Bond Now, Let Others Pay Later

When the economy goes sour, the federal government can always play its ace: Pump dollars into the heartland via tax cuts or the pork barrel, and sign IOUs for the eventual bill. That strategy, in not so many words, was the gist of the President’s Watch-Me-Care State of the Union address on Tuesday.

In the conventional wisdom, this option is limited strictly to the feds. Individual states, no matter how desperate their circumstances, cannot spend more than they receive from taxes. The books must balance at the end of each fiscal year.

However painful during the rough times, this economic fact of life has averted many a financial disaster across the land. The requirement of a balanced budget has kept governors and legislators from wandering into the swamp of deficit financing and forced them into fiscal honesty.

But in California, the old rules may no longer apply. We have, almost without noticing, adopted a nascent form of deficit financing that is growing like a tomato under radiation. And the results could prove as crippling for California as it has for Washington.

Those of you who still vote probably know whereof I speak, because this particular form of deficit financing usually requires voter approval. I refer to bonds, the credit cards of state financing.

In the old days, bonds amounted to an economic side show. Ten million here, 10 million there. They were no big deal, and since they financed construction for items like state universities, bonds acquired a good-guy reputation.

In 1980, for example, California floated exactly $180 million in bonds. For the 20 million of us who lived in California at the time--remember those frontier days?--this sum hardly posed a fiscal threat. We could manage the interest on $180 million.

Then came the deluge.

In ‘84, bonds jumped to the half-billion-dollar level. In ’89 they broke the “B” barrier and went to $1.23 billion.

Last year they hit $3.58 billion.

Altogether, California now owes $12 billion, a figure that remains manageable. But remember, I said this game was only beginning. Sitting on the runway are some $6.7 billion in bonds already approved by the voters, awaiting the signal from state Treasurer Kathleen Brown to roar off the Tarmac.

And just last week the governor, doing his best to imitate the President, let it be known that he intends to pump prime the California economy with a new package of $6 billion in bonds. If these bonds win approval and grind through the system in time-honored fashion, they should begin their priming sometime in 1994.

But never mind the nit-picking. Let us add the numbers. By my figuring, the already approved bonds and the governor’s new package would double California’s indebtedness, pushing the total to $24.7 billion.

What caused the bond explosion? Lots of stuff, ranging from Proposition 13 to politicians more than willing to mortgage the state’s future.

Of all these, one is my favorite: California’s decision, made in the early ‘80s, to build and maintain the largest prison system in the Western world. Stupifyingly expensive, this project was accomplished entirely with state bond funds.

During the decade, we signed up to pay $3.1 billion for new prison construction. About $1.5 billion of that total came in the last two years.

Those were construction costs alone, mind you, and are separate from the perpetual and equally staggering costs of feeding, clothing and guarding the vast herds of the incarcerated now scattered over the landscape.

During that decade, the prisoner population grew from 25,000 to 101,000, a fourfold increase and perhaps the most dramatic jump of its kind in modern history. Just to compare, the entire federal prison system currently houses 67,000 inmates. Texas, the No. 2 state, holds 57,000.

As for costs, the tab for each of our prisoners, every year of their miserable lives, comes to $21,000. That’s average. Some prisons reach $30,000 per prisoner per year.

You might think, given the current fiscal unpleasantness, that we might reconsider our strategy and ask whether we are getting a bang for our buck. Crime rates have not fallen from the 1980 levels, when we incarcerated fewer for shorter periods.

But no. Wilson believes that tough-on-crime still sells, and the new package of bonds will contain hundreds of millions for yet more prisons.

And it will be OK, see, because it’s only bonds. Someone, at some point, will get the bill. Exactly who and when is not so important.

As long as it’s not now. As long as it’s not us.