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CALIFORNIA READING AND LITERACY IMPROVEMENT AND PUBLIC LIBRARY CONSTRUCTION AND RENOVATION BOND ACT OF 2006.
Legislative Bond Act.

QUESTION

Should the state borrow $600 million through the sale of general obligation bonds to provide 65 percent of the cost of projects for constructing and renovating local public libraries?

BACKGROUND

Public libraries are generally built and operated by cities, counties, and special districts. Local libraries in California receive funding from the state and federal governments for various operating costs. In 1988 they received about $90 million; currently they receive $46 million, according to the state legislative analyst's office (LAO). State funding for operational library expenses under the Public Library Foundation (PLF) was $56.8 million in 2000-01 and $15.7 million in 2003-04.

California voters have passed two similar library bond measures.

• The California Library Construction and Renovation Bond Act of 1988 (Proposition 85) provided $75 million, which funded 24 projects.
• The California Reading and Literacy Improvement and Public Library Construction and Renovation Bond Act of 2000 (Proposition 14) provided $350 million in bond funds for library projects. Proposition 14 has funded 45 projects, many of which are currently underway. Eligible applications were submitted for an additional 60 projects, seeking $506 million in bond funds; these projects were not funded.

In many localities, funds have been used to keep libraries open, rather than for new and renovated facilities. A 2003 California State Library survey has identified 579 projects costing $4.4 billion. The needs include technological upgrading, urgent seismic retrofitting and structural repairs, and expanded facilities to keep pace with population growth.

Proposition 81 reserves $25 million for "joint use" projects, those that include cooperative agreements between local libraries and school districts in their service areas. Examples of joint use projects include providing local schools with support facilities to access the Internet and computer programs on literacy or building a reading and homework center in the local community library for student use after school.

The 2000 library bond measure gave priority to joint use projects. All of the projects for new construction (40 of 45 projects) were joint use projects, with cooperative agreements signed between school districts and public libraries. Most were homework centers, family literacy centers, career centers, or computer centers. One is a "co-located facility," the Mariners Branch Library of the Newport Beach Public Library, now under construction, which will unite the branch library with the Mariners Elementary School Library. Please see the map for all projects funded by Proposition 14 (PDF file). Further information is at http://www.olc.library.ca.gov. Select "Library Bond Act, 2000" and then select "Grant Awards" under Cycles 1, 2, and 3.

Approximately 3.4 million adult Californians are at "below basic" literacy levels. They cannot read medicine labels, election ballots, a television guide, or a jury pool summons. They cannot read to their small children. Last year, California Library Literacy Services served more than 20,000 adults on a one-to-one or small-group basis in 780 communities through 103 public library jurisdictions. Currently California's library literacy programs have more than 5,000 adults on their waiting lists. The joint use projects funded by library construction bonds provide spaces where library staff, in cooperation with staff from schools and other agencies, can conduct literacy programs.

Two-thirds of adult Americans visited their public libraries in 2005, according to a survey conducted by KRC Research and Consulting for the American Library Association. Seventy percent said they were extremely happy with their public libraries, 85 percent think libraries need more funding, 92 percent believe libraries will still be needed in the future--even with all of the information available on the Internet.

The state regularly finds that it cannot fund long-term capital projects on a pay-as-you-go basis because of the pressure of immediate needs. It then may use bond financing, a type of long-term borrowing to raise money for specific purposes. The state gets money by selling bonds to investors. The state repays this money plus interest. The money raised from bonds primarily pays for the purchase of property and construction of facilities, such as parks, prisons, schools, colleges, libraries, and infrastructure. At the outset, the amount of interest and other costs doubles the amount to be borrowed over a period of 25 or 30 years. Under Proposition 81, we would pay $1.2 billion to spend $600 million on construction. Inflation is likely to reduce the actual amount paid back from the state's general fund. A bond measure does not impose a new tax but servicing the bond debt reduces the amount of general fund monies for other uses in future years.

PROPOSAL

Proposition 81authorizes the state to borrow $600 million through the sale of general obligation bonds to fund 65 percent of the cost of approved projects to construct and renovate public libraries, including equipment and furnishings.

The bond measure requires project applicants to contribute 35 percent in matching funds from any other source. Sixty-five percent, between $50,000 and $20 million per project, would be financed by the bond sales.

The measure continues the California Public Library Construction and Renovation fund for deposit of bond sale monies to be distributed to authorized projects from city, county, joint city and county, or special district applicants.

The measure provides for a seven-member state board to adopt policies for the program and decide which local agencies would receive grants. The board is composed of the State Librarian, the Treasurer, the Director of Finance, an Assembly Member appointed by the Speaker of the Assembly, a Senator appointed by the Senate Committee on Rules, and two members appointed by the Governor.

