Will "bond fatigue" sink RM4 and the wave of new taxes on November statewide ballot?
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The potential new bond indebtedness appearing on the November ballot may surpass $80bn --will CA voters say "enough is enough"? Ben Christopher at CalMatters explores why voters may say no to RM4 and other super expensive new tax measures.
With lawmakers considering a bevy of bond measures in 2024 that could total as much as $80 billion — more potential debt than the state has put on the ballot since at least 1980, even adjusting for inflation — the sheer scale of the state’s potential borrowing plans could test the upper limit of what voters are willing to stomach.
“It’s conventional wisdom that if you put a bunch of bond proposals in front of voters, they get overwhelmed and are like ‘I don’t want to pay all of this money, so I don’t want to pay any of this money,’” said Louis Mirante of the Bay Area Council.
“There is only so much capacity that the state has for debt,” said Ray Pearl, executive director of the California Housing Consortium, which lobbies for more affordable housing construction in the Legislature. “And politically, for the governor and the Legislature, there’s only so much they are willing to take on.”
Whatever the borrowing cap, it’s as much a question of political arithmetic as it is budget math. There is no legal limit on how much debt voters can approve in a given election. Budget analysts keep their eye on different metrics comparing the state’s debt payments to its discretionary cash cushion, its overall budget or the total size of the California economy. Projections of future interest rates and future budget surpluses and deficits also get considered.
One measure — the ratio of the state’s annual debt payments to the budget’s discretionary “general” fund — currently sits at roughly 3.5%, depending on how you measure it.
There are clear exceptions. Sometimes the voting public, presented with particularly eye-popping sums, gets into a tight-fisted mood.
The November 1990 election was the most bond-happy in recent history, with 14 borrowing proposals in total. Voters batted down 12 of them.
A more recent example of bond failure: The March primary election in 2020, when voters rejected what would have been the largest school bond in California history, a $15 billion IOU. One of the possible post-election explanations offered at the time: Voters, saddled with a bumper crop of borrowing measures at the local level, succumbed to “bond fatigue.”
Now, with 2024 approaching, some housing advocates worry the electorate is susceptible to the same condition.
As a matter of fiscal reality, the two major housing proposals — the affordable housing measure and the Newsom-backed mental health bond — are dipping from the same pool of fiscal overhead and electorate will.
Politically, California voter frustration with unaffordable housing and homelessness could cut one of two ways.
Voters who believe public dollars are poorly spent may not welcome proposals to throw more money at the problem.
Earlier this year, lawmakers directed the state auditor’s office to dig into how the state’s homelessness funds are actually being spent. A 2020 audit from the same office called for an “overhaul” of California’s “cumbersome” affordable housing funding process, after the state allowed $2.7 billion in bonds to expire untapped.
Read the whole thing here.
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