I realize Californians are known for their rather hasty decision-making and Isla Vista residents are known for their “I-don’t-really-give-a-shit-about-shit, man” mindset, but voting is one of the few situations where the haste we are predisposed to can have especially negative, long-term effects on the rest of the state. Propositions 1B, C, D, E and 84 are five propositions that utilize a bond to fund the construction or program it suggests, and they do this with reckless disregard for the state’s fiscal predicament and for the voter’s future tax bill.
A bond is essentially an IOU from the government that uses California’s power to tax as collateral. The appeal of bonds to politicians is obvious: bonds provide funding for popular projects without unpopular tax increases. The appeal of bonds to voters is a little less obvious and a lot more retarded. California’s bond rating is already the highest in the nation and thus mandates that our state pay the highest interest rate in the nation. Voters have already passed $76 billion in bonds at the state level, of which $32 billion has not yet been able to be issued by the Treasurer due to California’s ever-worsening budget crisis. As another symptom of the state’s floundering attempt at direct democracy via checkbook, propositions backed by bonds have been so easy for politicians and interest groups to get passed for the same reasons that they have been such failures for the state’s fiscal prognosis. In avoiding the ugly legislative process that at the very least produces well-drafted legislation that is backed by accountable people, we get this crap.
It would be difficult to argue that propositions don’t suggest appealing projects: $20 billion for transportation improvements (1B), $10 billion to repair aging education facilities (1C), $4 billion for flood control and levee improvements, to name a few. However, funding them through the acquisition of debt is not a practical solution and not the only option California has to execute these projects. Debt financing through bonds is estimated to double the cost of public works projects like those Props 1B-E and 84 propose. This year alone, state and local governments will pay about $100 billion in interest on outstanding debts. $100 billion that could go to improvements to infrastructure like those we want right now, $100 billion that should have remained in the pockets of the taxpayers – about $330 extra if divided equally among the entire U.S. population. And that figure only represents the money wasted on interest payments, not accounting for the substantial costs to pay the Wall Street lawyers and financiers who handle the underwriting, analysis and other nuances of the bond industry.
The appeal of bonds to politicians isn’t limited to their short-term thinking and their ability to feign their protection of your tax dollars – how effectively bonds decrease the budget’s transparency is another big-time bonus. Because we aren’t paying the aforementioned Wall Street bondos to do nothing, they have concocted quite the complex bond deals for us, so complex in fact that the budget is rendered foreign-language status to any citizen lacking their Certified Public Accountant license. The helpful California government remedied that with a debt primer to educate citizens. However, the primer is 606 pages. If you were to read those 606 pages, you might be a loser and you might also find that there is an additional legal stipulation on bonds like those in this year’s ballot measures that state their repayment has priority over all other state spending. That means that regardless of any state emergency, or any other funding need that may arise in California, money must be diverted from that and first to the bond’s repayment, precisely according to terms and with interest.
California’s congested infrastructure is a source of frustration to all of us, but don’t let politicians exploit your frustration or your desire to support worthy projects. Because bonds are so attractive for elected officials, they will employ them in every initial attempt to solve a problem, but that does not mean that they are what is best for California or that they are the only way to solve each problem, only that they are the best for a politician’s voting record. Demand more from those you put in office, whatever party, by voting against Propositions 1B, 1C, 1D, 1E and 84.
Daily Nexus columnist Courtney Stevens gets mad props.