Take Action to Support Crucial CAB Reform

UPDATE:  Texas Public Policy Foundation's David Guenther has interviewed Representative Dan Flynn on HB 3416 and CAB abuse.  The discussion will be available online tomorrow, April 15, as a TPPF Policy Cast here.  

As I've written previously, a bipartisan group of state leaders have proposed CAB, or Capital Appreciation Bond, reform.  The Senate version, (SB 449 authored by Sen. Juan Hinojosa) passed by a resounding vote of 28-3.  Now the House version, (HB 3416) is languishing in the Ways and Means Committee. 

Last week Leander ISD Trustee Pam Waggoner skipped the district's board meeting to attend a hearing on the House bill and argued that her district could not live without CABs that would allow them to defer debt for 30-40 years (and lead to a monstrous total debt burden of $2.7 billion).

Below is a communication I received from a concerned resident asking for help with this issue: 

Last Thursday in a public hearing LISD told the Texas House Ways and Means Committee that they couldn't live without CABs, that LISD kids would be stuck in portable buildings!  The brokers and some of the school districts turned out in droves to fight House Bill 3416  which would severely limit CABs, both to 20 years length instead of 30 or 40years and to 20-25% of the debt ratio per student for a district.  Not perfect, BUT WE NEED THIS BILL to slow LISD's insane spending.   It's our ONLY hope as LISD looks at issuing another $173 million bonds using CABs to drive our debt toward $4 BILLION.  The Bill is "pending", according to Rep. Flynn's office (the author) it is being tweaked and if we want it voted on and not languishing to die, we need to call and let them know they've been mislead by LISD and the Wall Street interests that are making millions off these CABs. 

I told them that a group of citizens here has worked for 2 years begging LISD to stop using CABs, and that they refused to listen.  I told them that virtually no voters in LISD actually know about the CABS, much less understand them, since LISD did absolutely NOTHING to tell voters in advance about their decision to incur the CAB debt before they issued them.  Then they used them to build lavish, extravagant facilities that would rival a private college campus, not just to replace portables. 

Please call or fax Chairman Hilderbran's office TODAY and talk to his staff. Let them know what you think about CABS! The more calls they get, the sooner it will be voted on. If you can think of anyone, please ask them to call to. Let's get this bill out of committee before LISD and Wall Street kill it!

Rep. Hilderbran, Harvey
District 53
(512) 463-0536
(512) 463-1449 Fax

Rep. John Otto (R) Vice Chair
(512) 463-0570
(512) 463-0315 Fax

Rep. Dwayne Bohac (R)
(512) 463-0727
(512) 463-0681 Fax
Rep. Angie Chen Button (R) Angie Chen
(512) 463-0486

Rep. Craig Eiland Craig (R)
(512) 463-0502
(512) 936-4260 Fax

Rep. Allan Ritter (R)
(512) 463-0706
(512) 463-1861 Fax

Rep. Mark Strama (D)
(512) 463-0821
(512) 463-1199 Fax

Rep. Trey Martinez Fischer (D)
(512) 463-0616
(512) 463-4873 Fax

Rep. Naomi Gonzalez (D)
(512) 463-0622
(512) 463-0931 (Fax)

Please note:  At this point, calls are more effective than emails.  

State Leaders Move To Ban Leander ISD's Dangerous Borrowing Practices

Apparently Leander ISD has become the Texas poster-child for poor financial leadership.  Not only did LISD borrow & build excessively, the district further exacerbated their financial woes with the use of Capital Appreciation Bonds, or CABs.  CAB financing allows borrowers to 'kick the can down the road' with bond maturity dates 20, 30, or even 40 years after issue.  Furthermore CABs increase total payoff significantly, leaving taxpayers to pay back as much as 10 times the amount initially borrowed.  Consequently, Leander taxpayers are now on the hook for $2.7 billion dollars in local debt. 

The alarming CAB trend has prompted legislators of both political parties to act.  Democrat Senator Juan "Chuy" Hinojosa and Republican Representative Dan Flynn have filed bills to prohibit local governments from using CABs to finance debt.  The companion bills are SB 449 and HB 3416.  If approved, the measure will prevent any future districts from 'becoming Leander ISD.'

Sadly, the measure comes too late to protect Leander taxpayers.  Years of poor financial management have created a quagmire for the school district (which features empty schools but plenty of impressive football facilities.)  While the district is ripe for new leadership, only one school board member has been challenged.  Trustee Pam Waggoner has served intermittently since 2002, and has been challenged by Jim MacKay.  Waggoner, who is endorsed by Democrat State Representative Donna Howard, has served as an apologist for LISD debt.  In stark contrast, Jim MacKay has been endorsed by former Republican Party of Texas Chair and Reagan Administration official Tom Pauken.  MacKay has launched his campaign with some serious questions about the finances of the district. and the CAB problem is huge factor in the upcoming election. 

Leander ISD's financial future is uncertain, but hopefully the State Legislature will act to prevent other districts from the same fate.