It was a personal defeat for Gov. Arnold Schwarzenegger when Republican state legislators refused to allow a variable of his proposed $68 billion to $70 billion in new construction and repair bonds onto the June primary election ballot.
Schwarzenegger immediately “guaranteed” the bonds would return, using language similarly to his movie character who boasted, “I’ll be back.”
But bonds are nothing like Terminators. They don’t necessarily deserve an opportunity for another chance when a better alternative waits, lacking only political will to become reality.
That alternative is “pay-as-you-go,” the way most households operate when considering things like roof repairs or expanding a patio, roughly analogous on a micro scale to the gigantic levee, highway, school, jail and other repairs and construction envisioned by Schwarzenegger.
There’s compelling math for pay-as-you-go. There’s also plenty of political reason to adopt that approach, even if the governor’s supposed adversaries among Democratic lawmakers have not yet seen it that way.
Politically, if Democrats like Assembly Speaker Fabian Nunez of East Los Angeles and state Senate President Don Perata of Oakland okay bonds to finance the repairs and improvements virtually all Californians agree are needed, they will be providing Schwarzenegger precisely the platform he wants to run on in his reelection drive this fall.
Even if, as Nunez aide Steve Maviglio insists, the bonds “would have many things in them that are great for Democrats – school construction and repair, flood control and plenty of traffic and transit improvement” – they would quickly become Schwarzenegger’s bonds, just as when he took over a business-inspired ballot initiative aiming to clamp down on labor union political spending in last fall’s special election. The idea wasn’t his, but you’d never have known that by listening to him.
In the strange choreography of Sacramento, Nunez and his Democratic compadres insist they want bonds voted on this November because “they are good for California.” Nobody can be quite sure they’d be saying this or voting for the bonds if legislative Republicans weren’t so dead set against them.
The truth is, fiscally sane Californians should also be highly skeptical of a big new bond issue. For one thing, it would cost the state about $130 billion over the next 30 years to pay back $70 billion in bonds – an average of just over $4 billion per year. If legislators and the governor passed a law guaranteeing that same $4 billion a year for the same type of rebuilding and new construction, the $4 billion per year would only be paid out for about 17 years.
Any such pay-as-you-go plan, of course, could stipulate that if state revenues fail to reach a baseline level in any given year, the spending need not occur.
This is an idea first advanced by Bill Leonard, a former Republican lawmaker now on the tax-collecting state Board of Equalization.
Leonard also noted that construction could occur much more quickly under pay-as-you-go, because the state would neither have to wait for an election to okay spending nor go through the time-consuming exercise of selling bonds.
Using bond money to fix the problematic levees of the Sacramento-San Joaquin river delta would mean waiting at least until next summer to get started, setting up another year of flood risks that Schwarzenegger maintains are more severe than those in pre-Hurricane Katrina New Orleans. Using pay-as-you-go, reconstruction could begin almost immediately.
And where would the $4 billion per year come from? This year, it could come from the approximately $6 billion in unexpected revenue the state has taken in. Some lawmakers prefer to hold onto most of that money just in case tax receipts don’t run as high next year.
But the possibility of a flood in the Delta poses far more financial risk than using money already in hand to fix the problems.
And once politicians have seen how nice it is to approve projects without needing to ask voter approval, maybe the pay-as-you-go idea will really catch on.