Replies

FYI

Companion article from Oakland Tribune:

How refinancing schemes work
By Steve Geissinger
SACRAMENTO BUREAU

SACRAMENTO -- The state's controversial new state bond-debt restructuring strategy works something like the refinancing of a home mortgage, pushing bond payoffs years -- or even decades -- into the future.
Critics fear that with the state pushing bond payments ahead for the first time, taxpayers will now be paying off the bonds well past the useful life of some of the projects that were financed with the bond monies.
Bay Area school districts were among those which received initial allocations from the bond measure in 1999, according to documents obtained from the state Office of Public School Construction in the Department of General Services.
In Alameda County, money from the school bond went in 1999 to the Albany Unified School District for a middle school and New Haven Unified for a middle school and an elementary school.
In Contra Costa County, school bond money that year went to Antioch Unified for an elementary school.
Records obtained from the state treasurer's office under the California Public Records Act show that more
than $1 billion in bond payments that would have come due this year and next will now be paid from 2003 to 2030.
The recent refinancing postpones payments on various multimillion-dollar bond issuances under the authority of 25 ballot measures that voters approved:
In 1988, for construction of schools, universities, libraries, local jails and state prisons, as well as for clean-water projects and water conservation efforts.
In 1990, for construction of state prisons, schools and universities, as well as for seismic-safety retrofitting, mass transit, transportation improvements and affordable housing.
In 1992, for school and university construction.
In 1996, for earthquake safety, school and university construction and clean-water projects.
In 1998, for school construction and repairs aimed at reducing class sizes.
Under the refinancing, state officials say for example, $3.5 million in bonds issued under the 1998 voter-authorized school construction measure that would have been paid off in April of this year and another $3.5 million that would have been retired in April 2003 will both instead be paid off in February 2029.
Therefore, critics say that bonds monies used in 1999 or 2000 for construction or repairs -- that are supposed to have a useful life of at least 10 years under the original $9.2 billion bond measure -- will be paid off decades later.
But the concerns are dismissed by top officials in a deficit-ridden state government, who view the refinancings as a widely accepted fiscal tool to free up cash in the short term and take advantage of the current low interest rates.

State Sen. Tom McClintock, a fiscally conservative Northridge Republican running for state controller in November, is so concerned he's calling for an immediate moratorium on long-term borrowing.

"Debt service is rapidly consuming an increasing portion of this and future budgets," says McClintock. "When you've just lost your job, you don't take out a home improvement loan."

McClintock has taken to traveling with what he calls the California Debt Clock.

"We're adding over $1 million in new debt per hour, and that's all money that will be tacked onto your future taxes unless we restore sound fiscal management to this state," McClintock says.

"The debt clock helps us communicate to fellow Californians that we need to eliminate the waste and out-of-control spending that's driving up our debt and fueling the call for more taxes," he says.

DUMP DAVI$ & the Den of Socialists

GO SIMON

Critics, however, fear the state is moving toward use of bond money to pay current costs in an erosion of the state's pay-as-you-go philosophy.

Using long-term debt to pay current expenses is lunacy.

The Democrat-dominated Legislature, at the request of Davis, approved a landmark measure that will put before voters a $25.3 billion school construction bond. The first $13 billion will appear on the Nov. 5 ballot.

We are paying $30 billion a year now for education, $10 billion of which never leaves Sacramento and can't be fully accounted for. And these lizards want more?

It's time to smash the military-priesthood educational model. You could buy every child in California a notebook computer and a set of DVDs with the entire K-12 curriculum for far less than we are spending annually to keep these teachers union jokers in power (where they can generously fund Democrat campaigns.) "Schools" are nothing but breeding grounds for antisocial and criminal behavior and we could improve the futures of millions of California children if we bulldozed every one of them starting tomorrow.

Need to stop buying land.

Stop the Insanity!

And I thought my less than 10K debt was bad. Kali is going to drag us all down eventually. They will never be able to pay off their debt and fedaral assistance will be granted, which I'm sure they are aware.

EBUCK

These long term bonds are the way that congress got us into staggering debt after WWII.

In Kali they are a socialist scheme of getting by prop 13 and the so called debt limits which are not there after Davis et al. "Taxpayers will be nailed at home in terms of property taxes for local school bond measures and then nailed in terms of general state taxes for any additional bonds that might be issued," says Lew Uhler, the Sacramento-based president of the National Tax-Limitation Committee. "It's going to be a nightmare."

Then there is this little goodie: McClintock has taken to traveling with what he calls the California Debt Clock.

"We're adding over $1 million in new debt per hour, and that's all money that will be tacked onto your future taxes unless we restore sound fiscal management to this state," McClintock says.

"The debt clock helps us communicate to fellow Californians that we need to eliminate the waste and out-of-control spending that's driving up our debt and fueling the call for more taxes," he says.

I like this Gessinger guy from the OT.

My only criticism of his article is this: He did not mention Article 16, Section 1 of the California Constitution which contains specific limitations on borrowing.

SECTION 1. The Legislature shall not, in any manner create any debt or debts, liability or liabilities, which shall, singly or in the aggregate with any previous debts or liabilities, exceed the sum of three hundred thousand dollars ($300,000), except in case of war to repel invasion or suppress insurrection, unless the same shall be authorized by law for some single object or work to be distinctly specified therein which law shall provide ways and means, exclusive of loans, for the payment of the interest of such debt or liability as it falls due, and also to pay and discharge the principal of such debt or liability within 50 years of the time of the contracting thereof, and shall be irrepealable until the principal and interest thereon shall be paid and discharged, and such law may make provision for a sinking fund to pay the principal of such debt or liability to commence at a time after the incurring of such debt or liability of not more than a period of one-fourth of the time of maturity of such debt or liability; but no such law shall take effect unless it has been passed by a two-thirds vote of all the members elected to each house of the Legislature and until, at a general election or at a direct primary, it shall have been submitted to the people and shall have received a majority of all the votes cast for and against it at such election; and all moneys raised by authority of such law shall be applied only to the specific object therein stated or to the payment of the debt thereby created...

Californians don't need a moratorium on debt, they just need to elect legislators who will follow the constitution.

I first became politically-aware when I was 19 or 20, and living in Eureka, CA. I had just finished reading an article on how the City government had gone into the red and it dawned on me that now the City of Eureka was in debt, the County of Humboldt was in debt, the State of California was in debt and the Federal Government of the United States was in debt.

I realized then that, in the fiscal chain - from top to bottom - I was the only one that knew how to balance a checkbook.

Pathetic.

The budget battle will be a doozie!