Bond Delay May Be Costly for State : Finances: Foot dragging could require an additional $10 million from taxpayers. Treasurer says the state cannot continue to borrowing at the current rate.


Gov. George Deukmejian and legislative leaders, already embarrassed by a political impasse in July that left the state without a budget for a record 31 days, now have dragged their feet on a $3.3-billion bond package so long that it could cost taxpayers an extra $10 million.

The additional expense, created by the necessity of sending specially printed ballot pamphlets by first-class mail, is but one of the problems facing Deukmejian and legislators as they wrestle with the bond package that would provide money for such projects as school construction, new prisons, subsidized housing and water projects.

With only two days left to work out some kind of deal before the end of the current legislative session, the governor and lawmakers are confronted by political problems inside and outside the Legislature.

Much of the difficulty stems from the massive scale of borrowing undertaken in recent years. The state must repay $6.6 billion in bond borrowings at an annual cost of $832 million. There also is an $11-billion backlog in bonds already approved by voters but not yet marketed. That includes the record $5 billion approved in the June primary election alone.


Further complicating the problem are four bond proposals for another $2 billion that have been put on the November ballot by various initiative measures.

Thus, if the entire bond package is placed on the ballot by the governor and Legislature, it would mean the possible approval this year of more than $10 billion in bonds in the primary and general elections. The previous record was set in 1988, when voters approved more than $6 billion in bonds. Annual costs of repaying the principal and interest on the bonds could soar to more than $2 billion.

Republican Treasurer Thomas W. Hayes said in a letter delivered Wednesday to Deukmejian and legislative leaders that “we cannot continue to pass bonds at the current rate or we will find ourselves paying so much in debt service that we will be taking away operating funds from important programs like education, transportation and social services.”

Hayes, who took office last year after being appointed by Deukmejian to fill the unexpired term of the late Jesse M. Unruh, did not go on record in opposition to any of the bond measures in the Deukmejian-backed package, but he did lecture that “bonds are not free money. They must be paid back, with interest.”


His Democratic opponent for treasurer, Kathleen Brown, urged the governor and Legislature to take a “go-slow” approach in light of a statewide economic slowdown, the possibility of war in the Persian Gulf and California’s own budget problems.

Both Hayes and Brown renewed their calls on Deukmejian to sign legislation sent to him recently that would put the state on some kind of orderly bond program. “Making these decisions on an ad-hoc basis the way we are doing now is plain wrong,” Brown said during an interview.

The estimate of the extra $10 million cost was made in a letter to the governor and legislative leaders by Secretary of State March Fong Eu, who noted that the Legislature now is eight weeks past the June 28 deadline for placing measures on the Nov. 6 ballot.

Eu said the possible $10 million tab “probably underestimates by a wide margin the actual cost of adding several measures at this late date.” On top of the additional expenses, she said the lateness of the date raises numerous questions about whether a “fair and efficient” election could be conducted.


“The delay is inviting chaos on Nov. 6,” Eu said.

Little progress on the bond measures was reported Wednesday.

Assembly Democrats are balking at the two measures Deukmejian is said to want the most--a $325-million measure to provide assistance to first-time home buyers and money for construction of low-cost housing, as well as a $450-million prison bond proposal.

Deukmejian insists that lawmakers pass the entire bond package that he and legislative leaders agreed to earlier this month--or none at all.


In addition to the housing and prison bond measures, proposals previously agreed to by Deukmejian and the legislative leaders include an $800-million bond measure for public school construction, a $450-million proposal to build additional facilities at community colleges and state-supported universities, a $200-million measure for construction of local courthouses. Other measures would provide $225 million for county jails, $410 million for parks, recreation and wildlife programs, $380 million for water projects and $30 million for child care facilities.

On Monday, the Senate gave final approval and sent to the governor a $400-million bond measure to provide funds for the state’s Cal-Vet mortgage program for veterans.

The proposed $800-million school bond measure contains a provision that would limit to $38 million the amount of bond funds that could be used by the Los Angeles Unified School District to buy the site of the old Ambassador Hotel. The site is owned by Donald Trump, who has been battling the district over his plans to build a giant skyscraper there. The State Allocation Board, which distributes bond funds to school districts, previously committed $50 million to the project. Despite the amendment, a district official said it would not try to block passage of the entire bond measure. “We don’t like the provision, but we are not going to try to inject our will on the entire package,” said Ronald Prescott, a district lobbyist.