Growing Mystery of Earthquake Financing : Have we squeezed everything we can out of what we have?

Gov. Pete Wilson wants to finance earthquake repairs with $1.05 billion in new bonds. Democrats, in a blocking maneuver, have amended his proposal to automatically impose a temporary quarter-cent sales tax increase if voters reject the bond issue, scheduled for the June ballot.

The governor opposes this tax increase. The Democrats, wary about asking Californians to assume more debt, favor a pay-as-you-go approach. But there’s a third way, isn’t there? California could finance at least some earthquake repairs with millions in previously approved but unspent bonds. And until the bonds can be sold, agencies could tap into another source of funds, the $26-billion investment fund run by the state’s Pooled Money Investment Board.

Sacramento ought to exhaust these alternatives before initiating the cumbersome process of issuing yet another pile of bonds. If more financing is needed, paying as we go with a temporary quarter-cent sales tax and/or a gasoline tax dedicated to highway repair is preferable to increasing the state’s indebtedness.

THE AMAZING BACKLOG: California already has an earthquake bond backlog. In 1990 voters approved the Earthquake Safety and Public Buildings Rehabilitation Bond Act to provide $300 million for seismic retrofitting and replacement of state and local government facilities. Most of this money, $196 million, remains unspent.

Why the backlog? Part of the problem is the excruciatingly slow process to activate bonds. Once the voters OK a bond issue, the Legislature must approve use of the funds. Then the specific plans must be certified by bureaucrats. It’s no wonder that, amid the snarl, the state treasurer’s backlog includes unsold bonds authorized 10 years ago.

Other bond funds also could be appropriated for earthquake repair. Wilson’s office already has identified $75 million in higher-education bonds--approved in 1988, 1990 and 1992--that could be used to help rebuild Cal State Northridge as well as buildings on other college and university campuses damaged in the Jan. 17 quake. However, Wilson submitted the appropriation to use these bonds to the Legislature in the same bill proposing the $1.05-billion bond issue for the June ballot. The higher-education bond appropriation should not be stalled this way. Spin it off separately to get those repair funds spent rapidly.

THE UNDERRATED OPTION: The State Allocation Board, which oversees a reserve account, may have discretion to allocate an additional $74 million in K-12 school bonds for earthquake repairs. Until any bonds to finance earthquake repair are sold, the State Pooled Money Investment Board, a short-term investment fund, can provide a line of credit of up to $1 billion to enable state agencies to begin construction more quickly. Agencies use the unsold bonds as collateral for loans.

Though the governor’s office insists otherwise, surely existing bonds could be used to finance some of what Wilson proposes now. For example, might not the $65 million for earthquake repairs to state buildings that Wilson wants be financed with the 1990 bonds? Similarly, could not parts of the $265 million for public infrastructure and schools be covered with existing bonds? Roughly half of the proposed $1.05 billion from new bonds is for the California Disaster Housing Repair Agency. Yet after the 1989 Loma Prieta quake, the agency was funded at $130 million with a temporary sales tax to help single-family and apartment owners rebuild. Why not again?

Sacramento is making a political game of addressing the state’s pressing earthquake needs. The federal government acted quickly and responsibly in securing aid for California. Sacramento should too--by the ledger, not by the party.