California’s state spending this year tops $297 billion, which is approximately double the amount spent 11 years ago. Even adjusted for inflation, it’s clear that California has a spending addiction. No one would argue that public services have improved significantly over the years.
There’s not much voters can do about such ongoing fiscal profligacy given the current politics of Sacramento, but they do have a say at the ballot box over bonds. Such taxpayer-backed debt traditionally is used to pay for long-term infrastructure projects, but lawmakers often rely on them to fund questionable projects.
According to the Legislative Analyst’s Office, California spends $8 billion a year servicing its bond debt. Because such spending comes from borrowed money, it notes that each dollar costs about $1.50 in repayment over, say, a 20-year term. Backers of state bond measures treat this like free money given that state bonds do not directly raise taxes, as they are paid back from the general fund. But they crowd out other spending and create pressure for new taxes. Local bonds directly boost taxes.
On the November ballot, California voters will consider some state bond measures. Proposition 2 would float $10 billion in bonds to finance public-school and community college construction. Proposition 4 would float $10 billion in bonds to pay for parks, water and environmental projects. The LAO figures that both measures would add nearly $1 billion annually to the state’s bond payments.
Proposition 5 doesn’t float any bonds, but it would reduce the vote threshold from a supermajority to 55 percent for approving local housing bonds – thus assuring local agencies will borrow money early and often. Some commentators argue that the bonds fund important projects – even if they are terribly costly. We come to a rather different conclusion.
Typically, bond supporters will tout the important congestion-fighting, water-providing, energy-creating elements of a bond. But those projects often are window dressing designed to win over voters who want to see the construction of roads and other useful infrastructure. But look into the fine print and the bonds are larded up with unnecessary or special-interest-driven projects. Often, the big-ticket items get bogged down for decades.
Consider Proposition 4. This Editorial Board argued that the measure promises myriad water-quality fixes but is actually “a giant feedbag of climate pork” and that “little money goes to traditional water-infrastructure projects.” Regarding Proposition 2, the state already spends more than 40 percent of its budget on public schools. As a column in these pages noted, borrowing more money for schools only props up a broken system. That latter point is crucial.
Providing easy money to public agencies relieves them of the need to make hard choices or to reform programs to get a better bang for the buck. The very existence of a bond suggests that lawmakers have been unwilling to do what every individual has to do: choose between conflicting priorities.
California’s massive budget is filled with unnecessary spending. Despite some cuts, California still is spending $45 billion over eight years on climate programs. It’s hard to understand the pressing need for another climate bond. Local governments likewise need to learn to live within their already generous budgets. Voters should help break lawmakers of their spending addiction and vote “no” on any state or local bond.
