Posted on 11/03/2006 12:02:17 PM PST by calcowgirl
SACRAMENTO – A ballot packed with proposals for record state borrowing, five bonds totaling $43 billion, poses a big question for voters on Tuesday: How much debt can the state afford?
When Gov. Arnold Schwarzenegger proposed a public-works bond package in January to rebuild California's neglected infrastructure, he wanted to give voters some assurance that the state would not plunge too deeply into debt.
“I will propose that the Legislature adopt a debt ceiling that maintains our debt at a prudent level, regardless of the amount of debt authorized,” Schwarzenegger said in his State of the State address.
But in another case of the governor proposing and the Legislature disposing, his debt ceiling was given a swift burial by legislators who feared the limit would reduce state budget options in the future.
The failure to ask voters to impose a debt limit is one objection cited by opponents of the bond package – Propositions 1B through 1E for transportation, schools, housing and flood control that were placed on the ballot by lawmakers; and an initiative by environmentalists for water and park projects, Proposition 84.
“The governor said he was going to cut up the credit card,” said Carl DeMaio, president of the Performance Institute in San Diego, a business that advocates government efficiency. “Now they want just one last hit.”
A poll by the Public Policy Institute of California found that 59 percent of the voters think the $43 billion bond package is “too much.” Some bond backers fear that the massive package may fall of its own weight.
There has been no public polling on whether including a debt limit with the bond package would attract Republican voters, who tend in polls to oppose the bonds, or on the other hand, whether it would erode strong support among Democrats.
The debt limit proposed by Schwarzenegger was based on a traditional guideline that annual bond payments, if they are to be kept at a prudent level, should be no more than 6 percent of annual revenue.
“I think it is something I am more comfortable with if we stay around 6 percent or below that ceiling,” Schwarzenegger said Tuesday as he campaigned for the bond package at a Sacramento high school.
Bond opponents disagree with a two-page overview of state bond debt in the ballot pamphlet written by the nonpartisan Legislative Analyst that says if all of the bonds were approved, debt payments would not exceed 6 percent of revenue.
“It would peak at 5.9 percent in 2010-11 and decline thereafter,” the analyst says in the ballot pamphlet.
“That is absolutely not factually correct,” said DeMaio of the Performance Institute.
DeMaio said the analyst was not counting annual payments on $11.3 billion worth of deficit-reduction bonds, authorized by Proposition 57 two years ago, that would push payments past 8 percent if the bond package is approved.
The analyst's office agrees that counting the deficit-bond payments would cause annual payments to peak at about 8.4 percent. But the deficit bonds will be paid off in three or four years, allowing annual payments to drop.
Schwarzenegger's Department of Finance agrees with the analyst's decision not to count the deficit-bond payments. The finance department said the deficit bonds are unusual “self-liquidating” bonds paid off by a dedicated quarter-cent of the sales tax.
“I think there is some legitimate debate,” said Robert Kurtter of Moody's Investors Service, a Wall Street credit rating firm, when asked whether the deficit bond should be counted in the annual bond payment.
Kurtter said California was a low-debt state that had been “ramping up” in recent years. He said annual bond payments of 4 percent to 7 percent of revenue were regarded as mid-range among states, and 10 percent is high.
But rating agencies have not published state debt payments as a percentage of revenue for about a decade. The focus now compares state debt to population and personal income.
Moody's ranked California's per capita debt last year, $1,597, ninth among states and well above the average of $1,060. California debt as a percentage of personal income, 4.6 percent, ranked 11th among states and above the average of 3.2 percent.
At another Wall Street credit rating firm, Standard & Poor's, Steve Zimmerman said analysts also tended to look at per capita debt and other indicators, rather than whether payments exceed 6 percent of revenue.
If voters approve all of the bonds on the ballot Tuesday, he said, the 30-year bonds would be issued not quickly but over a number of years as planning for projects is completed and they become ready for financing.
