Posted on 12/13/2005 9:11:13 PM PST by NormsRevenge
Word has it that Gov. Schwarzenegger is seriously considering a $100-billion infrastructure bond, causing many to ask, “Can we afford this?” The answer is an emphatic no, even though California’s fiscal picture is slightly better than it has been in recent years.
That can be attributed to a generally healthy economy funneling billions into state coffers. Structurally, however, California remains in poor condition as the state continues to pay for past mistakes such as spending sprees during the Davis era.
This locked California into obligations that were only sustainable with the tremendous tax-revenue growth of the late 1990s. Predictably, the influx dwindled after the dot-com bust but the obligations remained, leaving the state with massive annual deficits. Papering over these deficits with substantial borrowing was the second mistake.
Instead of making needed spending cuts to balance the budget, bonds were sold for fast cash. While Wall Street bailed California out, the state continued to sink in fiscal quicksand. By 2003, the $38 billion shortfall pushed the state to the brink of insolvency. Not surprisingly, creditors lowered the state’s bond rating to just above junk bonds. Though the credit rating has improved, it remains last among the 50 states. These poor ratings mean California must pay billions more in interest.
California now carries about $54 billion in outstanding debt. Debt service on that sum reached $3.9 billion in fiscal year 2005-2006 and is expected to hit $4.3 billion in fiscal year 2006-2007. That’s over a billion more than the entire Cal State University budget. By 2009, more than 6.8 percent of the general fund could be spent on debt repayment.
If the infrastructure bond is approved, total state debt will triple and annual debt service will take up a bigger slice of each year’s budget pie. And since the legislature has repeatedly shown no desire to cut expenditures, more debt service means an increase in taxes since every dollar borrowed must be repaid with more than a dollar of taxes.
Many would agree that spending on infrastructure is needed in California and the governor deserves credit for trying to fix our crumbling roads and schools. His proposed bond, however, is the wrong way to go. School and highway construction could produce tangible gains for the state’s economy if the money was spent wisely and efficiently, by no means a certainty. Adding to the state’s extensive debt load would be fiscally irresponsible and unfair to California taxpayers.
See also, similar opinion from Howard Jarvis Taxpayers Association:
CA: Massive Bond Threatens State's Financial Future
CaliforniaRepublic.org ^ | 11/29/05 | Jon Coupal - HJTA
Posted on 11/29/2005 8:38:00 PM PST by NormsRevenge
Schools and highway construction.
We already spend too much on schools and the roads suffered because fuel taxes were spent elswhere.
And now the state is already getting a windfall in the form of taxes from greatly increased fuel prices. (ba humbug!)
Ronald Reagan proved that the cheapest most bloodless way to beat leftism is via debt. I'm ok with $100 billion spent on hard assets because it means the socialists can't fund more left voting state workers, career students, and immigrants. If conservatives work hard to restore fiscal health it will only result in California turning into a Mexican version of France.
The spending will be tied, by legislation, to prevailing wage which can only be described as stupid. 40% more costly than open, competitive bidding. Borrow $100B, get $60B in improvements and service tha debt at an uberhigh rate on the full $100B.
That's smart, Austrian governance. Subject the electorate to legal usury while delivering millions to the union, political, campaign coffers.
Subject the electorate to legal usury while delivering millions to the union, political, campaign coffers.
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You don't hear Wall St. and bond sellers complaining, do you? ;-)
If conservatives work hard to restore fiscal health it will only result in California turning into a Mexican version of France.
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If we actually had leadership that were really conservatives, there might be a chance, but what we have today are Vichy Republicans (Moderates).
One of the latter was the recent campaign's biggest contributor and #2 is closely connected.
Surprise. Probably not.
I was gonna ask whose side they contributed to, but no matter the outcome of the election, they likely stood to benefit regardless what props won or loss or what bonds get floated in the near future.
Another winning expression!!! You RULE!!!
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