California's Multi-Billion Dollar Bondage Proposition

California's Multi-Billion Dollar Bondage Proposition

NEWS RELEASE – Planetary Solutionaries
For more information contact Patrick Porgans pp [at] planetarysolutionaries.org
3 November 2014

Prop. 1 and 2 will cost taxpayers billions - benefits at least four of California’s 90 billionaires

California Governor Jerry Brown is up for re-election, and, when he wins, will make history as the state's first fourth-term governor.

Ironically, Brown is not out campaigning for his job. Instead, he is the major proponent of two “legislative sponsored” ballot initiatives.

Proposition 1, a water bond”, and Proposition 2, a “rainy day” fund, reportedly have the overwhelming support of Democrats and Republicans.

Brown‘s T.V. ads claim voter approval of Prop. 1 and 2 will enable Californians to save water and money. Also, it will secure the Golden State’s economic and financial future, increase water supply reliability, and help it prepare for climate change.
Taxpayer groups claim that Brown is plunging Californians deeper in debt. Some critics claim Brown is promoting his father’s legacy to complete the SWP. Others contend it is an ingenious financial scheme to use the state’s tax-base, credit rating and natural resources to promote and sustain the fortunes of California’s elite at the taxpayer's expense.

California is already facing a wall of debt of $147.8 billion in G.O. bonds that are authorized, according to the State Treasurer’s Office; repayment on that debt is around $300 billion.

Currently, there is $78.5 billion in outstanding general obligation (G.O.) bond debt. Every dollar the State borrows in G.O. bonds, it cost two dollars, according to the State Treasurer, Bill Lockyer. Repayment costs on the outstanding G.O. bonds are in excess of $150 billion.

In order to put the magnitude of this debt in perspective, the current general fund expenditures to keep the state running is $107 billion. The annual debt service to repay outstanding G.O. bonds is around $8 billion.

Prop. 1 “Authorizes $7.5 billion in general obligation (G.O.) bonds for state water supply projects, including surface and groundwater storage, ecosystem and watershed protection, wetlands restoration and drinking water protection. Voter approval of Proposition 1 would increase state bond (indebtedness) cost averaging $360 million annually over 40 years,” according to the Secretary of State Office.

Mainstream media views Brown as being fiscally conservative; however, his support for the water bond would not save money; it will cost taxpayers $15 billion in new debt. If approved, taxpayers will repay this debt obligation through the state’s heretofore deficit-ridden General Fund.

Prop. 1 and 2 are inextricably tied together. The “rainy day fund” requires annual transfer of state general fund revenues to budget stabilization account. It also requires half the revenues be used to repay state debts. Limits use of remaining funds to emergencies or budget deficits.

Proposition 1 was initially conjured up under former Republican Governor Arnold Schwarzenegger’s Administration, as was the Bullet Train and the Delta tunnels, all of which are being championed by Brown. Schwarzenegger, also viewed as a fiscal conservative, was a strong advocate of G.O. bond indebtedness that Californians will be repaying into the next century. G.O. bonds are backed by the full faith and credit of the State, which has the authority to sell public assets to cover the State’s debt.

Brown kept Schwarzenegger’s Director of Finance Ana J. Matosantos on the job. During the last two budgets of Schwarzenegger’s reign, and the first budget Brown approved, they had made draconian budget cuts from the General Fund in excess of $100 billion during a three-year period.

Selling State Building to Pay for Budgetary Shortfalls: Things went from bad to worse, when the State attempted to enter into a sale-leaseback deal in a 2010. The deal involved the sale of 11 publicly-owned properties the transaction was to extract revenue from the state’s real estate assets to provide revenue for the state’s budgetary shortfalls.
Opponents of the deal challenged it in the courts and it received a scathing review from critics. A report regarding the details of the sale was published by the state’s Legislative Analyst’s Office (LAO).

Opponents view the propositions as a backstop that authorizes a legal way to issue more bonds and drain money from the General Fund that could be used to fund other essential services. They claim that the rainy day fund is just another way of soaking the taxpayers to provide water projects that benefit at least four of California’s 90 billionaires.

According to a report those four billionaires have a combined acreage in excess of 720,000 acres that are in need of water and infrastructure. Water realized from the bond act will be used to plant more permanent crops and foster additional urban development, on lands that they own in central and southern California.

Approval of both propositions would enable Brown and his supporters to open the flood gates and promote more G.O. bonds. Those funds are to be used to cover the debt for the estimated $54.1 billion “Delta fix – twin tunnels” (Bay-Delta Conservation Plan) and the High Speed Rail “Bullet Train”.

Reportedly, since the voters initial approval of the Bullet Train in 2008, construction cost double to $69 billion. Recently, the California Supreme Court refused to hear the case involving the issuance of bonds for the high-speed rail, clearing the way for the state to sell up to $9 billion in G.O. bonds.

Prior to the state’s current budget, draconian budget cut, which took a toll on safety-net services, education, jobs, parks and other public services slashed from the General Fund to offset G.O. bond debt. The state’s credit and bond rating went down the drain, and major investment firms lost interest in the bonds.

While it is not the intent to discount Brown’s assertions, critics claim it is a matter of interpretation. For example, since the mid-1990’s, more than $19 billion in G.O. bonds were authorized, the majority sold. The bonds were spent for water supply reliability, safe and clean water programs, water for fish, drought relief, and habitat improvement. Voters were assuaged to approve those bonds because they had politicians’ assurances that it would resolve the very water shortages the state is currently experiencing, since the mid-1990s.

Government records attest to the fact that Californians have expended vast sums of money on water development projects over the past century. In fact, it was Brown's father, Edmund G. "Pat" Brown, Sr., who successfully launched the California State Water Project (SWP), by getting voters to approve a $1.75 billion G.O. bond, back in November 1960, to build a project that was sold to the public on the promise "it would pay for itself."
The concept was prefaced on the assertion that SWP water and power contractors would be obligated to repay all of the reimbursable costs for the SWP. The record does not support that assertion.

Insiders' contend that Proposition 1 is just another in a longstanding series of a publicly subsidized bailout for SWP contractors. Governor Brown, Sr. conceded that the SWP was knowingly underfinanced and contractually over committed (“sold” more water than it could deliver), since its inception.

SWP contract requires contractors to pay certain annual cost even if they do not receive water; the revelation of the SWP’s economic plight surface at the end of the 1987-1992 droughts.

In 1994, Senate hearings revealed that the SWP was not paying for itself and bond syndicates were troubled about the financial integrity of the Project. Those findings and concerns were affirmed by testimony from SWP agricultural contractors that they were on the verge of default. The crisis prompted the state to resort to issuing commercial paper to make good on the SWP’s financial obligations.

In the ensuing period, politically-connected landowners and water agencies worked out an ingenious financial scheme to use publicly borrowed money, via the promotion and sale of G.O. bonds, to keep the underfinanced SWP afloat. Whichever is the case; Prop. 1 and 2 will be determined by the voters on November 4th. #