2018 CA Primary Election - Proposition 68
Time for an examination of the ballot measures we will vote on in the primary election here in California on June 5, 2018. First up is Proposition 68. The Secretary of State's website has a page with detailed information on this measure. This summary is from that page:
"Authorizes $4 billion in general obligation bonds for: parks, natural resources protection, climate adaptation, water quality and supply, and flood protection. Fiscal Impact: Increased state bond repayment costs averaging $200 million annually over 40 years. Local government savings for natural resources-related projects, likely averaging several tens of millions of dollars annually over the next few decades."
The Los Angeles Times Editorial Board has recommended a vote of Yes on Prop 68. I disagree. I will vote No on Prop 68. Not because I'm opposed to spending money on the projects outlined in the proposition. They are worthwhile projects and should go forward (for the most part).
Why will I vote no? A number of reasons, but I'll start with a few letters. AA-, Aa3 and AA-. Those are the bond ratings for California's general obligation bonds by Fitch, Moody's and S&P; respectively. They represent the 4th best rating in each system, and are just below the average rating of all state's bonds.
Here's a number. Bloomberg dot com published a story this past March about the state's current bond situation. At that time there were over $30 billion in unsold bonds. The Times editorial points out very clearly that California is spending (and will continue to spend) 6% or less of the state's general revenues on bond interest.
The May budget projections show estimated revenues of $129.8 billion. 6% of that amount is $7.8 billion. Estimates of the cost of the interest expense of this bond issue over its 40 year life is $2.53 billion. That budget projection included adding over $5 billion into the state's "contingency" fund, which would bring that reserve to nearly $13.5 billion.
The outstanding bond debt isn't the state's only financial problem. There are unfunded pension liabilities of over $220 billion for state employees. When you add in local unfunded pension liabilities the total rises to over $330 billion.
In May of 2016 I wrote a blog about how the CA budget is far too dependent on personal income tax revenues. The situation now is even more precarious given the changes regarding itemized deductions in the 2017 Tax Cuts and Jobs Act. The deduction for state income and property taxes is now limited to $10,000. The workarounds being proposed in CA and NY aren't going to work, as pointed out in this Forbes piece.
I believe that the state legislature should pick and choose the most urgent of the projects listed in Prop 68, fund them from the budget surplus and not take on additional debt at a time when our state's fiscal stability is in so much peril.
Vote No on Prop 68.
"Authorizes $4 billion in general obligation bonds for: parks, natural resources protection, climate adaptation, water quality and supply, and flood protection. Fiscal Impact: Increased state bond repayment costs averaging $200 million annually over 40 years. Local government savings for natural resources-related projects, likely averaging several tens of millions of dollars annually over the next few decades."
The Los Angeles Times Editorial Board has recommended a vote of Yes on Prop 68. I disagree. I will vote No on Prop 68. Not because I'm opposed to spending money on the projects outlined in the proposition. They are worthwhile projects and should go forward (for the most part).
Why will I vote no? A number of reasons, but I'll start with a few letters. AA-, Aa3 and AA-. Those are the bond ratings for California's general obligation bonds by Fitch, Moody's and S&P; respectively. They represent the 4th best rating in each system, and are just below the average rating of all state's bonds.
Here's a number. Bloomberg dot com published a story this past March about the state's current bond situation. At that time there were over $30 billion in unsold bonds. The Times editorial points out very clearly that California is spending (and will continue to spend) 6% or less of the state's general revenues on bond interest.
The May budget projections show estimated revenues of $129.8 billion. 6% of that amount is $7.8 billion. Estimates of the cost of the interest expense of this bond issue over its 40 year life is $2.53 billion. That budget projection included adding over $5 billion into the state's "contingency" fund, which would bring that reserve to nearly $13.5 billion.
The outstanding bond debt isn't the state's only financial problem. There are unfunded pension liabilities of over $220 billion for state employees. When you add in local unfunded pension liabilities the total rises to over $330 billion.
In May of 2016 I wrote a blog about how the CA budget is far too dependent on personal income tax revenues. The situation now is even more precarious given the changes regarding itemized deductions in the 2017 Tax Cuts and Jobs Act. The deduction for state income and property taxes is now limited to $10,000. The workarounds being proposed in CA and NY aren't going to work, as pointed out in this Forbes piece.
I believe that the state legislature should pick and choose the most urgent of the projects listed in Prop 68, fund them from the budget surplus and not take on additional debt at a time when our state's fiscal stability is in so much peril.
Vote No on Prop 68.
posted by me at 8:42 PM
<< Home