CA: Taxpayer group moves to block state's billion dollar bond sale (Pacific Legal)

SACRAMENTO (AP) - Gov. Arnold Schwarzenegger's plan to sell $929 million in bonds to cover the state's pension obligation this year violates constitutional mandates that voters approve all big loans, according to a lawsuit filed Thursday.

The governor and the Legislature included the bonds in this year's budget as one of several loans the state took out to help close a funding gap that was once estimated at $17 billion.

The move was made even though a similar pension obligation bond proposed last year by former Gov. Gray Davis was struck down by a state judge as unconstitutional.

Attorney Harold Johnson of the Pacific Legal Foundation, who filed the challenge on behalf of an Orange County anti-tax group, said the legal issues this year are the same as last year.

"The state constitution requires that all major borrowing be approved by the voters," Johnson said. "There are no exceptions."

At issue is Article 15 of the constitution that prevents the state from borrowing more than $300,000 without voter approval, he said.

The administration has argued that the constitutional ban is not in play. It claims the bonds are tied to reforms of the pension system that will save nearly $3 billion over 20 years. Savings from the reforms will more than pay off the bonds, Schwarzenegger has said, and thus there is no debt to the general fund.

H.D. Palmer, spokesman for the governor's finance department, said Thursday that administration officials remain confident that the bonds will eventually be found legal.

If the judge rules against the administration, the loss of the bonds will complicate an already difficult budget picture.

The nonpartisan Legislative Analyst's office reported last month that the state is facing a $6.7 billion shortfall in the 2005-2006 fiscal year. The analysis included the $929 million in bonds, which means the deficit next year will grow to more than $7.6 billion without that option.

Palmer said the governor and staff are assembling next year's budget plan, due to be delivered to the Legislature by Jan. 10. He said they are reviewing all assumptions that were part of the current year's spending plan including savings from the bonds.

Thomas Babcock, a small business owner and president of the Fullerton Association of Concerned Taxpayers, which brought the lawsuit, said the solution to California's budget problems is not more borrowing.

"Lawmakers are operating California on credit cards, and leaving our kids to pay the bill at higher interest rates," said Babcock, whose group is based in Orange County.

"Californians are already overtaxed, but the state is still spending more than it takes in," he said in a statement. "The answer is not to borrow more and put it off for the next generation. It's to make the hard choices about where to cut spending. If lawmakers don't understand that, the people do."

Key to resolving the issue is whether the judge agrees with the governor that real savings will be achieved through the pension reforms, said Jon Coupal, executive director of the Howard Jarvis Taxpayers Association, whose group sued and won last year on the Davis bonds.

In an agreement reached with the state's largest employee union last summer, the state would create a two-tiered pension system where new employees would not become eligible to join the retirement plan for two years, saving the state billions in benefit payments.

The agreement with the union, however, also protects employees from losing any of their benefits. New workers would pay a portion of their salaries into a separate tax-free account and after two years would be eligible to roll that money over into the state retirement system. They would also have the option of cashing out and starting over in the state system.

Thus, some critics have called the pension deal just another gimmick, where the savings from the reforms are based on the hope that new employees will not take full advantage of all their retirement benefits.

Officials at the California Public Employees Retirement System, agree with the governor and the proposed two-tiered plan will save money.

Haven't they read Proposition 58?

If its unconstitutional then the politicians would have to persuade the public to charge the state's debt to a credit card. A statewide vote would be a good idea. If we're going to float a bond sale, we might as well hold a vote on it.

They're part of the McClintock kookified wing. He's still upset over Prop 58 so this isn't a surprise.

It's a way for them to get fat and happy on right-winger donations, stir up trouble for Arnold, get some press and for the taxpayers of California to get screwed. As usual!

We're sick to death of being told by lawsuits and courts that the will of the voters means diddly squat in California! If it's not the sore losers on the left doing it, it's the sore losers on the right!

He's still upset over Prop 58 so this isn't a surprise.

As he should be. Arnold is violating his promise to cut up the credit cards by borrowing to cover consinuing expenses.

We're sick to death of being told by lawsuits and courts that the will of the voters means diddly squat in California!

The will of the voters was that Arnold would borrow ONE TIME to cover the State's cash flow bind and then "cut up the credit card." He is breaking that promise.

the will of the voters means diddly squat """

I don't follow what you're saying. According to the article, the pension bonds are being challenged because they haven't been submitted to voters for approval. In other words, the "will of voters" is being ignored by these pension bonds. Why do you support not giving the voters a say? And didn't Prop 58 -- which you claim to support -- outlaw future bond borrowing? So why do you support these bonds, if you think Prop 58 was great? And why do you castigate taxpayer groups who would challenge these bonds so that they can be put to a vote and the "will of the people" can be consulted? Maybe I didn't understand your post, or maybe you're just not a clear thinker.

the will of the voters means diddly squat """

And didn't Prop 58 -- which you claim to support -- outlaw future bond borrowing? So why do you support these bonds, if you think Prop 58 was great? And why do you castigate taxpayer groups who would challenge these bonds so that they can be put to a vote and the "will of the people" can be consulted? Maybe I didn't understand your post, or maybe you're just not a clear thinker.

You and your small clan of Tom bashers can take a flying leap you know where..

Words like fanatics, kooks , kookified wing of the CA GOP, etc are pretty much the extent of your vocabulary when anything Tom related gets posted.

Maybe you would be more comfortable bashing conservatives over at DU, seeing as the only news you seem to junk is anything about Tom or posted by someone who supports him and conservatism.

Oh, and by the way aRnie seems to be stirring up quite a bit of trouble all by his lonesome and his GReeno agenda.

Bump what you said.
I get sick of the surrender monkeys popping up everytime there's another 'California-nears-bankruptcy' thread and blaming Arnold's helplessness on McClintock.

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