There are three main reasons why the state has not been rapidly rebuilding California’s public facilities, despite an urgent need.
Two of them I’ve written about recently: gubernatorial ambivalence and bureaucratic inertia.
But the third is a more long-term problem. The state simply does not have enough money to build all that it needs.
A massive public works program is essential to stimulate the stagnant economy, create tens of thousands of jobs and — over the long haul — restore California to greatness after decades of sweeping its decaying infrastructure under the political rug.
There have been fits and starts.
In 1990, then-Gov. George Deukmejian led a campaign for voter approval of a gas tax increase to finance a major highway construction program. But the Loma Prieta earthquake devoured much of that new money.
In 2006, then-Gov. Arnold Schwarzenegger won voter approval of an unprecedented $43-billion public works program for transportation, housing, education, flood control and water facilities. But five years later, only roughly half the bonds have been sold. And of that money, just 70% has been spent. Too many projects aren’t shovel-ready.
The yellow light for public works was first flashed by Gov. Jerry Brown when he was governor the first time in the 1970s. Unlike his father, Gov. Pat Brown — the legendary builder — Jerry Brown preached an “era of limits” and pulled back on capital outlay. He later admitted it was a mistake.
“I surely didn’t expect California to grow like it did,” Brown told me last year as he was starting to run for governor again. “We had tremendous growth. And when you have growth, you’ve got to build: energy, water, roads, transit, schools, jails.”
But the Democratic candidate added a caveat: “We need a design change. We can’t just keep paving over. We’ve paved over the San Fernando Valley. We’ve got to use the land better. We’ve got to use our energy better — the natural resources, the wind, the sun, geothermal.”
Gov. Jerry Brown II has been promoting renewable energy, but hasn’t gotten around to the “design change” on other public works. He has been focused on truly the state’s No. 1 priority: balancing its books.
In the meantime, as I’ve written, billions of sold but unused infrastructure bonds have been piling up in the bureaucracy. As of last month, the total came to $9.1 billion. Brown protested that he actually had inherited a $13.4-billion stash of idle money and is bent on whittling it to $3 billion by next July.
Since then, however, the state has sold another $1.8 billion in infrastructure bonds. And there’s an additional $35 billion in voter-authorized bonds available for selling.
Hoarding borrowed billions that you’re making loan payments on but not spending makes no sense. But borrowing the remaining $35 billion and asking voters to approve still more bonds in future elections — as is a virtual certainty — makes little sense either until the state figures out a better way to pay them off.
Generally, every borrowed dollar costs another dollar in interest; $1 billion costs $2 billion. That’s $1 billion in taxpayers’ money lining the pockets of investors instead of paying for operating schools, clinics, parks or prisons.
The state budget already is pinched. The General Fund, which finances 80% of infrastructure bonds, has been slashed by 17% in the last three years.
“If you want to pay for capital outlay, you can’t pay for schools, colleges, parks or something else,” notes Democratic state Treasurer Bill Lockyer.
California’s infrastructure was designed for 25 million people, but we’re fast approaching a population of 40 million.
“We’ve got a lot of needs, but we’re never going to be able to finance them with the General Fund,” Lockyer says. “It’s too big a price tag.”
“And we’re going to have to ration,” he continues. “Whatever the bond flavor of the year may be — whatever the politics — there needs to be more discipline figuring out how to divide up the pot of money.”
Good luck with that one. The likes of a bullet train fantasy always seems to attract starry-eyed voters and politicians, governors included. Lockyer long has advocated shifting more bond financing out of the General Fund and into kitties paid for by facility users.
The nonpartisan legislative analyst has promoted the same idea. An August report on infrastructure spending suggested more toll roads and charging fees based on miles driven.
Ideally, the state would take a big step toward pay-as-you-go financing for highway construction and borrow less. To do that, it would need to again raise the gas tax, which hasn’t been hiked in 21 years.
“It makes no sense to borrow if you can have a cash flow,” says veteran highway construction lobbyist Dave Ackerman, once an official in the Deukmejian administration. “A cash flow comes from increasing taxes. Republicans look at that and say, ‘We can’t go for any more taxes.’ Yet this borrowing is killing us.”
The 1990 gas tax boost long ago lost its punch because of inflation and more efficient engines. Motorists are buying less gas to travel the same distance. But they’re causing the same wear and tear on roads. That’s why there’s a mini-movement toward charging motorists a fee per mile driven.
“We’re using the same concrete that was poured in Pat Brown’s day, and it’s starting to fall apart,” Ackerman says. “His infrastructure is the underpinning that made our state strong.
“There are rusty hinges on the Golden State.”
The governor needs to get out his grease gun.