Dan Walters

Observations on California and its politics

Dan Walters: Proponents of veterans’ bond issue mislead voters on costs

05/26/2014 12:00 AM

05/25/2014 7:05 PM

There are just two measures on the June 3 statewide ballot, Propositions 41 and 42, and both were placed there by the Legislature.

Proposition 42 more or less cleans up a decision by Gov. Jerry Brown and legislators to save money by no longer paying local governments for some state-mandated services they provide.

Reacting to criticism from open-government advocates, Proposition 42 would place into the state constitution – as if that document isn’t long enough already – a requirement that local governments comply with open-records and open-meeting laws even if the state isn’t reimbursing them.

Proposition 41, however, is a different kettle of fish.

It purports to be a benign, no-cost way of financing housing for homeless and low-income military veterans by using $600 million in previously authorized veterans’ home loan bonds. But its backers are misleading voters about a very significant shift of housing policy.

The decades-old veterans’ home loan program is, by any measure, a rare government program that pays for itself. The state issues general obligation bonds to obtain the lowest-possible interest rates, then lends the money to veterans to buy homes.

The program costs taxpayers nothing because the mortgage payments cover all costs. Sponsors of Proposition 41 would have voters believe that shifting the use of the bonds would be a minor change.

“This act doesn’t create new taxes or add new debt to California,” reads the official argument for the measure signed by, among others, former Assembly Speaker John A. Pérez.

That assertion is absolutely untrue. It adds new debt because while the bonds were authorized previously, they don’t become debt until they are sold. Proposition 41 would sell them, thus adding $600 million of new debt to a state already some $340 billion in debt, according to a recent study.

And while the measure doesn’t technically “create new taxes,” retiring the new bonds – unlike veterans’ home loan bonds – would cost taxpayers about $50 million a year, according to the Legislature’s budget analyst. That’s money that would be shifted from other purposes.

Steve Smith of the California Labor Federation, another backer, went even further, writing in a recent online pitch, “The measure doesn’t ask voters for new money. It won’t cost taxpayers a dime.”

That’s a strange – and dead wrong – characterization of something that would cost taxpayers $50 million a year.

These statements continue an insidious trend among politicians of treating bonds as free money when, in fact, repaying them costs taxpayers up to twice as much as their face amounts.

The plight of homeless veterans is certainly worthy of attention.

However, helping them is not the cost-free exercise Proposition 41’s sponsors would have us believe. We shouldn’t pretend otherwise.

About This Blog

Dan Walters' column appears in dozens of California newspapers. He joined the Sacramento Union’s Capitol bureau in 1975 and in 1981 began writing the state’s only daily newspaper column devoted to California political, economic and social events. He and the column moved to The Sacramento Bee in 1984. Contact him at dwalters@sacbee.com or 916-321-1195. Twitter: @WaltersBee


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