California voters say 'yes' to more than $40 billion of local school bonds

California voters were friendly to municipal bonds in Tuesday's election, with a few notable exceptions.

The state's voters passed two separate $10 billion state bond measures and put their stamp of approval on at least $42.8 billion of local school general obligation bonds.

Tuesday's ballot was the biggest for local bond measures in the state's history, said Michael Coleman, creator of CaliforniaCityFinance.com, which tracks local tax and bond measure results.

On the ballot were 266 school bond measures that required 55% voter approval to pass, requesting more than $50 billion in bond authority.

Coleman thinks the surge likely has to do with the state's Proposition 2, which authorizes $10 billion of state general obligation bonds to provide matching capital funds to local districts.

Prop. 2 was ahead with almost 57% of the votes counted as of Wednesday evening, which should be a large enough margin to pull it over the required 50% threshold.

All results are preliminary, and final numbers tend to trickle in slowly in the state's vote-by-mail system, a process that sometimes shifts the early results.

As of Wednesday evening, California had tallied about 9.9 million votes, according to the Secretary of State's office; that means if state turnout matches the 17.78 million of 2020, almost 8 million votes remain to be counted.

Proposition 4, authorizing $10 billion state GOs for water, wildfire, and climate risks, was faring even better at 57.9% approval.

The largest measures for K-12 schools were successful, topped by the Los Angeles Unified School District's $9 billion Measure US. In early results posted by county election officials Wednesday afternoon, Measure US had more than 66% of the vote.

Measure US, like most California school bond measures, needs 55% of the vote to pass, a rule established by a 2000 ballot measure that lowered the threshold from two-thirds.

Statewide Proposition 5 would have extended the same 55% threshold to bonds for local infrastructure and affordable housing.

Voters weren't buying it, though: it is headed for defeat, registering less than 44% of the vote as of Wednesday. Such non-school bond measures will still need a two-thirds supermajority.

"This particular ballot measure did not have a ton of resources on the proponent side," said David McCuan, a political science professor at Sonoma State University in Rohnert Park, California. "A lot of the dollars that were promised didn't come along."

As a result it didn't get much attention in an election with several other big-money state ballot measure campaigns flooding the zone with TV commercials and mailers.

The official ballot description, "Allows local bonds for affordable housing and public infrastructure with 55% voter approval," wasn't helpful, he added.

"That title and summary was really tortured," he said. "If you're starting from a place where it's hard to get a 'yes' vote, where the default is usually 'no,' and you have a difficult title and summary, that adds a couple more points to the 'no' side."

This year California school bond elections contrast with the previous record election in November 2016. That year, school bonds almost ran the board, with 168 passing and six failing, according to data from the California Debt and Investment Advisory Commission. This year, dozens will fail.

Coleman's preliminary tally published Wednesday afternoon has 168 bonds passing with at least 56% of the vote, authorizing $42.8 billion.

Another 57 measures are in the too-close-to-call 52% to 56% range that could shift as more votes are tallied, though dozens may fail to clear the 55% hurdle. And 41 others have clearly failed.

The environment for local bond measures in California is getting harder, and that's not going to change, McCuan said.

"The anti-tax crowd that concentrates resources at the state level is trying to concentrate its focus at the local level," he said.

"The opponents are learning better how to push back against bonds," McCuan said. "That's spilling over to the local and regional levels."

School bonds still have a built-in advantage: "Education starts at a higher base 'yes' vote," McCuan said. "Education bonds generally start, all things being equal, at a higher 'yes' vote."

While the largest community college bond measure, San Diego Community College District's $3.5 billion Measure HH, appeared well placed Wednesday morning at 59% in favor, some other large community college bond proposals are likely to fall short of the line.

They include a $720 million measure for the Rancho Santiago Community College District in Orange County and a $750 million measure for the Mt. San Antonio CCD in Los Angeles County. In Fresno County, the $698 million State Center CCD measure was on the wrong side of the too-close-to-call line at 53.3% in early returns, and Riverside CCD's $954 million was just above it at 55.2%.

"Voters are in favor of schools, but when they say K-14 what they really mean is K-12," McCuan said. "Community colleges have become a kind of stepchild of bonded indebtedness."

There were 18 local ballot measures Tuesday that would have benefited if voters lowered the threshold to 55% by passing Proposition 5.

The largest three ? from Sacramento Metro Fire District for $415 million, the city of Santa Clara for $400 million and a $390 million GO bond request from San Francisco ? passed in any case, with more than two-thirds of the vote. Six other non-school GOs passed with two-thirds supermajorities. Ten of them failed, nine of which garnered more than 55% of the vote.

The biggest measure approved Tuesday, for Los Angeles Unified School District, adds $9 billion of authorization to the district's $8.7 of authorized but unissued debt, according to a September report from Kroll Bond Rating Agency affirming its AAA GO rating for the district.

The KBRA report came ahead of a $1.1 billion GO sustainability bond issue. The district, a frequent issuer, carries Moody's Ratings' Aa2 GO bond rating and Aa3 issuer rating, and Fitch Ratings rates LAUSD's GO bonds AAA with an AA-minus issuer default rating.