|
By Jon Coupal
In addition to last week’s record-busting $310 billion dollar budget, the legislature is also advancing a $15 billion “Climate Bond” to appear on the ballot sometime in 2024. This “climate bond” should be viewed with a great deal of skepticism by California voters for several reasons.
First, why is a bond – any bond – necessary? Despite a drop off in state tax collections, California continues to produce massive amounts of tax revenue from the highest-in-the-nation income tax rate, highest state sales tax rate and highest gas tax. Taking on further debt makes little sense.
Moreover, this proposal is inconsistent with the principles of sound debt financing. Bond financing can be justified where the cost of a major infrastructure project – at either the state or local level – is greater than could be funded directly from general fund revenues without making significant reductions in service. But proponents have not made the case for why this grab bag of various projects couldn’t be financed from the general fund.
Second, an important consideration for the issuance of public debt is interest rates. Borrowing costs today are higher than they have been in years and while Wall Street bond brokers and bond holders will profit from more California debt, voters have to decide if it is in California’s best interests.
Third, under Article XVI of the California Constitution a statewide bond measure must be limited to “some single object or work to be distinctly specified in the act.” The “climate bond” here is authorized by Assembly Bill 1567, which is entitled the “Safe Drinking Water, Wildfire Prevention, Drought Preparation, Flood Protection, Extreme Heat Mitigation, Clean Energy, and Workforce Development Bond Act of 2024.” This bill is a 25-page listing of various projects ranging from restoring the Tijuana River to providing residential housing for California Conservation Corps members. Even under the most liberal interpretation of “single object or work,” this bond measure doesn’t comply.
Fourth, the fact that a substantial amount of the proceeds from the bond are intended to be used for programs rather than brick-and-mortar infrastructure violates the principle that the “single object or work” should have a useful life that extends beyond the term of the debt repayment. This climate bond is like a family taking out a 30-year mortgage to pay for groceries.
To read the entire column, please click here.
|
