Let’s avoid insane ‘payday loans’ for local government

According to a recent news article, a school district in California recently got a $2.5 million bond (i.e., a loan) that will cost taxpayers in the district $34 million to pay off – almost 14 times the size of the original loan. Curiously (at least, it’s curious to a non-expert on local government debt) this loan was needed so that the school district could qualify for another, federally subsidized loan of $25 million, which the school board president said would be “foolish” to “leave … on the table.”

Evidently, this seemingly over-priced form of local government debt, which the California State Treasurer calls “the school district equivalent of a payday loan,” is a real problem in cash-strapped (and evidently mathematically challenged) California government. In a similarly egregious case, a school district in suburban San Diego got a loan of roughly $100 million that will cost taxpayers there $1 billion to pay off.

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