California Democrat Backs Bill to Hasten Public Work Bond Sales
Noreen Evans, the chairwoman of the budget committee, introduced legislation to speed issuance of general obligation bonds approved by voters but not yet funded by the Legislature. California has $63 billion of general obligations outstanding and voter authority to sell $47.5 billion more, according to the Treasurer.
California, whose 12.4 percent unemployment rate eclipses the national jobless rate of 9.7 percent, is among states most hurt by the worst recession since the 1930s. The disappearance of jobs has weighed on tax collections and torn a $20 billion deficit in the budget through June 2011.
The aim of the bill is to stoke employment and “kick-start the economy so that we can bring the states revenue levels back to a healthy level,” Evans, of Santa Rosa, said in an interview. Issues lacking funding may be supported by new taxes or fees drawn from the projects they finance, to avoid burdening the cash-strapped government, she said.
California is already the largest borrower in the U.S. municipal debt market, with $20 billion of new bonds issued last year. Next week, the state plans to raise $2 billion for public works projects in its first sale since November.
The sale comes after lawmakers passed measures to chip away at the budget gap and give officials greater flexibility to keep the state from running out of cash if a new spending plan isnt in place before the fiscal year begins in July.
Outstanding Bonds
California pays a penalty to borrow money because of chronic shortfalls that have left it with the lowest credit rating of any U.S. state. A tax-exempt bond maturing in 2039 traded in blocks of more than $1 million for an average of 5.46 percent on March 3, 1.01 percentage points more than top-rated municipal bonds, as measured by Municipal Market Advisors.
Assemblywoman Diane Harkey, a Dana Point Republican on the budget committee, applauded Evans for seeking ways to ease the strains that debt is placing on the budget, but said any moves to raise taxes or fees for the projects could run into opposition.
“Anything thats helpful is a good idea, anything that reduces our future debt load,” Harkey said. “But finding new fees or taxes for projects that should be paid for with our current taxes will be a tough sell.”
Fees can be raised with a majority vote. Tax increases require a two-thirds majority, a threshold requiring Republican support. Any bill would also need the approval of Republican Governor Arnold Schwarzenegger to become law.
Evans said her committee may hold a hearing on the bill later this month.