“We don't see it as a problem,” Zimmerman said of the new debt if voters approve the entire bond package. “California can absorb it. It's a big state. It's a growing state.”
But DeMaio said voters should reject the bond package and force lawmakers to come up with more safeguards on how bond money was spent, develop a plan to pay unfunded state worker retiree pension and health benefits that could total $110 billion, and set a debt limit.
“This is an unprecedented package,” said DeMaio. “If we are going to do it, we ought to do it right.”
Schwarzenegger, who has been campaigning for the bond package throughout the state, said he was encouraged by polling that shows growing approval among voters.
“The momentum is on our side,” the governor said. “We are with all of our infrastructure bonds above the 50 percent mark – and some are as high as 58 to 59 percent.”
I'll be voting no on ALL the bonds.
New Feinstein/Schwarzenegger ad: "We Agree"
In 1988 California had about $4 billion in long term debt.
today California has over $40 billion in long term debt, and the total of these new bonds is over $40 billion.
bond issues might sound like a painless way to pay for things, since it avoids the regular budget process by having the people approve these directly.
But it's the same concept as having a mortage on your house, and too much debt will hurt the state in the long run.
They should be ashamed!
" “The governor said he was going to cut up the credit card,” said Carl DeMaio, president of the Performance Institute in San Diego, a business that advocates government efficiency. “Now they want just one last hit.” "
What'd I miss? When you max your card, they cut you off...what's the difference here?
“That is absolutely not factually correct,” said DeMaio of the Performance Institute. DeMaio said the analyst was not counting annual payments on $11.3 billion worth of deficit-reduction bonds, authorized by Proposition 57 two years ago, that would push payments past 8 percent if the bond package is approved.
A little bit louder now!
Hmmmm... 5.9%? 8% does it really matter? I don;t care if it maxes at 3%, as long as the clowns in sacto remain, they will always be clamoring they can't balance the budget for "essential services". They will always find enough 'open space', 'protected species', 'class size', day-care for all, after-school programs, stem-cell boondoggles, renewable energy rebates, etc., etc., etc. to eat up the other 97% and claim they need more to cover essential services that we all depend on. shameless.
I never vote for CA bonds, especially for schools.
I don't understand the ads. They have the gall to suggest that "bonds won't cause your taxes to rise" which we all know is total BS. I'm voting no against everything except 90.
At an event at the Port of Oakland today promoting his infrastructure bonds, Schwarzenegger was asked what he thought of Tom McClintock's opposition. The goveror said he "appreciates" McClintock's point of view, but "he is totally wrong on that one. If you go with his way of thinking we would never rebuild California."
The problem with the pay-as-you-go approach supported by McClintock and others, Schwarzenegger said, is that there are always competing priorities that stake a claim on the state's operating budget. The only way to get significant money for infrastructure, in his view, is to borrow it and then force lawmakers to spend the money required to pay it back.
"The politicians would never put that money aside for infrastracture if we don't commit to these things," he said.
Same Here. I voted NO on all five.
If Sacramento cannot afford to fund their social programs with our current tax dollars, perhaps they should do more to close the border and stop the onslaught of illegals who are bankrupting the state.
McClintock says YES on 1A and 1E.
A nice compromise position, imo. I'll be voting against ALL of them, including 1A and 1E. If they want $4 billion for levees (which is at least 1/4 pork), they can find it in the $100B+ general fund (a token $1 Billion a year for a few years would do the trick). Better yet, find an appropriate revenue source--not the general fund!
That's my opinion too. I've never voted for any CA bond measure, and I've never missed an election...even when I was stationed overseas.
Hey...do they still need 60% to pass (except school bonds)?
IMO, the fact that the local bonds require a higher threshold is the main reason we are seeing all of these propositions as state funded projects. Many of these local road and transportation projects should be funded locally. The same is true with a good portion of the Levee bond. Locals won't pass them so they get put on the State ballot by the big-government cronies who just can't seem to get the message--they are already spending too much--and on the wrong things!
Whatever it is--I'm against it...
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