Climate of doubt: State’s rising debt levels could drown Prop 4’s chances this November
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Talk about an inconvenient truth: as California swims in $1.5 trillion debt, voters are much more skeptical about “free money” from expensive loans. The Prop 1 homeless bond barely squeaked by in March. This November, Prop 4 wants to make an end run around the general fund, to pay for already existing environmental programs. The Orange County Register’s Jon Coupal wonders if voters are ready to charge another $10 billion to the State’s credit card.
The amount of debt already assumed by state and local governments is easily in the hundreds of billions of dollars. In fact, if debt is defined as legally binding obligations that require future payment, this would include pension debt and promises for lifetime health benefits for public employees on top of more traditional debt such as general obligation bonds, revenue bonds, “certificates of participation,” and a host of other binding commitments. According to a 2022 analysis by the California Policy Center, this amount exceeds $1.5 trillion.
In a welcome development, it appears that voters are becoming increasingly suspicious of politicians who pretend debt is free money. The recent statewide bond measure to address homelessness, Proposition 1, barely passed despite proponents outspending opponents by 15,000 to 1.
As for the “climate” bond, this $10 billion proposal is a scaled-back version of the $15 billion bond introduced earlier in the legislative session. It’s no bargain. Now renamed the “Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024,” it would borrow money to cover the expense of running ongoing programs. If the programs are worthwhile, they should be funded in the budget instead of racking up interest charges for 30 years.
In a nutshell, this proposal is inconsistent with the principles of sound debt financing. Bond financing can be justified where the cost of a major infrastructure project – at either the state or local level – is greater than could be funded directly from general fund revenues without making significant reductions in service. But proponents have not made the case for why this grab bag of various projects couldn’t be financed from the general fund, other than the self-inflicted “budget crisis.”
Read the whole thing here.
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