Pete Rates the Propositions
Sensible opinions on the California ballot propositions      since 1980      by Pete Stahl

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Pete Rates the Propositions
June 2014

Pete recommends:
41   YES   Veterans Housing Bonds
42   YES   Local Compliance with Public Records Act
        My Semi-Biennial Lecture on Bonds
        Voting in "Top Two" Primary Elections


Proposition 41: Veterans Housing Bonds – YES

Summary: Prop 41 allows the state to borrow $600 million to fund affordable and supportive housing for homeless and low-income veterans. Unlike the Cal-Vet loan program, Prop 41 will not pay for itself; it will cost us $50 million per year over 15 years. But the need is acute. Over 15,000 California veterans are homeless, and many need housing with supportive services for physical and mental disabilities. We owe this to our veterans.

Details: (Please see My Semi-Biennial Lecture on Bonds, below, for my opinion on bonds in general.)

The number of veterans who are homeless or on the brink is a national scandal. An estimated 60,000 veterans and their families are currently homeless, including at least 15,000 here in California. They have high rates of post-traumatic stress disorder, substance abuse, and unemployment, making it challenging to lead stable lives and stay off the street. Considering that so many are vulnerable precisely because they fought for you and me, I'd say we owe them a way forward.

Prop 41 is a $600 million bond to fund construction and renovation of apartments and other multi-family dwellings for low-income veterans and their families. At least half of this will target veterans with extremely low incomes (below roughly $14,000/year, depending on county and family size).

The housing provided by Prop 41 is classified as supportive, transitional, affordable, or some combination. Supportive projects combine housing and supportive services, including, job training, mental health and drug treatment, case management, care coordination, or physical rehabilitation. At least $180 million from Prop 41 is dedicated to this.

Transitional housing is low-rent housing intended to give tenants a stable place to live and a chance to get their lives together. As its name implies, transitional housing is temporary, with units recirculated to other eligible tenants after six months or more.

Affordable housing is for veterans whose income is above "extremely low" but is still "low" (<~$38,000). These units will be available long-term, with monthly rents that will max out at 30% of the income limit, maybe $950 in an area with much higher rents. This will help many veterans take the next step toward affluence, and prevent others from falling into the cycle of poverty.

Prop 41 has nothing to do with the Cal-Vet loan program. Cal-Vet provides qualifying veterans with low-interest farm and home mortgage loans, which they pay off at a rate that covers the bonds, interest, and administrative costs. This means Cal-Vet bonds are self-liquidating. The program is currently undersubscribed to the tune of about $1.1 billion because ordinary mortgage rates are so low. Nevertheless, Cal-Vet has been a wonderful success since 1921, and it will continue to be.

Prop 41 bonds, on the other hand, are not self-liquidating. The $600 million in principal plus perhaps another $150 million in interest will come out of the General Fund. Yes, there are noises that some Prop 41 money will be issued as loans and repaid by developers, but I wouldn't count on it. In all likelihood Prop 41 will cost the General Fund $50 million every year until 2030.

Considering that, it's outrageous that Prop 41 is being marketed as a cost-free repurposing of unsold Cal-Vet bonds. On page 12 of your ballot pamphlet you'll see supposedly respectable politicians writing with presumably straight faces that Prop 41 will help veterans "without raising taxes or adding to California's debt."

What a pile of baloney! Technically, yes, Prop 41 will not raise taxes – because it is an unfunded spending mandate. Paying off the Prop 41 bonds will require the Legislature every year to find $50 million somewhere, probably by reducing other programs' funding. But, hey, no new taxes. And technically, yes, Prop 41 won't add to the state's total potential bond debt, because of an accounting gimmick that reduces the theoretical ceiling on unneeded Cal-Vet bonds by $600 million to "balance" Prop 41. But remember, Cal-Vet bonds pay for themselves, while no one expects Prop 41 to generate significant revenue. So in practice, Prop 41 will increase bond debt we actually pay by some $750 million.

I am exasperated by this deliberate misrepresentation because it should be completely unnecessary. Prop 41 is a slam-dunk on moral grounds, on patriotic grounds, and even on fiscal grounds. According to a 2009 study by the Los Angeles-based Economic Roundtable, every homeless veteran placed into supportive and transitional housing saves the public an estimated $27,000 annually in emergency housing and medical care, drug treatment, law enforcement and jails. Multiply that by a few thousand veterans, and we're talking $100 million saved in just one year. Prop 41 is a wise investment.

The inability of the federal Department of Veterans' Affairs to treat veterans with the dignity and respect they deserve is well documented. We in California have the resources and basic decency to help. Let's be decent.



Proposition 42: Local Compliance with Public Records Act – YES

Summary: Requires local governments to pay for compliance with the Public Records Act and any future amendments to it. Currently this is partially reimbursed by the state. But access to information is a basic obligation of all governments, so local governments should expect to cover it without state aid, as they do their own telephones, electricity and plumbing.

Details: California's Constitution requires the state to reimburse local governments for the costs of complying with any post-1975 changes to laws. This includes relatively recent amendments to the 1968 Public Records Act requiring governments to assist members of the public requesting access.

The Legislative Analyst estimates that local governments spend "in the tens of millions of dollars a year" complying with the amended Public Records Act, all reimbursable by the state.

Now, if you were facing a budget crisis, as California was last year, you might look for a way to avoid that cost. So: why not simply suspend—temporarily repeal—those costly amendments? If local governments aren't required to comply, they won't demand reimbursement, and the state will save those tens of millions.

