LOS ANGELES -- California leaders are seeking ways to package huge general obligation bond proposals for the 1992 ballot to avoid a repeat of a 1990 election in which voters rejected nearly every bond measure.
At a recent joint hearing of two state bond committees, members debated the merits of placing fewer but larger bond measures on the ballot, eliminating rail bond proposals, and using advertising. Legislators also discussed selling large amounts of bonds as a catalyst for economic recovery.
State officials are concerned that last year's November election not be re-encted. Voters rejected an unprecedented 12 out of 14 general obligation bond measures, approving only $800 million of a proposed $5.7 billion.
Next month, both legislators and the governor will choose from nearly $15 billion of bond issues proposed in legislation for the June and November 1992 ballots. Several of these measures are duplicative and rival bills.
Members of the state Senate Appropriations Subcommittee on Bonded Indebtedness and Methods of Financing and the Assembly Committee on Banking, Finance and Bonded Indebtedness met in San Diego last Friday to determine which bonds they may suggest to the governor.
It is too early to tell which bond measures Gov. Pete Wilson will back, George Valverdes, administrative secretary of the State Department of Finance testified at the joint hearing.
He said the finance department still supports the $5.9 billion in debt levels for the 1992 ballots that were proposed in the department's "1991 Capital Outlay and Infrastructure Report." The figure includes $1.6 billion of bonds for school construction in 1992.
The finance department's report proposed shifting the burden of bond sales to local districts after 1992. But this plan assumes schools will be able to pass local bond measures with a majority vote approval instead of the current two thirds required. Legislation to allow that change did not pass this year.
"That's the weakest part of your plan," Assemblyman Steve Peace, D-San Diego and chairman of the Assembly bond committee, told Mr. Valverdes. The assemblyman said it was unrealistic to expect local school districts to provide the amount of funds necessary. He also critized the $1.6 billion figure as too low because it would mean only $800 million for schools in both 1992 and 1993. He said California schools have $5 billion in construction needs.
According to Assemblyman Peace, "800 million is spitting in the wind.
It doesn't do a thing to solve the problem," he said. "I get a sense that no one in finance has ever sat down and tracked the benefits from these bond measures. What is the rationale for these numbers from a business or planning perspective?"
The assemblyman suggested that the state accelerate debt issuance for new schools and other construction as a way to stimulate the California economy, and he asked Mr. Valverdes if the finance department could conduct a study on this. He pointed out that several school construction projects were ready to go but did not have the funding available.
"Now is the time to reduce the 1995-1996 budget deficits by borrowing when costs are low," said Assemblyman Peace.
Committee members expressed support for the creation of one large school bond measure to address funding needs for kindergarten through community college levels. Members' support stems from their belief that voters would be more likely to pass one bond measure rather than several.
ARthur Lupia, a professor at the University of California at San Diego, boosted support for this plan when he said his research showed the dollar amount of proposed bond measures did not affect approval percentages.
Mr. Lupia said voters are more likely to approve a measure when they have a clear message as to why a bond measure is needed, and suggested advertising. One assemblyman said legislators could use marketing slogans, such as "pass a bond, get a job."
The professor also warned that the state of the economy two to three months before the election is an important factor in bond approval.
Committee members discussed shelving plans for rail bonds until 1994 because stalled projects have delayed the sale of $3 billion of rail bonds approved by voters in 1990. State leaders previously had agreed to place $1 billion of rail bonds each on the 1992 and 1994 ballots.
Assemblyman Peace said this creates "public skepticism" over rail bonds.
The two committees met on the day Standard & Poor's Corp. downgraded the state's general obligation bonds to double-A from triple-A.
State Treasurer Kathleen Brown said the rating downgrade "should not affect the legislature's actions as it approves bonds for the ballot."
The total amount of bonds placed before California voters has jumped each year, from $1.56 billion in 1982 to $10.92 billion of bonds in 1990. Of the $10.92 billion in 1990, $6.4 billion were GO bond measures put on ballots by the legislature and $4 billion by voter initiatives.