In 2024, California is facing a financial shortfall, prompting Democratic lawmakers in the state legislature to consider pitching large bonds to voters to secure funding. The proposed bonds include housing, education, and climate bonds, all of which are expected to be included in the November election and approved by voters.
In May, Governor Newsom proposed a budget revision for the 2024-25 fiscal year, aiming to utilize the state’s reserves and cut some projects and expenses to balance the budget. However, the state needs to address a $56 billion deficit over the next two fiscal years (until 2026). With funding scarce, lawmakers are looking to issue bonds to finance various projects rather than relying solely on existing resources.
The proposed ballot measures for the November election include two education bonds of $14 billion each, two climate bonds of $15.9 billion and $15.5 billion respectively, and a $10 billion housing bond, totaling $70.4 billion. Given the substantial amount, lawmakers are discussing consolidating and downsizing the bond measures by the end of June and getting them on the ballot.
In the primary election in March, Proposition 1, “Behavioral Health Services and Bond Measure,” passed with a 50.2% approval rate. It allocates 30% of funds from a $2-3 billion annual tax on the wealthy and allows the government to issue $6.4 billion in bonds to address the housing crisis, with a total repayment cost of $9.3 billion over 30 years.
A survey at the end of 2023 showed that 68% of people supported issuing $6.4 billion in bonds, but when it came to the March vote, only 50.2% of voters supported it, with 49.8% opposed. Among California’s 58 counties, only 16 supported the measure, while 42 opposed it. The measure narrowly passed due to the higher number of voters in counties like Los Angeles, Santa Clara, San Francisco, and Sacramento, with support ranging from 54% to 73%.
The measure passed without opposition and was supported by Newsom’s Ballot Measure Committee, which raised over $13 million to promote it.
The shift in voter sentiment can also be seen in the Public Policy Institute of California’s public opinion poll. A prediction in February suggested that Proposition 1 would receive 59% support, but 48% of voters believed the California government was wasting taxpayers’ money, and 8% felt it was wasting too much. Around 60% of people believed California would face economic difficulties in the next 12 months.
The primary election results in March showed that California voters were not very enthusiastic about the government issuing bonds. According to Politico.com, Governor Newsom stated post-vote that “the public wants to see results, they are not interested in how much we are spending,” so “we need to be mindful of this when promoting these bonds.”
Under the California Constitution, the legislature cannot generate more than $300,000 in debt or liability without a vote of more than two-thirds of legislative members and approval by the people in an election. Currently, with Democrats holding a majority in both the state Senate and Assembly, easily garnering two-thirds support, the issuance of billions of dollars in bonds will depend entirely on voter approval, with repayment periods likely ranging from 10 to 30 years. Here are some of the proposed bond ballot measures:
Democratic Assemblymember Buffy Wicks of the 14th District introduced AB1657, the Affordable Housing Bond Act of 2024, proposing a $10 billion housing bond to provide assistance for emergency housing, multi-family housing, farmworker housing, low-income and very low-income family housing, and first-time homebuyers.
Democratic Assemblymembers Al Muratsuchi and Mike Fong of the 66th and 49th Districts respectively introduced AB247, the Transitional Kindergarten Through Community College Public Education Facilities Bond Act of 2024, proposing a $14 billion bond for construction and modernization projects from kindergarten to community college facilities.
Democratic Senator Steve Glazer of the 7th District introduced SB28, the Public Preschool, K-12, and College Health and Safety Bond Act of 2024, proposing a $15 billion bond. These two education proposals may be combined to issue bonds as Governor Newsom cut funding for education projects in the May budget revision, and lawmakers hope to cover the required expenses through bond issuance.
Assemblymember Eduardo Garcia of the 36th District introduced AB1567, the Safe Drinking Water, Wildfire Prevention, Drought Preparation, Flood Protection, Extreme Heat Mitigation, Clean Energy, and Workforce Development Bond Act of 2024, proposing a $15.9 billion bond.
Senator Ben Allen of the 24th District introduced a similar climate bond, SB867, the Drought, Flood, and Water Resilience, Wildfire and Forest Resilience, Coastal Resilience, Extreme Heat Mitigation, Biodiversity and Nature-Based Climate Solutions, Climate Smart Agriculture, Park Creation and Outdoor Access, and Clean Energy Bond Act of 2024, proposing a $15.5 billion bond.
Governor Newsom estimated in March that California has the capacity to borrow $20 billion in bonds. Bond issuers acknowledge the need to scale back plans to comply with the limit restrictions. California is facing a $56 billion deficit until 2026, and if these billions in bonds are issued, hundreds of millions or more in principal and interest will need to be repaid annually.