CALIFORNIA ELECTIONS TREASURER : Hayes Botching School Bonds, Brown Says

SACRAMENTO —  On a hot, sun-baked schoolyard, Democrat Kathleen Brown warmed up the race for state treasurer Wednesday, claiming that incumbent Thomas W. Hayes has “mismanaged” the financing of the school bond program in a way that has cost schools $37 million in higher interest payments.

Brown, a former Los Angeles school board member who loves to use schools as a backdrop for press events, struck a teacherly tone in attacking her Republican opponent. She said: “If we were to give him a grade, we’d have to give him an F for mismanagement in the area of school finance.”

Donna Lucas, Hayes’ campaign manager, responded: “I’d have to give her an I for incomplete because of her lack of information.”

Lucas, in an earlier statement, contended that Hayes “has earned more money and sold more bonds for education than any other treasurer in California’s history.”

Striking back on a more personal level, Lucas pointed out that Brown quit her elected job on the Los Angeles school board to move with her husband to New York in 1980. “She quit the Los Angeles Board of Education abruptly in the middle of her second term when L.A. school kids needed her the most,” Lucas said.

Brown called that a cheap shot, saying her decision to give up her seat was made solely to keep her family together. “What transpired in my personal life and my family life is something totally outside of my control,” she said.

Triggering the campaign potshots was a treasurer’s office policy that requires schools to temporarily borrow money for construction projects from the state’s Pooled Money Investment Fund, even when voters have approved state bond issues that could provide the money at a lower interest rate.

The treasurer’s office ultimately issues the bonds for school construction, but only when the projects are well under way or even completed.

Hayes claims his hands are tied by requirements stemming from a 1986 federal tax law. The law allows state and local governments to sell bonds only when the construction projects are ready to go. In the past, governments had floated the bonds, put the money in the bank and earned substantial interest on it while waiting for projects to be readied.

Brown, however, argues that Hayes is being excessively cautious in interpreting the law--and his caution is costing the schools dearly. By paying the higher interest rates, she says, schools have lost at least $37 million.

She used the playground of a severely overcrowded school in South Sacramento to illustrate her contention that money lost by Hayes could have built as many as seven new schools around the state. Prairie Elementary School was built for 350 students and currently serves nearly 1,250.

Brown’s contention was supported by Diane Kirkum, a special assistant to state Supt. of Public Instruction Bill Honig. She said the Department of Education calculates that schools spend roughly $50 million a year on interest payments to the Pooled Money Investment Fund.

“We figure that $90 million has been charged to the school construction program over the last two years for interest that must be paid to the Pooled Money Investment Fund,” she said. Kirkum added that the system will require that $100 million more be set aside over the next two years. “Those monies otherwise could be used to build schools,” she said.