California Governor Jerry Brown hailed his signature tax-hike to fund education–known as Proposition 30–as a towering achievement that will ensure educational excellence in higher education and spare those trapped in poor and failing K-12 California public schools from budget cuts.
“I know a lot of people had some doubts and some questions: Can you really go to the people and ask them to vote for a tax?” said Mr. Brown on election night. “Here we are…We have a vote of the people, I think the only state in the country that says let’s raise our taxes, for our kids, for our schools, and for our California dream.”
But a new study by five UC Berkeley doctoral students titled “Swapping Our Future: How Taxpayers And Students Are Funding Risky UC Borrowing and Wall Street Profits” says that millions of dollars of the freshly raised revenues won’t go to California’s school children. Instead, they will go to wealthy Wall Street firms who bag three-quarters of a million dollars a month because of bad decisions made by Wall Street cronies serving on the UC Board of Regents. According to the study, UC Board of Regents’ risky decision to move the University of California’s financial practices to bond issuances hedged by interest rate swaps cost UC $57 million and helped doubled its debt in the period between May 2007 and the end of last year.
So how did it happen?
As the California Political Review notes:
An increasing number of posts in top UC management and on the Board of Regents have been filled by former Wall Street bankers, the report explains, including a new CFO position created in 2009 and filled by Peter Taylor, who was the Managing Director of Public Finance for Lehman Brothers before he found himself out of a job following the firm’s spectacular collapse.
Monica Lozano, a UC Regent, also serves on the Board of Bank of America, a position for which she has received approximately $1.5 million. Bank of America stands to make as much as $28 million from an interest rate swap at UC San Francisco.
Proposition 30 boosts the California state sales tax a quarter of a cent for four years and raises income taxes up to 3 percent for seven years on Californians earning $250,000.