December 17, 2008
Economy affecting school bonds

More evidence, as if we needed it, that things are tough all over.

The ailing economy could make it more expensive for Texas school districts and their taxpayers to borrow money as the state has temporarily postponed its school bond guarantee program, which helps lower interest costs for construction projects.

About 20 Texas school districts -- none in the Houston area -- are immediately affected. More districts potentially could feel the impact as they consider selling bonds for various school construction programs already approved by voters.


David Anderson, general counsel for the Texas Education Agency, emphasized that school bonds could be guaranteed again as soon as next month.

Identifying the bond guarantee capacity requires precise calculations to determine the limit on the bond guarantee program, he said. Those limits are based on Internal Revenue Service regulations and are tied to 2.5 times the lesser of cost, or market value of the Permanent School Fund.

The wretched economy has dragged down the value of the Permanent School Fund from a high of $26.6 billion in 2007 to about $17.6 billion today. The number of school districts applying for the bond guarantee combined with diminished value of the fund has temporarily impeded the state's ability to guarantee school bond issuances.

"We're too close for us to be comfortable saying we know that we have capacity," Anderson said.

There's a vicious circle at work here, since things like school bonds and the construction they generate are economic stimulants. Scaling back on this sort of thing is exactly what you don't want to do during hard times. It's totally understandable, given the state of the credit market, but still. I just hope programs like this will be within scope of President-elect Barack Obama's stimulus package so that the school bond election process can continue normally.

Posted by Charles Kuffner on December 17, 2008 to Budget ballyhoo

Given that my husband's work is totally dependent on these bonds, you can imagine the anxiety this induces in us (and his work). Our only hope is that Obama will make good on his promise to fund bonds and help with school development---it's part of his economic and education stimulus.

Posted by: Julie Pippert on December 17, 2008 7:05 AM
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