 million a crack — to businesses in areas “with the greatest potential for high-wage job growth.” The bond revenue would pay for the career-tech programs. The bond-buyers would earn a rate of return based on a program’s results, as judged by some committee. “I’m not sure I completely understand it,” Zaremberg [Allan Zaremberg, President & CEO of the California Chamber of Commerce] told me. “Why don’t we just fund this out of existing resources? Is this not a priority? … like Zaremberg, he [Jack Stewart, President of the California Manufacturers & Technology Association] doesn’t quite grasp the bond idea.

Dan Walters is another California commentator who has written much over many years about the need for stronger career technical education programs in California public schools. (For example, see Technical Education Fight RagesSacramento Bee – November 19, 2007)  I look forward to reading his perspectives on Senate Bill 594.