A sampling of answers about state's debt and governor's bond plan
The Associated Press
http://www.bakersfield.com/state_wire/story/5811711p-5827880c.html
Q: What is the governor proposing?
A: Gov. Arnold Schwarzenegger is urging lawmakers to put $68 billion in general obligation bond measures on the ballot to help pay for $222.6 billion in transportation, flood control, school and certain other public works projects. The governor also is asking lawmakers to authorize the sale of another $800 million in lease revenue bonds, which don't require voter approval and sell at higher interest rates than general obligation bonds. The general obligation bond measures would be placed on ballots between 2006 and 2014.
Q: What is a general obligation bond?
A: General obligation bonds are a traditional way of paying for public works projects. Sale of the bonds needs voter approval and paying them off, with interest, is the first obligation of the state treasury.
Q: Why can't the state pay for Schwarzenegger's program without borrowing?
A: A number of legislators support using more of a pay-as-you-go approach to financing public works projects, but the sheer size of the governor's plan would make it difficult to finance just by using year-to-year state revenue.
Q: How much bond debt does the state have now?
A: As of Nov. 1, the state had nearly $53 billion in bond debt. Another $37.2 billion in bonds haven't been sold yet because the money hasn't been needed for the programs the bonds will finance.
Q: How much would Schwarzenegger's plan cost the state in interest?
A: It depends on the interest rate the state has to pay to bond buyers. For example, a 4.6 percent interest rate paid over 30 years would cost taxpayers about 85 cents in interest for every dollar in bonds sold, according to the legislative analyst's office.
Q: How good is the state's credit rating?
A: Not good, although there have been improvements in recent years. California is currently tied with Louisiana as the state with the worst ratings. That means it's paying about two-tenths of a percentage point more in interest on its bonds than states with the highest ratings. Steve Zimmermann, an official with Standard & Poor's, one of the nation's major bond rating houses, says the governor's plan shouldn't result in lower ratings and suggests California's ratings would improve if the state could eliminate persistent budget deficits.
Q: Would the governor's plan freeze out other bond proposals?
A: Possibly. Schwarzenegger also is urging lawmakers to approve a constitutional amendment that would limit annual debt service payments to no more than 6 percent of the state's general fund. Administration officials predict that debt service payments, now at 4.5 percent of general fund revenue, would climb to 5.91 percent in 2014 under the governor's plan before declining.
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Sources: Legislative analyst's office; governor's office; Standard & Poor's.
BOHICA.
San Diego County passed specific sales tax increases for additional jails and highway relief around 1988-1990. I worked for the County of SD at that time, and BEFORE the taxes were approved by the voters, the various departments had already divvied up the proceeds. True, every nickel collected from the additional 1 cent sales tax increase went directly into prisons and transportation. However, the Board of Supervisors merely reallocated funds from the "General Fund" that used to be spent on transpiration and prisons, so the net increase in funding was much less than the sales taxes collected, and every other department (including social services) gained from the tax increase as well. In other words, the "targeted" tax increase was no different than any other tax increase, i.e. the politicians spent it on their favored programs, not those for which the tax was passed.
And, NO DEMOCRAT POLITICIAN favors additional or improved roads, except in the politically influential SF Bay area, which gets $0.70 of every tax dollar back (in contrast to about $0.40 per $1 in San Diego and Orange Counties). The only "transportation" roadways which will be improved will be those which carry buses or trolleys.
San Diego County's Transportation management agency (SANDAG, and probably other counties work the same way as well) spends $0.85 of every transportation tax dollar on MASS TRANSIT, including the auto gas taxes and DMV auto tag fees which account for most of the transportation revenue. SANDAG spends $0.15 of every dollar on highway maintenance. There has been NO new highways built in San Diego County in over 30 years. [b]The fact that there is no money for new highways or additional highway lanes in California is by design. SANDAG's latest released 40 year plan continues that policy, i.e. no new publicly funded highways or extensions. The goal is to get Californians to voluntarily relinquish their right to drive an automobile, and to play for the mass transit alternatives using the California auto drivers.
Bottom line: Arnie can plan all he wants. The only thing he will succeed in doing, however, is raising the funds. The Democrats will authorize any and every means to raise taxes and increase funds coming to the public treasury. Once they have the money, they will do whatever the heck they want with the new money, and it won't involve building the public infrastructure Californians actually require.
The Governor is either woefully ignorant of the reality of California leftist politics, or has been wholly captured by the Democrat-left. Based on who he has just hired as his advisers and Chief of Staff (top Grey Davis Democrats), I'd say Arnold has just become a born-again, free-spending Democrat.
SFS