This is precisely what the state did. For a time, access to public records at some local governments was slower and more difficult. Those most inconvenienced by this were the media, who understandably raised a huge ruckus about it. The Legislature quickly reversed itself and, to make sure it never happens again, gave us Prop 42.

Prop 42 will amend the Constitution to eliminate the requirement that the state reimburse local governments for compliance with the Public Records Act, both as it exists today and with any future amendments to improve public access to government information. (Prop 42 also applies to the 1953 Brown Act, but that was already covered by a little-noted provision of Prop 30 of 2012.)

Basically, Prop 42 asks us whether requiring local governments to provide reasonable public access public records is (a) an onerous, arbitrary imposition by the state, or (b) a fundamental obligation, like chairs, electricity, and indoor plumbing. If it's the former, the state should continue to pay; if the latter, local governments should pay for it themselves.

In the twenty-first century, easy access to information is ubiquitous and universally expected. It has become a basic requirement—"table stakes"—much as telephones, photocopiers and email were for earlier generations. The idea that a local government will eschew modern information technology unless the state pays for it is ludicrous.

Reasonable public access to government records is a basic obligation of any local government, and therefore it's legitimate for the state to require local governments to bear the cost. Prop 42 will place the responsibility where it belongs, and will ensure we won't have our access interrupted again because of crazy budget machinations in far-off Sacramento.



My Semi-Biennial Lecture on Bonds

When California wants to finance a large project, it asks the voters for permission to take out a loan. Prop 41 is just such a request. If voters approve, the state may take out a loan for the project by selling general obligation bonds, which are paid back with interest over fifteen years or so. The bond payments come out of the state's main budget, the General Fund. So when we vote on bond measures, we are really voting on whether the projects in question ought to be added to the state's budget.

"Wait a minute!" I hear you cry. "What about those interest payments? Won't we end up paying more for interest than for the bonds themselves?" This may once have been the case, but with today's low interest rates each dollar of bond money will cost only 30 cents in interest, accounting for inflation. (See details on page 18 of your ballot pamphlet.)

"Okay," you admit, "but loans are still more expensive than pay-as-you-go." This is true. Still, loans are the only way to buy a house, or a car, or anything else that you need immediately but can't pay for yet. It's worth paying the premium of interest to get the funding now.

"Well and good," you continue, "but there are $600 million in bonds on this ballot. Isn't that too much to borrow?" For you, yes, but the State of California can handle it. Bond payments today amount to less than 5% of the General Fund, down from a high of 5.3% four years ago. Prop 41 would raise that figure by less than 0.1% -- basically noise.

Prop 41 will fund long-lived, tangible acquisitions, such as apartment buildings. It's sensible to make extended payments for things that will be used far into the future.

Remember, too, that California's population continues to grow by hundreds of thousands of people every year. Borrowing makes particular sense if you know your income will go up in the future. As the state grows, the General Fund will certainly grow too.

There is one last reason to vote for a bond measure. In addition to being formal requests for permission to take out loans, bond measures are also looked upon as referenda on the merits of the proposed projects. If a bond measure fails, legislators are likely to believe that the public feels the project is not worthy of receiving state funding. By voting no, you may have meant, "Yes on the project but no on the bonds," but your message to Sacramento will read, "No on the project." So if you vote down a bond measure just because you don't like bonds, you may well have killed forever the project the bonds were to have funded.



Voting in "Top Two" Primary Elections

As my regular readers know, I do not rate candidates. However, I do have a few words of advice on how to approach our new, "top two" primary elections.

"Top two" was approved when we passed Prop 14 in 2010. This election is the second to use it. Under the new system, everyone's primary ballots contain all candidates for state and federal office, regardless of party. If you're a Democrat, your primary ballot will contain not just Democrats, but also Republicans, Libertarians, "no party preference," and so on. You may vote for any of them.

The top two finishers in the June primary advance to the November general election, again regardless of party. In some contests, two Democrats or two Republicans could advance, freezing out all other parties.

The pile-up of candidates on your ballot can be very confusing. For example, there are 15 people vying for Governor, including the incumbent, Jerry Brown. Candidates are listed in random order, so if you want to vote for Jerry (or anyone else for that matter), you may have to wade through a dozen or more entries before you find him. (To make it even harder, Jerry's first name is listed as Edmund.) Be patient and be careful; the potential for error is high. We don't want to become a laughingstock electorate like Florida was in 2000.

With that many people running, you can probably find an obscure candidate to fall in love with, one who shares your views on virtually every issue. It will be quite tempting to vote for that candidate, even if he or she is not among the poll-anointed "front-runners."

That was the right way to vote in old-style partisan primary elections, because even if your heartthrob lost, you knew your party would have somebody more or less acceptable on the November ballot. But that's no longer the case. Your party is not guaranteed a slot in the general election. Only the top two vote-getters will advance. And they will be chosen by voters who vote for the major contenders.

Surely one of those two to four front-runners must be acceptable. Not perfect, maybe, but better than the major candidates you really can't stand. You can help that acceptable front-runner win a spot in the November run-off, or you can vote your heart's true desire let the rest of us nominate two finalists you may despise. Your choice.

It pains me to say that. You should be able to support your favorite candidate without risk. It can be unpleasant to vote for a front-runner tainted by unsavory special interests, political naïveté, excessive dogmatism, or vicious attack ads. But you've got to play the hand you're dealt. You have just one vote. Use it as effectively as you can.



 
 
 
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