Prop. 12 benefits vets, pays for itself

There’s a small, innocuous bond proposal at the tail end of Tuesday’s state ballot that could get trampled if voters are in a knee-jerk, no-spending mood. And that would be a shame.

Proposition 12, a $900-million bond to continue the Cal-Vet home loan program for California veterans, is the only spending measure on the ballot that would pay for itself.

All the rest would feed out of the chronically deficit-plagued general fund, piling more spending onto a state government that already can’t live within its means.

The economy is in the dumps, and there’s no recovery in sight. But that’s only part of Sacramento’s dilemma. Capitol politicians -- the governor and Legislature -- simply can’t manage a budget. They can’t agree on how to assure that there’s enough coming in to match what’s going out.

And until they figure that out, it seems imprudent to launch new spending programs.

The one exception is Prop. 12.

To start with, Cal-Vet is not a new program. It dates back 87 years and has proven to be self-financing. Since 1921, more than 420,000 veterans have bought a home or farm through the program at favorable interest rates. They’ve paid off the bonds and covered the state’s administrative costs through their mortgages.

If there’s any cost to the state, it’s indirect. The bonds are tax free, so Sacramento loses out on revenue from bond-buyers’ profits. But investors looking for tax-free bonds will find them somewhere, with or without Cal-Vet.

The program basically works this way:

Most any veteran -- whether on active duty or honorably discharged -- is eligible if he or she has served anywhere while American forces were in combat. That includes members of the National Guard if their unit was called up by the president.

The vet finds a house to buy and applies for a Cal-Vet loan. The state lends the money at slightly below going rates -- from a quarter to a half point under -- and holds the mortgage until it’s paid off.

No subprime. All fixed rates, usually for 30 years. Minimal closing costs. No refinancing. The house has to be the buyer’s personal residence.

“We do foreclose, but not a lot,” says J.P. Tremblay, deputy secretary of the state Department of Veterans Affairs. “Last I checked, there were 16 mortgages in default out of 14,000 we were serving.”

Prop. 12 would provide money for an estimated 3,600 more loans. There’s roughly $100 million left from a 2000 voter-approved bond issue, but that’s expected to go fast as Californians -- particularly guard members -- return from Iraq and Afghanistan.

Cal-Vet bonds have been on the ballot 26 times and never been rejected. The current proposal sailed through the Legislature on unanimous votes. Prop. 12 has no organized opposition. But there’s no money behind a “yes” campaign either.

And the legislative sponsor, Senate Veterans Affairs Committee Chairman Mark Wyland (R-Escondido), says he’s worried, even though the latest Field Poll shows it comfortably ahead.

“There’s been real confusion about this,” he says. “People have confused it with money that comes out of the general fund.

“In an era when people are extremely concerned about the money the state has, they see the word ‘bond’ and think we can’t afford it. These bonds have never cost the taxpayers a single dime. I run into people who say ‘I’m not voting for any bonds.’ But once I explain it, they change their minds.”

Another negative, Wyland says, is the unpopular war itself. “People who believe it was a horrible mistake might think, ‘The heck with Prop. 12.’ ”

“But whatever your view, these veterans have given up a lot of opportunities in order to serve their country. They’ve been on short rations and gone through a lot of sacrifice.”

OK, sold.

But the other bond measures would gobble money from the general fund and compete against education, healthcare, public safety. . . .

Projected deficit spending climbs by the day. It soared to $10 billion last week, and by week’s end number crunchers were speculating about $25 billion.

Gov. Arnold Schwarzenegger declared a fiscal “state of emergency,” announced he’d call a post-election legislative session and warned of steep midyear spending cuts for schools. Maybe even prisoner releases.

“Everyone has to take a haircut here,” he said. “Education gets hit. Law enforcement gets hit. Prisons are going to get hit. And also healthcare is going to get hit. It’s just the math. It’s not me.”

But Schwarzenegger is conflicted. He wants to cut with one hand and spend with the other.

The governor couldn’t resist endorsing two bond measures: Prop. 1A, a nearly $10-billion down payment on a Los Angeles-San Francisco high-speed rail line, costing the general fund $647 million annually for 30 years; and Prop. 3, a $980-million bond to expand and upgrade children’s hospitals, at $64 million per year.

A bullet train is hard to resist. But it’s a luxurious toy compared with California’s more pressing infrastructure needs: A dependable, clean, stable state water system. Expanded local commuter rail and transit. Even pothole filling, not only on local roads but interstates.

Sure, children’s hospitals should be top-of-the-line. But $345 million remains from a 2004 bond measure. And nearly 800,000 California kids don’t have health insurance, largely because the state can’t afford it.

Then there’s Prop. 10, the T. Boone Pickens boondoggle. It authorizes $5 billion in bond borrowing, mostly to finance rebates for buyers of vehicles that burn alternative fuels, such as the natural gas that Pickens’ company supplies. The bonds would cost taxpayers $335 million annually for 30 years, long after the vehicles have been junked.

Schwarzenegger opposes the Pickens prop. He supports the Cal-Vet bond.

The best buy on the ballot, by far, is Prop. 12 for California veterans.

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george.skelton@latimes.com