LEGISLATIVE COUNCIL'S STATEMENTS FOR THE PROPOSED AMENDMENT
1. The state's guarantee of a school district's bonds may enable that school district to obtain a higher rating for its bonds, which would enable the school district to sell its bonds at a lower interest rate, saving property taxpayers money on interest.
2. This provision is needed to provide for a program to allow all school districts easy access to the bond markets through the backing of a statewide guarantee fund. This will help address the backlog of school building needs, a problem throughout the state.
3. Some school districts have difficulty passing bond elections for new facilities. This provision may aid in passing bond proposals when the local patrons know that the property tax burden will be less--through lower interest payments--because this guarantee program is in place.
4. This amendment is an innovative, almost risk-free way for the state to help local property tax payers save money while promoting public education. Government is created to solve problems and this is a way the state can help with some innovative, forward thinking. Other states, including Utah, Wyoming and Oklahoma, have school bond guarantee programs that are working well.
LEGISLATIVE COUNCIL'S STATEMENTS AGAINST THE PROPOSED AMENDMENTS
1. The amount of interest savings to a particular school district would be small compared to the cost of establishing this program. Many school districts can purchase "bond insurance" to upgrade their district's bond ratings. The cost and bureaucratic red tape of this program may not be worth the effort.
2. This proposed amendment sets a bad precedent for state guarantee of local municipality debt. While this amendment only addresses school district debt, it may open "Pandora's Box" so that in the future the state will be guaranteeing municipal and county debt. Additionally, even though the state is only contingently liable for the school bonds, the state would be held responsible for payment in the event of default by a school district. This represents bonding the state without a vote of the people at the a general election, which is required by the state constitution.
3. The amendment may not be needed if the program were created by statute. The argument can be made that the state constitution does not specifically prohibit the loan of credit to school districts, but only mentions "municipalities," which some court decisions argue includes only cities and not other forms of taxing districts.
4. It may not be necessary for the state to guarantee school bond debt to achieve the desired result. For example, the state could create a system that diverts payments from state education funds to bond holders when needed to avoid bond payment shortfalls, without actually guaranteeing those payments. The amount of any bond payment shortfall would be treated, in effect, as a set-off against funds otherwise due the school district from the state.