Water Bond Sinking

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Sometimes good things happen for all the wrong reasons. That just may occur if the legislature pulls the plug on a proposed $11 billion water bond scheduled to go before the voters this coming November.

Some legislators see the bond as a threat to passing Gov. Jerry Brown's temporary tax hike proposal, and therefore may put off the proposal for another time.

First cobbled together by the legislature in 2009, the water bond contains $3 billion for badly needed dams and a slew of other projects for a variety of water-related needs, some good and some very questionable.

But that's not the point.

After all, anytime that a proposal this large is crafted, it's bound to have elements of dubious value just to get enough votes; that's the essence of politics.

The real problem with the $11 billion bond is that it adds so much weight to the state's bond debt that comes in the form of interest paid out of the annual state budget. Most people don't have a clue about the process. 

As a matter of fact, a state poll in 2004 found that only 8 percent of Californians knew how bonds work.

These days we are drowning in bond debt. As of 2011, Californians were paying interest on $90 billion worth of bonds, about as much as the entire state budget for the year. In addition, the voters had approved another $53 billion in bonds that had not been issued to financial houses for purchase, bringing the total to $143 billion.

The state now ranks 11th in per capita bond debt, up from 23rd just three years ago.

The story only gets worse. In 2011-12, about 6.5 percent of the state budget went to bond interest, a figure scheduled to rise to 11 percent within the next two years before "leveling off" to 9 percent for the foreseeable future.

Think about it: out of a $100 billion state budget, $9 billion will be allocated just for bond interest. If you want to know why California lacks money to meet its needs, you've just discovered 9 percent of the problem.

It's also a major reason why California has the lowest credit rating of the 50 states, which translates to higher bond interest.

None of this is to suggest that bonds are intrinsically bad, it's just that in California they are over-used.

That's because rather than raise taxes, the voters prefer to pay for something over thirty or forty years that will ultimately cost two times or more over time. We'll do anything but face reality.

Hopefully, in the near future, the legislature will reconfigure the bond package, committing to the dams and paying for the other projects in real money as we go.

Of course, that gets us back to the "T" word, and sadly, most Californians would just as soon go on blindly denying themselves the programs and services they desperately need, yet refuse to recognize.

And until we collectively accept that revenue need, the state will remain mired in its own mess.

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