Dan Walters

Jerry Brown backtracks on debt, OKs bonds for jail construction

An inmate at the Madera County jail is taken to a housing unit at the facility in 2013. California is poised to sell lease-revenue bonds to finance local jails.
An inmate at the Madera County jail is taken to a housing unit at the facility in 2013. California is poised to sell lease-revenue bonds to finance local jails. Associated Press file

The state budget that’s sitting on Gov. Jerry Brown’s desk – $122 billion in general fund spending – is almost exactly the dimensions of what he had proposed in January and revised slightly in May.

Yet, Democratic legislators are claiming victories in persuading Brown to spend several hundred million more dollars, principally on welfare – by granting some cost-of-living raises and removing the “maximum family grant” – and on early childhood education.

So how, one might wonder, could the spending be hiked for those and other categories while the overall budget remained virtually unchanged? Did Brown and legislative leaders cut back on other spending?

Not really. The biggest reason they could spend more is that they did something that Brown has devoted his entire second governorship to opposing. They borrowed the money and added to an already huge debt load.

They didn’t do it directly, of course. The voting public would have frowned on going into debt to lift the two-decade old ban on providing welfare grants to children conceived while their mothers are receiving aid, which is what the maximum family grant issue is all about.

They did it indirectly, through fiscal sleight of hand, which takes a little explaining.

Brown’s January and May budgets proposed that the state provide $250 million in general fund appropriations to help counties build and improve their jails, which have been under terrific strain as the state reduced its prison population.

In previous years, the state had provided $2.2 billion for local jails through a bit of financial trickery called “lease-revenue bonds,” which it also has used to build prisons.

Public works “general obligation” bonds require voter approval, but decades ago, some smart folks in the Capitol dreamed up “lease-revenue bonds” under which one state agency would borrow money, build prisons and then “lease” them to the prison system.

The prison system makes lease payments to the other agency, which then repays the lenders in installments, bypassing the need to get voter approval.

What worked for the prisons would also work for jails, it was reasoned, which is how the state came to issue $2.2 billion in lease-revenue jail financing.

Brown’s January budget devoted several passages to criticizing the practice as “cumbersome” and unfair, forcing counties to go through elaborate hoops.

Therefore, the budget proposed a direct appropriation of state funds, implicitly because the money would be coming out of the same budget.

The $250 million proposal bolstered Brown’s oft-expressed intent to pay down state debt and avoid incurring more. He’s opposed another state bond issue for school construction, for example.

However, Brown’s resolve on debt crumbled when faced with demands from legislators for more spending. He agreed to a $270 million pot of lease-revenue bond money for jails.

Continuing to use bonds, Department of Finance spokesman H.D. Palmer said, “will be cumbersome,” acknowledging that it was a way to meet the legislative demands without increasing the overall level of current general fund spending.