It is being reported in the San Francisco Chronicle that negotiations among the legislative leaders and Governor Schwarzenegger on an infrastructure bond measure for the November ballot are coming close to a compromise agreement.  The article says that there is a goal of trying to get something placed on the ballot before the heavy negotiations begin on the state’s budget.  This approaching self-imposed deadline seems to really be turning up the heat to ‘make a deal’ — and so I would caution negotiators that the only reason that there is any steam coming out of the hot kettle is because you have all created a convenient, but artificial deadline.  The actual deadline for placing something on the ballot is still months away.

If the pressure filled environment of this ‘pre-budget’ deadline results in the successful negotiation of a responsible borrowing plan to take to the voters, than this is alright.  But let’s remember that there is a 2/3 vote requirement to take a plan to the voters for a reason.  That is because the plan needs to not only get the support of the legislature’s liberal members (who never met a bond for anything that they didn’t wholeheartedly embrace), but also the chambers fiscally conservative members.  So if the pressure is getting too hot, and the deal is a bad one for California taxpayers, then turn down the burner, and you can always return to these negotiations after the budget is approved.  After all, it is important to remember that there is such a thing as a plan that is bad enough that it is preferable to have no measure on the November ballot.

Last December, when the last round of infrastructure bond negotiations were underway, State Senator Tom McClintock penned a piece for the FR, Bond Bombshell, where he reviewed what are, in his opinion, three key things to keep in mind when reviewing a final borrowing package:

"First, bonds should only be used for capital projects with a useful life at least equal to the debt service.  If our children are called upon 30 years from now to repay a bond, they should have the full benefit of the project built with that bond.  While Brown borrowed for lasting works like university buildings and state hospitals, our generation has squandered long term bonds to pay for day-to-day operating expenses, deferred maintenance and equipment that is obsolete long before the debt is repaid. 

Second, state bonds should be used only for projects that benefit the entire state.  Projects that exclusively benefit local communities should be paid for exclusively by those communities.  A state university, for example, accepts qualified students wherever they live in California – a local school does not.  In the past, state bonds were used for university facilities, while local bonds paid for local schools.  Today, state bond funds are dolled out in a grab-bag of local pork projects, literally robbing Piedmont to pay Pasadena.

Third, revenue bonds, not general obligation bonds, should be used for capital-intensive projects that provide direct services to distinct users.  A general obligation bond is repaid directly by the state’s taxpayers. A revenue bond is repaid by users of a particular project, such as a bridge financed by tolls paid by bridge users.  Today, general obligation bonds are used indiscriminately, including a pending $10 billion high speed rail bond that would force taxpayers who don’t use the train to pay for those who do."

The Chronicle article referenced funds in this package for ‘affordable housing.  This is liberal double-speak for taxpayer subsidies to provide housing for the poor – which while I have an issue with the program in general – it certainly has no place in an "Infrastructure" bond package.

Infrastructure means that as the free-market system works, there are certain types of basic support (like roads) that are needed to support the inevitable expansion of population and housing.  Certain ‘building blocks’ that it makes sense for all taxpayers to bear the burden of paying.  It does not mean that government should get into the actual business of building homes or apartments, or paying people to live in them.  Taking money from one California taxpayer to pay the rent or mortgage of another is socialism, and is morally wrong.

Here is a quote directly from the Chronicle piece:

A fourth bond of roughly $1.5 billion would promote urban housing development and the building of homes near transit stations. It also replenishes the nearly empty coffers of a variety of state housing programs for the homeless and poorer families.

If this bond isn’t a deal-killer for Republican negotiators, including our Republican Governor, we have a very, very serious problem.  That is $1,500,000,000,000.00 in round numbers – and does NOT include the interest to pay it back.

In the Spring, Assembly Republicans made a principled stand, calling for a modest pay-as-you-go provision on a go-forward basis, with the idea that we have such an infrastructure crisis in California now because there has not been an annual commitment by the legislature and Governor to funding these bread and butter projects.  Republican negotiators should not take this demand off of the table.

If a common-sense proposal can come out of a legislature that is dominated by Democrats who have no incentive to want to give the Governor the ‘political win’ of a common-sense infrastructure plan, great!  (See my thoughts on that here.)  But if the best we are looking at is a compromise that includes (among other largesse) this $1.5 billion socialism bond, then I say lets turn down the heat on the kettle, and wait.  Or better yet, let’s look towards qualifying via signature a real common sense plan.

This entry was posted on Wednesday, May 3rd, 2006 at 12:00 am and is filed under Blog Posts.