Will Governor propose $50 billion infrastructure bond?

By CMTA Staff

Capitol Update, Nov. 18, 2005 Share this on FacebookTweet thisEmail this to a friend

It appears to have not taken Governor Schwarzenegger long to bounce back from last week’s special election losses. He reportedly is in discussions to propose a $50 billion public works bond to help rebuild the state’s aging and outdated roads, hospitals, ports, levees, schools, water treatment systems and other public facilities.

A bond of this size is much larger than previous proposals for state borrowing and would set the Governor on a path not seen since the late 1960’s when then-Governor Pat Brown committed the state to massive public works projects to construct roads, universities, and water conveyance systems. If he is to succeed, the Governor will need the support of the Legislature, business community and labor for this massive building proposal.

Financing public works projects by this method is not without its risks and detractors. Some of the more conservative members of his own party will be highly skeptical and view government borrowing as the wrong way to go to finance these sorts of investments. Democrats may have other priorities for state funds beyond financing the debt for infrastructure improvements.

The Legislative Analyst reports that the current state debt service ration (DSR) is about 4.7 percent .  The DSR is one indicator of the state's debt burden used by policymakers and the investment community.  Even without further borrowing, the LAO projects that the DSR could reach over 7 percent by 2009-10.  This high level is largely due to repayment of the deficit-financing bonds authorized by Proposition 57 (approved by the voters in 2004).  The most recent high point was 5.4 percent DSR in the mid-1990s.

CMTA promotes increased investment in critically needed public and private infrastructure because manufacturers are highly dependent on water, energy, transportation and ports facilities.  CMTA continues its lead in promoting siting of LNG terminal(s) on the west coast through Cal-CASE.  CMTA is an active participant in a coalition to address ports congestion issues and limit imposition of unfair fees.

CMTA will be urging administration officials and legislators to achieve the necessary infrastructure improvements, protect the California economy and improve the fiscal health of the state.
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