Posted on 01/24/2004 9:03:38 AM PST by SierraWasp
If voters reject bond, 'chaos' may not ensue
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Davis package would act as fallback if court upholds it
By Ed Mendel STAFF WRITER
January 24, 2004
SACRAMENTO – Gov. Arnold Schwarzenegger may have a problem as he launches a full-scale campaign to overcome voter skepticism about a $15 billion fiscal-recovery bond measure on the March 2 ballot.
It's not entirely clear that voter rejection of Proposition 57 will, as the governor has warned, result in "economic chaos," "Armageddon cuts" in services, or leave no choice but to "drastically increase taxes."
If the governor's bond is rejected, the state simply would continue with the budget signed by former Democratic Gov. Gray Davis before he was replaced by Schwarzenegger, a Republican, in an historic recall election last fall.
The current budget authorizes a $10.7 billion fiscal-recovery bond, which is being challenged by a lawsuit contending that it violates a provision in the state constitution requiring voter approval of long-term debt.
The governor's $15 billion bond proposal would avoid the risk that the courts could block the $10.7 billion bond issue, punching a huge hole in the budget. Schwarzenegger's bonds also would provide an additional $4 billion to ease the need for cuts or tax increases.
As he launched the campaign for the $15 billion bond measure at an event in Fresno this week, the governor was asked if it is accurate to warn of "Armageddon cuts" when some believe the $10.7 billion bond will withstand the legal challenge.
"But the court also hasn't declared it legal," Schwarzenegger said. "So we don't want to count on that. It is absolutely important that we don't count on magic. There is no magic."
Schwarzenegger said the only way to fix the "financial mess" he inherited is voter approval of the $15 billion bond measure and a companion balanced-budget measure, Proposition 58. Neither takes effect unless both pass.
"We've got to have this restructuring of a bond for inherited debt, refinancing it and then have this never-again spending limit so that the politicians will never again spend more money than they have," he said.
When Schwarzenegger took office last November, he inherited a budget signed three months earlier based on the unprecedented use of long-term bonds to close part of a huge budget gap.
After a deadlock in which Republicans blocked a tax increase and Democrats rejected deep spending cuts, the Legislature authorized two long-term bonds last year totaling $12.6 billion.
Both bonds were challenged by lawsuits contending that they violate a provision placed in the state constitution more than a century ago that requires voter approval of any long-term debt over $300,000.
A court blocked a $1.9 billion pension bond, and the state is appealing. But the larger $10.7 billion in deficit bonds has a different financing mechanism that some legal experts contend does not require voter approval.
The $10.7 billion in bonds would be paid off over five years bya half-cent of the existing sales tax. Because bond payments would be appropriated each year by the Legislature, the argument is that it's not long-term debt.
State Attorney General Bill Lockyer and a law firm specializing in bonds have issued opinions that the $10.7 billion in bonds are legally valid. Wall Street rating agency Moody's has a similar view.
"In our view, there remains a good chance of completing the legal hurdles and issuing the bonds by June 2004," Moody's said as it downgraded the state's bond rating last month.
Two polls released last week found that only a third of voters favor the governor's $15 billion bond measure. The campaign for Propositions 57 and 58 has five weeks to build support before the March 2 election.
As a fallback in case the ballot measures are rejected, the Schwarzenegger administration is seeking a court ruling that the $10.7 billion bond authorized by the state budget is legally valid.
The court validation of the $10.7 billion bond is opposed by the Pacific Legal Foundation on behalf of a Fullerton taxpayer group. Opponents have until the end of the month to file with the court.
A decision by the court can be appealed directly to the state Supreme Court. But no final decision on whether the $10.7 billion in bonds are legally valid is expected until after the March election.
"We want to see this get resolved sooner rather than later," said Arthur Mark, a Pacific Legal Foundation attorney. "That's our goal. We are not out here to delay things."
The Davis administration sought court validation for the $1.9 billion pension bond but not for the $10.7 billion fiscal-recovery bond, as if to show confidence in the legality of the special financing mechanism for the latter proposal.
Still, the Davis administration had a backup plan of its own in case the $10.7 billion bond was blocked when $14 billion worth of short-term loans come due in June.
The state purchased an expensive guarantee that would allow the largest of the short-term loans, $11 billion, to be extended if the state is unable to pay it off before the new fiscal year begins on July 1.
Will those user fees go UP or DOWN depending on whether the Bond is passed or no?
And the follow on question is :Exactly who gets punished depending on the various scenarios?
This is a revolting development and "rural folks" will get it in the neck/wallet, or other part of their anatomy, unless they revolt relentlessly, with legal representation (since they barely have elected representatives with any clout,due to "cows don't vote")!!!
Since confusion reigns, it's any good attorney's job to further confuse, then clarify on the client's terms.
McClintock's approach, which is irrelevant unless Arnold would consider it, to simply roll back the whole spending thing by 13% is evidently too simple. My idea is even simpler and has no chance at all... to simply go back to the 1998 budget and adopt it!!!
These simpler concepts would put the lie to the rip-off's these state agencies are perpetrating on our "rural folks," proving prima facia that they aren't needed!!!
They know dang good and well that city folks would organize immediately and revolt enmass to stop this as they have the votes that the "rural folks" lack because of "one person, one vote" in both houses of the State Legislature. If we had "one county, one vote" in the State Senate like we had prior to "cows don't vote," it would at least give "rural folks" a half a chance through elected reps!!!
Oh, and another thing...
The MetroMob are agravated that there are so many people out on their rural landscape ruining their "rural environment" (with they pronounce "rule") by building ANY rural homes to despoil their viewshed from I-5, or any river bottom, or even from a jet liner.
They may not be able to have our rural homes razed right now, but by golly they're gonna make sure that no more are ever built!!! People snear when they hear this prejudice articulated in public, but it's nonetheless the truth!!!
They figure they'll drive rural folks back into the congested, crime riddled cities with "smart growth," mass transit and "in-fill development!" They also figure we'll just "lye back and enjoy" this gang-rape job with fees!!!
Arnold doesn't get this and Pete's no help because he never got it, either!!! McClintock understood it, but he didn't have the star power of a personality to get elected. For that matter, Reagan never got it either, so maybe CA is truly ungovernable. The only real solution is to split the state into "Coastal California," and the rest of CA.
Starting with your neighborhood.
There are days I feel like I'm invisible.
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