Taxpayers file landmark lawsuit to prevent $12 billion in prison construction debt

The protest sign reads: 53,000 cells! $15 billion! A disaster for Cali.

Sacramento – Concerned parents, students, teachers, experts and taxpayers announced Tuesday the filing of their lawsuit to stop at least $12 billion of prison debt authorized by AB 900 at a noon press conference in front of the State Capitol. Californians United for a Responsible Budget, a coalition of community organizations from around the state, will also release an expert report exposing the true cost of AB 900.

The report, by esteemed economist Dr. Adam Werner, a principal in the securities practice at CRA International, details the waste and financial inefficiency of AB 900. According to Werner, “The use of lease-revenue bonds to finance these facilities is irrational from a purely economic perspective given the cost differential between using lease revenue and general obligation bonds.” 

Werner calculates the unnecessary costs to total an additional $2 billion in interest payments and the total cost to taxpayers of borrowing $7.4 billion is at least $12 billion. He opines that an entity that chooses lease-revenue financing must be motivated primarily by concerns other than economic efficiency. 

Dr. Werner writes, “One possibility is that lease revenue bonds are used to finance prisons because state officials believe that voters would reject the use of general obligation bonds for the projects in question.” 

The landmark lawsuit filed today against a number of state officials, including the governor, the state treasurer and the chairman of the Department of Finance, argues that AB 900 constitutes an illegal bypass of voters’ constitutional right to vote on debt (California Constitution Article XVI, section 1) and an illegal waste of scarce government resources (Code of Civil Procedure section 526a). 

“In the midst of a wrenching budget crisis, California is borrowing billions of dollars to build 53,000 new prison and jail beds,” commented Thomas Nolan, lead counsel in the CURB lawsuit. “How can we be kicking thousands of kids off of Medi-Cal and cutting the public school budget by billions, yet sink $12 billion into building tens of thousands of new prisons beds?” 

Dubbed by the New York Times the largest prison construction plan in U.S. history, AB 900 was passed last year with no public hearing, no public debate and with public opinion squarely against new prison construction. Dorsey Nunn, a plaintiff in the suit and a member of All of Us or None, explains that “AB 900 is in direct violation of the California Constitution, which demands that only the will of the voters can put the General Fund into this kind of debt.”

“It speaks so sadly of our future that my teachers are receiving lay off warning notices at the same time 53,000 new prison beds are being funded,” said Ericka Sokolower-Shain, one of the plaintiffs who is a public school student. Additional plaintiffs are Camilla Chavez of Bakersfield’s Dolores Huerta Foundation, Bonnie Long, who has a family member in prison, and Cynthia Chandler, parent of public school students. 

“California has opened 23 new prisons in the past 23 years, and our system is more crowded than ever,” explains CURB member Craig Gilmore. “By building more prisons, we’re making the overcrowding problem even worse. The real solutions to overcrowding are early release, parole reform, sentencing reform and full implementation of Proposition 36.” Chair of the Senate Public Safety Committee, Sen. Gloria Romero, has repeatedly stated that “we cannot build ourselves out of the prison crisis.” 

In a March letter to the State Public Works Board, Democratic Caucus Chair Carole Migden, who will appear at the press conference, wrote, “Due to the state’s current financial crisis, I do not think it is fiscally prudent to authorize the sale of lease revenue bonds which will increase the state’s current structural deficit.” The ongoing costs of AB900 will likely devastate the state budget for years to come.

The complaint, expert report, summaries and additional background materials are available at www.curbprisonspending.org.