Thursday, October 9, 2008
IN MY OPINION (Column)
More Debt? You’ve Got to Be Kidding!
By JON COUPAL
Even in the best of times, the three major bond proposals on the November ballot would merit a thumbs down. Propositions 1A, 3, and 10 would put taxpayers another $16 billion in debt to fund some dubious projects.
Proposition 1A spends $10 billion as a down payment on a massive bullet train project. Promoters, which includes the company responsible for Boston’s infamous “Big Dig” disaster, claim the project can be completed for about $50 billion. However, a just released study by transportations experts, which includes a former president of the High Speed Rail Association and a former member of the Amtrak Reform Council, show that actual costs could easily exceed $80 billion.
The study also shows that backers have radically exaggerated the potential ridership and that the travel time between San Francisco and Los Angeles would be much greater than advertised. Study authors actually support sound high speed rail projects, but they reject the Proposition 1A plan as a fantasy that could cost taxpayers additional billions of dollars for a much diminished outcome.
The California High Speed Rail Proposal: A Due Diligence Report was sponsored by the Howard Jarvis Taxpayers Foundation, the Reason Foundation and Citizens Against Government waste and can be viewed at www.hjta.org.
Promoters of Proposition 3 know the best way to gain support for a spending measure is connect it to children. Since its purported purpose is to expand childrens’ hospitals, its passage might seem a certainty. However, the primary beneficiaries of this billion dollar bond will be five private hospitals. Is anyone surprised that the campaign that placed Proposition 3 on the ballot was paid for by these private interests? After all, it is a great return on investment — a few million dollars upfront to collect signatures in return for hundreds of millions of taxpayers’ dollars later.
Proposition 10 is a clever scheme. It is designed to ride on the hysteria over global warming by claiming to reduce emissions of greenhouse gases. However, it is really a $5 billion subsidy to those who buy vehicles that use alternative fuels, especially natural gas. A company owned by billionaire T. Boon Pickens, a major supplier of natural gas, paid to gather the signatures to put Proposition 10 before voters. Without guaranteeing any net reduction in emissions, Proposition 10 will help to make a very rich man even richer.
Yes, in the best of times, these measures would leave taxpayers holding their noses. However, at a time when the state and nation are in the midst of fiscal crisis, the propositions move into a category under the heading of “You’ve got to be kidding!” California is already massively in debt — we approved another $42 billion in bonds just two years ago. These new bonds, would add another $16 billion to a debt that must be repaid from our state general fund, which has an ongoing structural deficit. Currently, more than 5% of budget goes to retire bond debt, money that is then unavailable for important state services like education, healthcare, transportation and law enforcement.
But it gets even worse. California is suffering 7.7% unemployment and is setting records for home foreclosures. The State Department of Finance says that California has experienced a net out-migration of citizens over the last decade as taxpayers and jobs are moving to other states and even other countries. Our state is already regarded as a bad credit risk and with the failure of some of our nation’s largest financial institutions the cost of borrowing is going even higher.
Usually, government bonds cost taxpayers double their face value when interest over 30 years is added. However, with the high cost of borrowing and our state’s poor credit rating, taxpayers could be on the hook for 220% or 240% of bond face value, rates that might make Tony Soprano look like a compassionate lender.
Even without going further into debt, State Treasurer Bill Lockyer warned the state will be hard pressed to pay its bills. Our state’s credit situation is so bad the governor has requested a $7 billion bailout from the federal government.
Propositions 1A, 3, and 10 mean more debt, and California needs more debt like a drowning man needs a brick.
Copyright 2008, Metropolitan News Company