Bond debt threatens to drown state’s finances

For decades, it’s been the California Legislature’s practice to ask voters every few years to approve a statewide education bond issue, providing funds to expand and rehab local schools, community colleges and state universities.

In fact, voters have approved 21 of 24 state school bond issues since 1949, according to one history on the matter.
And since 1998, state bonds have paid for a third of the approximately $100 billion in bond money spent on local schools, with the remainder coming from local bond issues repaid from property taxes.

K-12 and community college districts have placed 106 new bond issues totaling more than $14 billion on the Nov. 6 ballot, but even if they pass, state matching money will run out in a year or two.

Education groups want the Legislature to place another statewide bond issue on the 2014 ballot, but gritty fiscal reality is biting back hard.

Dozens of bond issues for all sorts of projects, and to finance state budget deficits, have given California one of the nation’s highest ratios of indebtedness — twice the national state median — and will drive “bond service” to nearly 9 percent of the state’s budget next year.

With more than $86 billion in general obligation debt outstanding and another $40 billion authorized but unissued, state officials have been slowing the marketing of new debt lest bond service gobble even more of a state budget already facing wide and chronic deficits.

Debt service — repaying principal and interest on outstanding bonds — will cost the state’s general fund budget $5.25 billion during the current fiscal year and is projected to rise to $7.54 billion in 2013-14, according to a new “debt affordability report” from Treasurer Bill Lockyer.

State legislators are already warning school advocates that there may not be the political will to put California more deeply into debt, according to an article in Cabinet Report, an online news service devoted to California education issues.

“To keep taking applications [for bond money] on the assumption that there’s going to be a bond, it’s like ignoring the reality of the state’s financial situation,” state Sen. Loni Hancock, D-Berkeley, a member of the State Allocation Board that awards school construction grants, told Cabinet Report.

The irony is that the Legislature itself fully engaged in the orgy of bond issues during the past couple of decades that produced this mountain of debt, along with some self-serving initiative promoters.

Voters approved bonds for stem-cell research, to cover budget deficits, to build highways (rather than raise gas taxes) and for myriad other purposes.

Just this year, the Legislature approved spending nearly $10 billion in bond money on a new bullet train system.
Schools or bullet train? When push comes to shove, that may be California’s choice.

Dan Walters covers state politics for the Sacramento Bee.

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