Chris Mann in the PE: Closing the billion-dollar revenue bond loophole


July 16, 2016 at 7:00 am

While Gov. Jerry Brown and the state Legislature negotiated and passed another year’s budget, Californians will be asked to to pay for more pet projects, even as our state debt continues to grow at an unsustainable rate.

Right now, California state government is more than $330 billion in debt (and that’s a conservative estimate). A staggering $157 billion is from general obligation and revenue bond debt alone. Sadly, these numbers are so massive that they have lost all meaning to many Californians.

What’s worse, in the last 20 years the state of California has issued more than $50 billion in revenue bond debt without ever asking voters for approval. That’s because voter approval is required for all state bonds except for revenue bonds. Sneaky politicians and unelected state bureaucrats have discovered this loophole and are using revenue bonds to fund their pet projects while sidestepping voters. These huge state projects affect millions of Californians who currently have no voice in how their dollars are spent.

Luckily, we can close this loophole and return power to the people by supporting Proposition 53, which will be on the November ballot. This commonsense initiative requires a public vote for state revenue bond mega-projects costing more than $2 billion – before we have to pay higher rates and fees.

While we can all agree that taking on debt in order to pay for important and necessary projects is sometimes unavoidable, it should be done responsibly.

Our state government should operate just like a family would: Only taking on debt when absolutely necessary and only in amounts that can reasonably be paid back.

All too often, though, California politicians knowingly underestimate project costs to gain initial support. Then they let costs balloon, leaving taxpayers to pick up the tab.

As former speaker of the Assembly Willie Brown famously said, “In the world of civic projects, the first budget is really just a down payment.”

The best example of underestimating budgets, overspending and using the revenue bond loophole is California’s High-Speed Rail project. Voters originally authorized $10 billion in general obligation bonds after the Legislature promised that was all it would cost them. But now the estimated costs have risen to over $64 billion. State legislators know that voters would probably not approve another $50 billion in general obligation bonds, so they have found a way to circumvent voter approval – revenue bonds.

As the founder of the Inland Empire Taxpayers Association, I am a proponent of giving taxpayers a voice on how their money is spent. Politicians and unelected state bureaucrats should not be able to write unlimited blank checks on voters’ accounts. It’s time to hold politicians accountable and bring transparency to the state revenue bond loophole.

I urge you to join me in supporting Prop. 53 on the November ballot.

Chris Mann is the founder of the Inland Empire Taxpayers Association.