California is poised to borrow billions. Tell us how the state should spend your money. | Opinion

The era of California budget surpluses has evaporated, but the desire for massive new investments has not. Without additional monies to spend, the state Legislature is looking to borrow. A lot.

More than $100 billion in bond proposals have been proposed so far this year. They advance everything from sustainable farming to flood control.

The entire list is far too big of an ask of voters. But some are expected to make it to the desk of Gov. Gavin Newsom and ultimately to voters in the November 2024 election.

The proposals in total will exceed the $70.7 billion in debt that California already owes in obligation bonds, according to the California Department of Finance. As the term implies, a general obligation bond approved by voters becomes a responsibility for the state to pay with its tax revenues, known cumulatively as the state’s general fund. Like a mortgage, a general obligation bond is paid off over years, typically 30, until the debt is fully retired.

Currently, the annual payments on this debt represent 3.89% of the 2023-24 state budget, according to the finance department. That is well within the state’s unofficial rule of thumb to keep the debt payments to 6 percent of the overall budget. This suggests there is some room in future budgets for additional borrowing.

But borrower beware. The same finance department is forecasting budget deficits for as far as projections can see. While forecasts change as they are updated, currently the next fiscal year’s beginning deficit is estimated at $6.4 billion, the following year at $10.9 billion and three years out at $14.3 billion. Bigger projected structural deficits plus bigger annual debt costs equal bigger potential financial trouble.

The forecasts do not assume an economy-changing disaster, such as a large earthquake or massive flood. Historic disasters will result in historic reductions in tax revenues. Suddenly the same state debt payment would feel bigger in a future budget. That is yet another consideration.

As the underwriters of this debt, the public will ultimately make the investment decisions via the ballot box. But legislators and the governor will get to pick the portfolio by deciding which bonds get to the ballot.

Before they do, perhaps you would like to take a crack at it. Readers, what do you think are California’s most pressing investment needs?

What’s proposed

Here is a list of bonds advanced before the Legislature this year and the rationale behind them:

Education infrastructure

In recent years, 108 California schools closed at least once because they were too damaged to remain open. Disadvantaged communities face repair problems at greater rates than affluent ones. The backlog of deferred maintenance at state universities is estimated at nearly $14 billion. The need to invest is apparent. State voters in March 2020 narrowly defeated a $15 billion bond to help address the problem, deferring the investment to another time.

Senate Bill 28 by Steve Glazer, D-Orinda, is authoring a bond proposing $15.5 billion in spending from kindergarten through college. Assembly Bill 247 by Al Muratsuchi, D-Torrance, has a similar proposal totaling $14 billion.

Flood protection

With experts predicting both larger storms and longer droughts as the state’s climate continues to change, better protecting at-risk communities would save money in the long run. Senate Bill 638 by Susan Eggman, D-Stockton, would fund $6 billion to finance flood control efforts. Assembly Bill 305 by Carlos Villapudua proposes a similar array of flood protection improvements, at $4.5 billion. Targets of spending include urban flood risks, dam safety, levee setbacks, floodplain restoration and levee maintenance. Levee projects in the Sacramento-San Joaquin Delta in particular have heavily relied on state funds.

Fentanyl eradication

The opioid fentanyl is estimated at 50 times more powerful than heroin and 100 times more powerful than morphine, the numbers behind its deadliness. More than 12,000 Californians died from overdoses last year. Assembly Bill 1510 by Reggie Jones-Sawyer, D-Los Angeles, proposes $5.2 billion attack against fentanyl. Approaches range from $2 billion for treatment, $2 billion for prevention and $500 million to help identify “high level drug traffickers.” The bill is devoid of stiffer sentencing for these traffickers that legislative Republicans have proposed and that Jones-Sawyer has blocked along with other sentencing reforms as chair of the Assembly Public Safety Committee.

Housing

The ever-rising cost of buying and renting in California is a problem that requires little explanation. An estimated 52 percent of California renters are using more than 30 percent of their available income to pay the rent, a threshold of economic stress. Meanwhile, new housing construction has languished at approximately 80,000 units per year, far short of Governor Newsom’s goal. Legislators are reacting to the housing crisis, which is also the primary driver of homelessness, with two different responses.

Senate Bill 834 by Anthony Portantino, D-Burbank, is the biggest bond proposal before the Legislature. SB 834 proposes a new $25 billion California Home Construction Fund to help provide secondary mortgages to qualified buyers and $7 billion for targeted new home construction.

Senate Bill 1657 by Buffy Wicks, D-Oakland, is more of a targeted approach on affordable housing. SB 1657 includes an infusion of $5.25 billion into an existing state Multifamily Housing Program for additional construction and rehabilitation and $1.5 billion to preserve existing rental housing projects.

Mental health expansion

California’s mental health system is in crisis. Decades of decentralizing mental health services to counties, combined with the state’s explosion in homeless residents with mental health needs, has overwhelmed the existing patchwork. Gov. Gavin Newsom is a key proponent behind Assembly Bill 531 by Jacqui Irwin, D-Thousand Oaks. It proposes $4.68 billion to help construct 10,000 community health beds throughout the state. The bill also includes $865 million to specifically target military veterans with serious mental illnesses.

Climate change response

From the Sierra watersheds to the coastline, warmer weather and flashier rain season will challenge virtually every California landscape. The proposed legislative responses to climate change reflect the expected wide-ranging impacts on the state. Both Assembly Bill 1567 by Eduardo Garcia, D-Coachella and Senate Bill 867 by Ben Allen, D-Santa Monica, take similar approaches. Both are similar in size — $15.5 billion for SB 867, $15.995 billion for AB 1567.

The name of Sen. Allen’s bond reflects breadth of the spending — the Drought, Flood, and Water Resilience, Wildfire and Forest Resilience, Coastal Resilience, Extreme Heat Mitigation, Biodiversity and Nature-Based Climate Solutions, Climate Smart Agriculture, Park Creation and Outdoor Access, and Clean Energy Bond Act of 2024. Proposed spending aims at dozens of programs, such as $300 million for new water recycling projects and $500 million for local fire prevention grants.

Garcia’s AB 1567 has a similar mix of spending, including $5.255 billion for safe drinking water, drought preparation and response, and flood protection.

Farming sustainability

Assembly Bill 408 by Lori Wilson, D-Suisun City, proposes the Climate-resilient Farms, Sustainable Healthy Food Access, and Farmworker Protection Bond Act of 2024. At $3.365 billion, the smallest of the bond proposals, AB 408 proposes an array of programs to improve farm water use efficiency, soil regeneration and grant programs to improve drinking water quality and regional food economies.

Getting before voters

Newsom is sure to support his own bond proposal to expand mental health services. Beyond that, he has yet to signal how much additional debt is interested in proposing to voters and what specific needs are the ones to fund. This makes now a timely moment to engage.

History suggests that no more than three bond proposals will make it on the ballot, the traditional political hedge against an overdose of proposals that leads to reflexive no votes across the board.

With the reality of limits in mind, of the list, what are your three top needs? Share them with us. Bond elections only work when the government puts the public’s highest priorities on the ballot. The deliberative process is in full swing in Sacramento. It is time to set California’s future investment priorities.

This story was originally published August 24, 2023 at 5:00 AM.