California’s state spending this year is more than $297 billion, nearly double what it spent 11 years ago. Even after adjusting for inflation, it’s clear that California is addicted to spending. No one would dispute that public services have improved significantly over the years.
Given Sacramento’s current politics, there’s not much voters can do about this ongoing fiscal profligacy, but they do have a say at the ballot box when it comes to bonds. Such taxpayer-backed debt has traditionally been used to pay for long-term infrastructure projects, but lawmakers often rely on it to fund questionable projects.
California spends $8 billion a year servicing bond debt, according to the Legislative Analysis Service. The report notes that such spending comes from borrowed money, which would cost about $1.50 for every dollar paid over, say, 20 years. Supporters of the national debt policy treat it like free money, given that it is not a direct tax increase because the national debt is repaid from the general fund. But they crowd out other spending and create pressure for new taxes. Municipal bonds directly drive up taxes.
California voters will consider several state bond measures on the November ballot. Proposition 2 would issue $10 billion in bonds to fund the construction of public schools and community colleges. Proposition 4 would issue $10 billion in bonds to pay for parks, water, and environmental projects. LAO estimates that both measures would increase the state’s bond payments by nearly $1 billion annually.
Proposition 5 would not issue any bonds, but it would lower the voting threshold for local housing bond approval from a supermajority to 55 percent, allowing local agencies to borrow money earlier and more often. Some commentators argue that bonds fund important projects, even if they cost a lot of money. We came to quite different conclusions.
Bond proponents typically tout the bond’s key elements of congestion relief, water supply, and energy production. But these projects are often window dressing designed to win over voters who want to build roads and other useful infrastructure. But a closer look at the fine print reveals that bonds are bloated with unnecessary and special interest-driven projects. Big-ticket items often get stuck for decades.
Consider suggestion 4. The editorial board said that while the measure promises countless water quality improvements, it is actually a “giant bait bag for climate action” and that “traditional water infrastructure projects receive little funding.” “It’s not being used,” he claimed. As for Proposition 2, the state already spends more than 40 percent of its budget on public schools. As the columns on these pages point out, borrowing more money for schools only props up a broken system. The latter point is important.
By providing easy money to public agencies, they don’t have to make hard choices or reform programs to get higher returns. The very existence of ties suggests that legislators are reluctant to do what every individual must do: choose between competing priorities.
California’s huge budget is filled with unnecessary spending. Despite some cuts, California is still spending $45 billion over eight years on climate action. It is difficult to see the urgent need for new climate bonds. Local governments similarly need to learn how to live within their already deep budgets. Voters should help their legislators break their spending addiction and vote “no” on state and local bonds.