The board must give first priority to eligible applications that were submitted but not funded under Proposition 14 (2000). No more than $300 million of the new funding would be reserved for these applications. The measure reserves $25 million for "joint use" projects serving both a library and a public education institution (such as a school district or college).

Factors to be considered when setting priorities for approval of applications include

• the needs of urban, suburban, and rural areas
• the age and condition of existing library facilities in the area
• the financial ability of the local agencies to operate library facilities.

Facilities funded under this measure must be dedicated to public library direct service use for at least 20 years after completion.

All projects must forbid use of project funds for certain administrative services, financing costs, books or other library materials, or ongoing operating costs after completion of the project. This measure requires competitive bidding for all construction contracts and limits construction costs to those considered normal for the area.

FISCAL EFFECT

According to the Legislative Analyst (LAO), the total estimated state cost would be $1.2 billion over 30 years ($600 million in principal and $570 million in interest). Payments would be about $40 million per year. At an interest rate of 5 percent, the state will pay $2 for each $1 it borrows over a 30-year period. After adjusting for inflation--since a dollar will be worth less in the future than it is today--each dollar borrowed will cost the state approximately $1.30, according to estimates by the LAO.

Local agencies would make cash expenditures covering 35 percent of the total project cost. The LAO estimates a one-time overall cost of library projects to local agencies statewide of about $320 million in matching funds.

The LAO says that local agencies could face increased annual operating costs of several million dollars after their projects are completed. The increase in operating costs would depend on the extent of the new or expanded facilities.

IMPACT OF YES OR NO VOTE

• A YES vote means that the state could sell $600 million in bonds to fund local projects for constructing new facilities and renovating existing public libraries to improve literacy and reading and to expand access to existing libraries for California residents.
• A NO vote means $600 million in general obligation bonds could not be sold to fund construction and renovation of existing public library facilities.

SUPPORTERS SAY

• Proposition 81 will expand reading and homework centers, giving children a safe, quiet place to study after school.
• We need to invest in literacy and life-long learning. Illiteracy is often passed from generation to generation, and adult illiteracy hurts our economic competitiveness.
• Library visits have skyrocketed with California's population increases.
• Proposition 81 invests in our local communities wisely; it does not raise our taxes, the funds cannot be used for local administrative costs, and the 35 percent matching fund requirement maximizes the use of limited state funding.
• By strengthening the partnership between libraries and schools, Proposition 81 is a critical element in achieving California's literacy goals and strengthening our entire educational system.

OPPONENTS SAY

• We should use our taxes to ensure that libraries stay open for more weekend and after-school hours to accommodate most students and working adults.
• The Legislature could finance library construction and renovation with the current tax money and avoid using bonds that more than double the funding costs when interest and other fees are added.
• We should find other methods of delivering library services such as the Internet, private bookstores and virtual schools.
• The Internet will make these new libraries obsolete in five years, but your taxes will be higher for 30 years--even if the economy collapses.
• Local governments that cannot raise 35 percent in matching funds cannot participate, but the local taxpayers will still pay for projects in other communities through their state taxes.

SUPPORT AND OPPOSITION

The official ballot arguments in support are signed by League of Women Voters of California President Jacqueline Jacobberger, Congress of California Seniors President Henry L. Lacayo, and California Federation of Teachers President Mary Bergan, California Business Roundtable President Bill Hauck, Faculty Association of California Community Colleges Executive Director Jonathan Lightman, and Children Now President Ted Lempert.

At press time, organizations that have endorsed Proposition 81 include Congress of California Seniors; California Contract Cities Association; California Democratic Party; California Language Teachers Association; California Nurses Association; Children Now; League of California Cities; League of Women Voters of California; California Federation of Teachers; Faculty Association of California Community Colleges; North Bay Labor Council, AFL-CIO; Sonoma, Mendocino & Lake Counties Building Trades Council.

The official ballot arguments in opposition are signed by Assemblyman Ray Haynes, Howard Jarvis, Taxpayers Association President Jon Coupal, and National Tax Limitation Committee President Lew Uhler.

At press time, organizations that oppose Proposition 81 have not yet been announced.

FOR MORE INFORMATION

Supporters

Les Spahnn, 916-737-9325, Yes for Libraries, les@giarrizzoconsulting.com, www.yesforlibraries.com

Opponents

Thomas N. Hudson, California Taxpayer Protection Committee, 916-991-9300, info@protecttaxpayers.com, www.protecttaxpayers.com

Web Sources

Analysis by the Legislative Analyst's Office: http://www.lao.ca.gov/ballot_source/Propositions.aspx

Voter Information Guide (ballot pamphlet) in pdf format: http://www.ss.ca.gov/elections/elections_viguide06.htm

Reports of campaign expenditures for ballot measures: http://cal-access.ss.ca.gov/Campaign/Measures/