Bonds Could Put State in Deep Debt

October 13, 2008 8:52:48 PM PDT
There will be a number of statewide bond measures on the ballot next month, bonds to raise money for well intentioned projects, but they'll put California even deeper in debt.

State governments typically finance big ticket things like road projects with bonds because the loan can be re-paid in as much as 30 years, much like a mortgage.

Today, California is paying off roughly $144 billon in voter-approved bonds.

The general rule of thumb is, for every dollar the state borrows, it takes a dollar of taxpayer money to pay it back, plus another dollar in interest.

California ranks tenth nationally in debt burden per capita with each resident paying nearly $1,700 in taxes a year to pay off bonds.

Next month, voters will be asked to approve more debt: $10 billion to jump-start high-speed rail construction from Northern to Southern California, $5 billion to finance rebates for alternative fuel vehicles, and nearly $1 billion for capital improvements to the state's Children's Hospitals.

"One of the problems is the share of the budget that must be diverted from police, fire and schools, and all the rest, just to service the debt," says Lew Uhler, from the National Tax Limitation Committee.

When Californians feel the pinch, they historically vote with their wallets. When the economy is strong, voters approve bonds 72 percent of the time. During the early 90's recession, less than a quarter passed, which could foretell next month.

"I'm assuming the voters are not going to uniformly be supportive of all the bonds that they will be picking and choosing. The question in my mind is, "Will any of them stand a chance of passage?" says Mark DiCamillo, a field poll director.

That worries children's hospitals which desperately need money to expand in advance of a projected 35 percent increase in pediatric patients over the next 20 years.

"We have to build now to have the beds, the physicians and the people necessary to treat the most seriously ill and injured children," says Diane Dooley, from California's Children's Hospital Association.

Almost every year, lawmakers fight over where to cut the state budget, but first, they always have to pay the bonded debt.


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