$9 billion is looking for a job
Gov. Jerry Brown says President Obama should embark on an FDR-type public works program to stimulate the economy. Excellent idea. And Brown should follow his own advice in Sacramento.
The Brown administration is sitting on $9.1 billion in infrastructure bonds that have been sold and are costing the state a ton in debt payments. A rough estimate is $630 million a year.
But the borrowed money is stashed in various drawers throughout the bureaucracy instead of circulating around California creating jobs.
Why? No one I talked to seems to know. They’re trying to find out. Or they’re waiting for someone to tell them.
There’s a vague partial explanation about the state changing its system of disbursing bond money three years ago and not yet adjusting to it. Something like that.
Sounds a lot like bureaucratic inertia. The governor probably needs to kick some butt.
This came to mind last week when I read excerpts from an interview Brown gave KNX-AM (1070) in Los Angeles.
“We need a national investment to fix our sewers, our schools and roads … [as] Roosevelt did in the Depression,” the governor asserted.
“Unless the president and the Congress come together with a program like we had during the Great Depression, this [slump] is going to go on for another four, five years….
“We don’t have enough coming out of our national leadership.”
But we should have $9 billion-plus in public works money coming out of our state leaders in Sacramento.
Deputy Finance Director H.D. Palmer says the administration is working on it.
“We don’t want that money burning a hole in our pocket,” he says. “Particularly in this environment.”
Agency heads may have overestimated their immediate need for the construction funds, Palmer hypothesizes, and grabbed the money before their projects were ready.
“We thought it would go out faster,” he says. “We’ve been telling them they need to get this money out.”
The message is that if projects aren’t shovel-ready, shunt them aside. Find others that are and spend the money on them.
It’s estimated that every $1 billion spent on heavy construction, for example, creates about 13,000 jobs.
Nearly half the idle money — $4.2 billion — is resting in the Resources Agency, apparently for such projects as levee repair, waterworks, habitat improvement and other conservation.
Caltrans has parked $2 billion, presumably for highway projects. There’s also $1 billion waiting for housing development — and about $2 billion for such things as health facilities, stem cell research, the Air Resources Board, the University of California, community colleges and K-12 schools. It’s a long list.
Since 2009, the state has sold $30 billion in infrastructure bonds, disbursing $21 billion. None has been sold this year.
But, another $2 billion worth go on sale this week. More money just to horde while the state makes additional loan payments? “I don’t think it’s going to be laying around very long,” says Tom Dresslar, communications director for state Treasurer Bill Lockyer.
That would be good. Bond-borrowing has become increasingly costly.
The treasurer calculates that debt service on bonds consumes nearly 8% of the state General Fund, or almost $7 billion. The state is paying off $67 billion in outstanding principal plus $63 billion in interest. In addition, voters have authorized $37 billion in infrastructure bonds that haven’t even been sold.
State Senate leader Darrell Steinberg (D-Sacramento) tipped me off to the unused billions, reporting that he’s looking for a way to pry loose some of it to put people to work. He wonders whether Brown “is being aggressive enough.”
I had called to ask the senator whether Democrats, who rule the Legislature, feel they can cross “jobs creation” off their “to do” list after passing a few major bills that the governor recently signed.
One measure will expedite construction of an L.A. football stadium by fast-tracking legal challenges. A companion Steinberg bill will do the same for other environmentally friendly projects costing at least $100 million. Business interests heralded a bill requiring that new state regulations impose a minimum burden and be cost-effective. Another measure created a single state office to push economic development.
“I think we’ve started to make a dent,” Steinberg said. “But there are no victory laps when unemployment is still over 12%.”
Steinberg said he’ll consider expanding his fast-track bill to cover projects already underway and those costing less than $100 million.
Virtually everyone agrees that California needs to change the nationwide perception that it’s unfriendly to business.
“The best way to deal with perception is to deal with reality and not just have press conferences,” says Allan Zaremberg, president of the California Chamber of Commerce. “Legislators have clearly gotten the message from the people that jobs are pretty important.”
Brown, appearing last week at an L.A. conference sponsored by the Milken Institute, decried excessive state regulation and short-sighted vision by politicians.
“There is a certain slowdown in the aftershock of the Internet boom and bust, the mortgage boom and bust,” he said, “but we have to go forward. Caution is not really the right path. We still need to be bold. Roosevelt was bold. Kennedy was bold.
“Kennedy talked about the moon shot. Get to the moon — that was almost a moonbeam kind of thought.”
A little self-deprecating humor from the man dubbed “Gov. Moonbeam” in an earlier life.
Brown doesn’t need to search the skies for a way to create jobs. He can look right under his nose and find $9 billion for thousands of paychecks.
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