Texas voters to decide whether to finance building more prisons with $1 billion issue.

DALLAS -- Under pressure to keep violent criminals behind bars and to relieve jail overcrowding, Texas voters will decide tomorrow whether to authorize the sale of $1 billion of general obligation bonds, primarily to finance state prison construction.

The prison proposal is the largest of $1.9 billion in four state general obligation bond proposals that are on tomorrow's ballot. Proceeds from the other bond issues would be used for self-supporting loan programs for agriculture, minority businesses, and homes for veterans, among other items.

"I don't think there is any single issue that Texans are more willing to spend money on than prisons, and that includes schools," said Bill Allaway, executive vice president of the Texas Association of Taxpayers. "There is a general perception that crime is rampant in the street."

Allaway and John Kennedy, senior analyst at the Texas Research League, said they expect voters to approve the prison bonds. Texans, they said, are tired of murderers and sex offenders being released early and they have a record of approving jail bonds.

Since 1987, Texans have authorized the issuance of $2 billion of general obligation bonds for prisons in three separate elections, including 1991 when $1.1 billion of bonds was approved.

If the latest issue is approved, most of the $1 billion issue would be used to help finance a program already underway to more than double the number of state prison beds, officials said. Some of the funds are being ear-marked for mental health and mental retardation facilities, but most of the money is expected to be spent for prisons.

Under the program, using funds from previous bond sales, five state jails with 10,000 additional beds are now being built throughout Texas. Six to 12 more jails could be built with 12,000 beds by August 1995, and more than 30,000 beds could be added later if building costs remain stable, Texas Department of Criminal Justice officials said.

The additional jails would accomplish several goals. The state could remove its inmates from county jails. With overcrowding forcing state inmates into county jails, the state has had to pay millions of dollars in fines to the counties, at $50 per day per inmate.

"A lot of the pressure to do these prisons is generated by the fines," said Anne Schwartz, director of the Texas Public Finance Authority.

County jails are now housing 28,000 state inmates, said David McNutt, assistant director for budget and management services for the Texas Department of Criminal Justice.

The state jails would also be used for nonviolent criminals, such as thieves and drug users, who would have access to rehabilitation programs. The shift would free space in maximum security prisons to hold violent criminals, such as sex offenders and murderers, for longer periods of time.

"Texans want the criminals to go to prison and stay there," said Kennedy of the Texas Research League.

But Texans already have paid big bucks for prisons -- the state has about $1.3 billion of outstanding prison debt -- and they will pay much more if the general obligation bond proposal is approved tomorrow. As a general rule, a $1 billion bond issue could cost double that in tax revenues over the term of the bonds, analysts said.

If approved, plans call for issuing about $335 million of the bonds in the fiscal 1994-95 biennium and using most of the proceeds for prison construction. The Legislature would appropriate the remaining funds in subsequent years.

"It leaves the Legislature some flexibility, so we don't have to go back to the voters every two years," McNutt said.

Rating agency analysts said that approval and issuance of the bonds could make balancing the state budget somewhat more difficult in the future, but they also said that Texas has relatively low debt compared with other states.

"Texas debt has never been a big problem," said Claire Cohen, executive vice president at Fitch Investors Service. "The only concern is if Texas debt builds up."

According to Catherine Fleischmann, an assistant vice president at Moody's Investors Service, the state ranks 40th in net tax-supported debt as a percent of personal income. The state's debt represents 1.1% of personal income, Fleischmann said.

"The state would have been facing continued heavy fines for jail overcrowding," said Peter D'Erchia, director of the municipal finance department at Standard & Poor's Rating Group. "The state has to build more prison facilities."

The state's general obligation bonds are rated double-A by both Moody's and Standard & Poor's, and AA-plus by Fitch.

In other bond proposals on Tuesday's ballot, Texas voters will decide whether to authorize:

* Selling $750 million of general obligation bonds to help Texas military veterans buy land, homes, and make home improvements. Of the total, $250 million would go to the Veterans Land Program and $500 million to the Veterans Housing Program.

The self-supporting programs have been very successful since the land fund was started more than 40 years ago and the housing program about 10 years ago. In recent times, demand for the low-interest loans has reached record levels. The proceeds from the bond sale would be used to replenish the funds.

* Increasing the amount of general obligation debt that can be issued by the Texas Agricultural Finance Authority to $100 million from $25 million. The self-supporting program provides loans for land purchase, building construction, machinery installation, and other items to help small businesses that want to process or market products from Texas crops and livestock.

* Issuing $50 million of general obligation bonds to provide loans through the state Department of Commerce to new businesses primarily owned by women and minorities. Called the historically underutilized business proposal, the program, targeting potentially 65,000 businesses employing more than 200,000 people, would be designed as self-supporting. Opponents have said that the state should be wary of lending money to high-risk businesses.

* Expanding the use of higher education constitutional appropriation bonds. Texas State Technical College would be added to the list of universities that can receive funds through the Higher Education Assistance Fund. The proposal also would allow debt to be issued for library materials, books and capital equipment at state universities and colleges.

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