Wednesday, October 22, 2008

California's $$$ Ballot Measures

Indentured Servants: California voters will decide Nov. 4 the fate of three new general obligation bonds totalling $16.8 billion which costs about twice that to pay off in interest and principal over the next 30 years. The state's current bond debt is $53 billion with another $68 billion unsold that will add to the debt. If the three measures -- Propositions 1, 3 and 10 -- are authorized, it would siphon $1 billion annually from the state's general fund once all these newer bonds are sold. The service debt/ratio would peak in 2010 to 6.2% of the state's operating budget. The Oct. 1 ratio was 4.4% for infrastructure bond repayment. The state's financial woes are reflected in its low credit rating which increases borrowing costs. Moody's, S&P and Fitch attached "A" ratings on the state, a category described as upper medium ability of adequate security to pay off the money it borrows. The state reports 4% interest on $2.005 million in sold bonds for 2009 and a projected 5.125% interest on $10.835 million in 2020. A Triple-A rating would allow the state to borrow a percentage fraction above what U.S. Treasury notes bring. Bond issuance is the common practice of paying for the state's road and bridge improvements, part of the infrastructure package referred to by politicians and bureaucrats. At the same time, with a state Republican-controlled legislature demanding to hold the line on higher taxes, mandatory repayment of these bonds takes money away from other programs such as Medi-Caid and state employee benefits. On top of all this, Gov. Arnold Schwarzenegger is asking the U.S. Treasury for an immediate short-term loan of $7 billion to meet an expected shortfall in government expenses. The money would be repaid by next June. The three propositions do have merit. Prop. 1 would authorized $9.95 billion for high-speed rail, primarily to continue plans and construction from San Francisco to Los Angeles. Prop. 3 is $980 million for capital improvement projects at children's hospitals. Prop. 10 is $5 billion for renewable energy and rebates to buyers of hybrid and alternative fuel vehicles. One wonders if voters are looking at the big picture in these times of economic stress. The beauty of these bond issues is they don't cost taxpayers out-of-pocket coin. But they can reduce the services a state is expected to provide.

Recommendations: No on Prop. 1. Some $58 billion already has been spent on planning for the Los Angeles to San Francisco high-speed rail with no end in sight. It should be rewritten to improve and add on rail connectors within the cities. When that is achieved, then go for the 'Frisco link to LA. No on Prop. 3. Nothing against kids. These are private hospitals and should expand without taxpayer funding. No on Prop. 10. Rewrite it without the rebates and it's the best renewable energy proposal ever written. If rebates are needed to sell the vehicles, let the automakers and energy producers subsidize the program. Personally, I would like nothing better than to vote in favor of all three props. But, the timing is terrible.

McCain Surges: The Associated Press Poll released Wednesday has John McCain surging within one percentage point of Barack Obama among likely voters. The poll is the first in several weeks in which McCain picked up valuable support, especially among white voters earning $50,000 or less. An NBC poll had Obama leading by 11 points as late as Tuesday. The AP poll interviewed 1,100 adults: Obama led 47-37 among all adults; he led by 5% among registered adult voters and 1% among those likely to vote. The margin of error is 3.5%. One reason given for the McCain surge was a large number of voters for the first time were interviewed on their cell phones rather than landlines. Since the last AP poll in late September, McCain trails Obama by 4 points compared to 24% among voters earning less than $50,000; among rural voters, an 18 point lead compared to 4; now leads by 20 points among whites with no college education; improved to a 24-point lead over married whites; modest gains among whites of both gender, now leading by 22 among white men and 7 among white women. On the question of whom voters trust most on the economy, Obama led by 6%, down from 15% in the last survey. Voters were skitterish over Obama raising taxes in a economic recession. One McCain surrogate called it "The Revenge of Joe the Plumber Strikes Back." This sucker is one close knock down, drag out fight to the finish.

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