NCPA - National Center for Policy Analysis


November 9, 2006

Tired of exasperating traffic jams, aging schools and inadequate affordable housing, Californians have launched a new era of public works construction.  California voters agreed Tuesday to finance the program by issuing $37.3 billion in bonds -- an amount greater than the annual spending of any other state.

As a growing federal budget deficit has eroded financial aid for highways and other projects, debates have simmered in recent years in state capitals about how to pay for them.

Critics say California voters made a mistake:

  • The borrowing will top $73 billion once the bonds are paid off with interest in 30 years, thrusting the state deeper into debt just as it is rebounding from the dot-com bust.
  • That could lead to cuts in funding for social services and other programs, they warn.

Supporters -- most prominently Gov. Arnold Schwarzenegger -- argue:

  • The benefits of highway and public transit improvements, better-equipped schools and reduced threats of flooding will be worth the cost.
  • That is especially true, they say, in a state predicted to swell by the population of Ohio over the next 10 years.

The four propositions will spend $19.9 billion on roads and public transit, $10.4 billion on school construction, $4.1 billion on levees and other flood-control projects and $2.9 billion on affordable housing.

The bond package will drive a public works building program unseen in California in four decades and could define Schwarzenegger's second and final term in office.

Allan Zaremberg, president of the California Chamber of Commerce, said passage of the mega bonds will become a catalyst for discussions nationwide about funding infrastructure.

Source: "California's $37.3 billion public works rebuilding program could be model for other states," Associated Press/Boston Herald, November 9, 2006.


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