April 16, 2024 Breaking News, Latest News, and Videos

CALIFORNIA FOCUS: Why Wait For A Bond? Start Fixing Sate Now

The idea is stunning in its simplicity: Why wait for a massive bond issue to begin fixing California? With surprisingly high tax revenues coming in this winter and no serious budget deficit problems in sight for at least a year, why not start right now?

This idea comes from a surprising source, former longtime State Senator Bill Leonard, a conservative Republican legislative mainstay until term limits forced him from office. Leonard is now a member of the state Board of Equalization, which rules on many tax issues.

Noting that Governor Arnold Schwarzenegger floated the idea of a $50 billion bond issue – the largest in state history – just after his failed November special election, Leonard the other day offered this suggestion in his weekly email newsletter:

“Everybody agrees that California’s infrastructure needs rebuilding. A $50 billion bond issue would cost $90 billion (with interest) over 30 years. So let’s dump the bond but agree to spend the same $3 billion per year that would have been spent on debt service on directly needed public works.”

As a practical matter, it’s unlikely that more than $3 billion a year would be spent anyway on upgrading bridges, sewers, highways, levees, parks, dams, hospitals and schools for several years after a bond was passed – if it passed. Cities, state agencies, counties, schools and water districts would be lining up for the money and it would take substantial time to allocate funds – unless a bond proposition spelled out hundreds of individual projects.

But because the state has run budget deficits for most of the last five years, legislators are not likely to place a gigantic bond issue before the voters next spring, no matter how specific it might be. Plus, if such a bond passed, it would automatically eat $3 billion of each year’s budget, reducing options even before lawmakers could begin to argue about other types of state spending.

But in a year when tax revenue is running at least $4 billion ahead of expectations, why not earmark a good chunk of that for the repairs and new construction everyone agrees is needed? All that takes is common sense.

If there’s anything California should have learned from the feast-or-famine tax collections of the last 10 years – big surpluses during the dot.com boom, deficits during the subsequent bust – it is that when excess money comes in, it should be spent on permanent capital investments and not to expand ongoing programs beyond the rate of population increase.

Fixing the systems that together compose California’s backbone would be the very essence of capital investment in the state’s future.

But so far, Leonard is a lone voice of reason crying out in the wilderness.

Yes, there have been suggestions about how a huge bond fund might be financed. Place a tonnage or container fee on goods shipped from California’s ever-busy ports. Put a tax on diesel engine emissions, raise the sales or gasoline levies. All these unpleasant notions have been advanced as possible ways to pay the debt service on a bond.

But that would not be needed if the governor and legislative leaders actually got together and signed some sort of document committing the state to spend up to $3 billion per year on infrastructure repairs, replacement or additions whenever tax collections run ahead of what’s needed to balance the budget.

This could avoid tax hikes of any kind, something Schwarzenegger has vowed to nix anyway. It would not interfere with balancing budgets, which Democrats like Treasurer Phil Angelides insist should be the state’s first priority.

It would avoid the problem of funding new freeway interchanges in the San Fernando Valley by having parents in Redding pay higher sales tax on their kids’ shoes.

It would place the state on a pay-as-you-go basis, and thus avoid placing heavy obligations on state spending even before anyone begins to think about how money should be spent.

In short, it’s far better than a bond issue, largely because all the money could go toward actual work and not to pay interest.

But doing this would take both mutual determination and mutual trust on the part of a Republican governor and a Democratic-dominated Legislature. It would be an almost unprecedented setting aside of petty politics in the best interests of the entire state.

Says Leonard, “The time is right to start building what we need to build. I say rather than pay interest for many years, let’s just build something now and every year after this.”

Unlikely as the notion may seem, it’s about time California’s elected officials rose to that level of good sense and real concern for the state.

in Uncategorized
Related Posts