There are two bond measures on the March 2004 ballot, and some people have questioned both the fiscal and political wisdom of putting them before voters at a time of financial uncertainty.

PROPOSITION 55

The League of Women Voters of California supports the education bond measure (Proposition 55) because it attempts to address important long-term needs for California that cannot be put off. Even with an uncertain job market, California's population continues to grow, and it is expected to double within the next 30 to 40 years. Our schools and colleges are simply not adequate to accommodate even our current needs, let alone increases of that magnitude.

Opponents will cry that we are in financial trouble and cannot afford this measure. Some advocate reliance on a pay-as-you-go approach to meet our needs, but spreading payment out over a long period, through good times and bad, is the traditional way to meet infrastructure costs. This is no different than the decision individuals make to buy their own homes, as many continue to do even when the economy is weak, because they know it is the only way to achieve their long term goals.

PROPOSITION 57

The second bond measure on the March ballot is Proposition 57 which would authorize the state to issue a $15 billion bond to address the state's budget shortfall. This bond would be used instead of the currently authorized $10.7 billion deficit-financing bond. The League of Women Voters of California has taken no position on Proposition 57 because our positions on long-term debt financing only consider bond measures for capital projects. Our positions call for adequate revenues to meet changing needs, for flexibility and for equity and fair sharing of the tax burden, as well as long-range finance methods that meet needs while taking into account the cumulative impact of public debt. None of this seems applicable to Proposition 57, unless one simply says it seems to be the only feasible alternative to address the deficit at the moment.

COST OF REPAYMENT

Interest payments come out of the General Fund each year, but bonds are sold in issues of different sizes and various times, so that the state Treasurer has the ability to manage bond issuance to take advantage of market conditions and keep repayment costs at a prudent level. According to the Legislative Analyst, if Proposition 55 is approved and $12.3 billion in education bonds are sold, the debt-service ratio would rise to about 5.3 percent in 2006-07 and decline thereafter. If debt-service on the currently-authorized deficit financing bond is included in this calculation, the total debt-service ration would rise to between 8 percent and 8.5 percent per year until the bond is paid off (probably in 2009-10). If, however, the bond proposed in Proposition 57 is approved and sold instead of the currently authorized bond, the ratio would increase by less in the near term-to between 6.4 and 6.9 percent annually between 2004-05 and 2008-09. However, this higher ratio would remain in place for a longer time, since the proposed bond would take longer to pay off.