Challenge to Bond Plan

State Treasurer Phil Angelides has begun a television advertising campaign opposing the $15-billion bond measure that Gov. Arnold Schwarzenegger wants to put before voters in March. The ad is the first to oppose Schwarzenegger’s proposals.

Title: “Faces”

Producer: Shorr Johnson & Associates, Philadelphia

Script: As black-and-white images of children flash on the screen, an announcer says: “Gov. Schwarzenegger’s plan to borrow $15 billion will saddle our children with debt for decades. Instead of asking what we can do for our children, Gov. Schwarzenegger is asking what our children can do for us. That’s why California Treasurer Phil Angelides is urging rejection of the governor’s debt plan. Treasurer Angelides says California must face up to its fiscal crisis ... no gimmicks, no tricks. That’s what our children deserve.”

Accuracy: The 30-second ad is part of Angelides’ campaign against Schwarzenegger’s plan to put $15 billion in deficit bonds on the March ballot. Future generations of Californians would have to pay for the state’s deficit spending if the bonds are approved. Like all general obligation bonds, the amount borrowed would have to be repaid with interest over a period of time -- up to 30 years. Depending on interest rates and the length of the borrowing, the state would have to take an estimated $1 billion to $1.4 billion a year out of the general fund to repay investors. That money would not be available to spend on education, health, environmental or other programs. Unlike other general obligation bonds, the state would not have an asset -- a school, college, park, transportation or water project -- when the bonds were paid off.

Analysis: The ads by the state treasurer, a Democrat who plans to run for governor in 2006, come after several months in which Angelides has been outspoken about the need to reduce the amount of borrowing to cover deficit spending. He notes that California’s credit rating is now the lowest of any state. Angelides has advocated a variety of tax increases, but few ideas about where to cut spending, as alternative ways to close the deficit. His adamant opposition to Schwarzenegger’s deficit bonds are in marked contrast to Angelides’ 2002 program to restructure some of the state’s debt. That program involved refinancing some bonds and stretching out payments on new borrowing to ease pressure on the budget. To date, about $10 billion in bonds have been sold with the new structure, which delays payment of principal for up to five years.

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Compiled by Times staff writer Jeffrey L. Rabin

Los Angeles Times