California’s dishonest bonds
In California we have a variety of bond types, but for purposes of this note, we can talk about just two types — local and state-wide. Local bonds are presented honestly. A voter who approves a local bond is also explicitly approving a special tax to raise money to repay the bond. The voter knows who is going to pay for the bond, roughly how much they are going to pay and over what period of time.
State bonds, on the other hand, are simply ways for the politicians to get around the requirement that the state balance its budget. Here’s how the scam works: the politicians figure out what’s most important to the voters (schools, road, prisons, whatever) and twice a year place multi-billion dollar bonds on the ballot, supposedly to raise money to pay for these things. But, unlike local bonds, state bonds are not tied to any revenue source. They are repaid (with huge amounts of interest, of course) out of general revenues.
For example, the most recent November ballot included some $50 billion in bonds, all sold as a package with the advertising slogan “buy now, pay over time, with no new taxes.” It’s a slick and appealing campaign and every one of the bonds passed. Heck, even Bookworm voted for one of them. But does anyone really believe that in future years there will be $100 billion of unneeded general fund dollars lying around just waiting to be used to pay off these bonds and their interest? Of course not!
At some point down the line when the bill comes due for all these bonds the state will have another “fiscal crisis” and the money will have to be raised, either by cutting other programs, raising taxes or (most likely) passing another round of even bigger bonds.
I don’t know where this all ends, any more than I know where the massive federal debt spiral or the massive trade deficit increases end, but I can’t imagine it ending well. Understand, I am not against bonds. I’ve been one of the leaders in the successful efforts to pass two school bonds in my community over the years. But I am in favor of telling the voters the truth. If the state is going to go into debt, it should say so and the voters should approve a special tax to repay that debt, just as they do at the local level. Not only is this more honest, it will avoid the raiding of the general fund and the periodic fiscal crises that are the inevitable outcome of the current dishonest system.
