Cal-Vet Bonds: A Good Deal

Military veterans deserve a break in peacetime. By supporting Proposition 206, the Veterans Bond Act of 1996, voters have an opportunity to continue helping Californians who have risked their lives in war to buy a farm or a home, at no cost to taxpayers.

Proposition 206 would establish a $400-million bond issue to bolster the Cal-Vet program, which since 1921 has provided low-interest loans on advantageous terms to help veterans with property purchases. The Cal-Vet program buys farms and homes and then resells them to veterans.

Veterans’ payments cover all the costs resulting from the sale of bonds, including interest estimated at $300 million in this case, plus the costs of operating the program. There is also a federal VA home loan program, but the California program is a direct contract for purchase; the federal program is simply a loan guarantee. The state plan is also self-liquidating, while the federal one relies on other lenders.

Those who oppose the measure argue that even though the program has always been financially self-supporting, the California real estate market has changed and foreclosures are running at an all-time high. Opponents are afraid that the veterans may default on their loans, leaving taxpayers to foot the bill.

They have no real basis for fear, however. In the program’s 75 years of operation, more than 405,000 California veterans have financed their farms and homes through this program, in good times and times far worse than now. The record of peacetime repayment has been excellent.

California voters have in the past approved a total of $7.5 billion in general obligation bond sales to finance these veteran purchases. If Proposition 206 is approved, it will enable at least 2,000 additional veterans to receive loans that will be paid off over a 25-year period. Proposition 206 was passed by the Legislature without a single opposing vote. November’s voters should do likewise.