Gov. Jerry Brown has signed legislation that prohibits schools from withdrawing bond proceeds to make their own investments.
Assembly Bill 2738 was introduced by Assemblywoman Kristin Olsen, R-Riverbank, after the San Mateo County Community College District authorized itself to withdraw bond funds from the county treasury, establish “surplus funds” and invest taxpayer dollars on the open market.
County Treasurer Sandie Arnott opposed the district’s move as did treasurers in different counties when schools attempted similar actions.
Brown signed the bill into law Sept. 22, and it was supported by the California Association of County Treasurer-Tax Collectors.
The community college district’s Board of Trustees, however, opposed the legislation.
Trustees approved a resolution in May opposing the legislation based in part on investments made by the county with Lehmann Brothers back in 2008 that cost taxpayers $155 million.
The community college district lost a total of $12 million in Lehmann Brothers’ failure.
Voters approved a $468 million bond measure in 2005 to improve facilities at the district’s three campuses at Skyline, Cañada and the College of San Mateo.
The money sits in an investment pool managed by the county treasurer until funds are needed to start projects.
District Chancellor Ron Galatolo sought to withdraw some of the bond revenue for the district to manage itself which prompted Arnott to seek modifications of existing law to keep the task in the county treasurer’s office.
“AB 2738 will bring clarity to the law binding investment of bond proceeds, ensure transparency in how bond proceeds are invested and provide a clear audit trail. It will protect taxpayer dollars by preventing the withdrawal of bond proceeds for purposes not outlined in the approved bond measure,” Arnott wrote in a statement.
Galatolo said Monday he finds it “ironic” the treasurer would be so strident in not letting the district invest its own money after losing the $155 million in investments in 2008 when Lehmann Brothers failed.
Letting the district invest its own money would be a “greater benefit to the taxpayer,” Galatolo said.
Olsen’s bill clarifies the intent of the law that limits the ways in which bond proceeds may be invested, ensuring proper oversight and accountability for the safekeeping and availability of funds for the sole purposes they were approved, according to Russell Watts, the treasurer-tax collector in Contra Costa County.
“Ultimately, this bill will further strengthen the public’s trust in school and community college districts to manage building funds in a legal and prudent manner, assuring the passage of future bond measures,” Watts wrote in a statement.
Olsen’s bill keeps school districts from investing taxpayer dollars on the open market.
“Voters approve school bonds to ensure that kids will have access to safe, clean and well-maintained learning environments. We must protect our hard-earned tax dollars by keeping them in the care of our county treasurers,” Olsen wrote in a statement.
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