Thursday, January 12, 2006
Just days after announcing his plan for the state’s largest public building program since the 1960s—a plan that would issue $68 billion in new infractructure bonds—Gov. Arnold Schwarzenegger on Jan. 10 announced his $125.6 billion budget for the state. But that plan for fiscal 2006-07 all but ignores the big bond issue.
The plan for new borrowing will emerge in the next week or two as the various bond measures—to build and repair roads, levees, schools, jails and courts—are introduced.
Schwarzenegger announced the big bond plan on Jan. 5, during the annual State of the State address. The multi-billion-dollar price tag shocked Republicans and Democrats alike.
John Laird, who represents the Central Coast and chairs the powerful budget committee, says he supports the governor’s plans for infrastructure improvements, but worries that borrowing billions of dollars will stress the state’s general fund.
“I’m excited about the fact that we would fund education, and transportation repair, and levee improvements,” Laird says. “It’s just that the scale is so large, and it falls on the general fund.”
Laird also says many other local projects, funded by old bonds, are now running out of money.
“We have bond money running out in library funding, water quality, parks and affordable housing,” he says. “If you look around the Central Coast—Palo Colorado was a beneficiary of the parks bond, Castroville’s library was a beneficiary of the library bond, multi-family housing in Salinas benefited from the housing bond, and the Pajaro water management district is applying for water recycling money. So it gives me pause.”
If the Legislature and voters agree to the new borrowing proposed by the governor—$25.2 billion in the first five years, and another $42.8 billion in the next five years—the payback will begin by the end of next year.
“I think the $68 billion question is whether the governor will now engage in a collaborative way and negotiate on these bond issues,” Laird says. “He proposed these measures without much consultation with the Legislature.”
Assembly Speaker Fabian Núñez has appointed Laird to the conference committee that will work out differences between Assembly and Senate bond bills. The committee is expected to begin work next week.
Whatever projects the bond measures eventually fund, both of Monterey County’s assemblymen say they want to see affordable housing receive a chunk.
“Sure, we can be concerned about the physical infrastructure,” says Assemblyman Simón Salinas, “but what about the people infrastructure? We need to do something about the escalating price of housing—it’s certainly an issue here in Monterey County.”
The governor’s 2006-07 budget does not raise taxes. Instead, it projects enough growth to cover spending.
“This budget continues California on a path toward fiscal responsibility and economic recovery,” Schwarzenegger said. “It puts gas tax revenue into roads and highways where it belongs, it makes critical investments in our schools [and] children’s health care and emergency preparedness.”
Schwarzenegger’s plan includes a $4.3 billion hike in K-14 education funding, and proposes that California restore art, music and physical education to public schools. It eliminates fee increases at colleges and universities. It includes $72.2 million in new funds for low-income children’s health insurance, and provides more than $20 million in public safety.
Additionally, the plan cuts the structural deficit. But, warns Laird, the state is still spending more money than it’s taking in.
“I am strongly aware of our $4.7 billion structural deficit that still exists,” Laird says. “And they say the governor’s proposed bonds would fall on the general fund. To have a structural deficit that we have addressed, and billions of dollars additional added on to the general fund is probably not the most fiscally responsible thing to do.”