The California Bailout - Not Enough, Won't Help
The economic recovery that is currently being bandied about in Congress, particularly in the House, would deliver $4.5 billion dollars for infrastructure projects to California. That's 10% of overall infrastructure spending, which is in line with our population, but the overall pot for infrastructure is too small nationwide, and that kind of relief is not enough to make a dent in the budget nightmare. The fact that money for tax cuts designed to snare Republican votes is crowding out infrastructure spending and job creation contributes to this, but the other problem is the deteriorating nature of our infrastructure, which could cost half a trillion dollars to fix properly. All that money doesn't have to come from the Feds, but with the bond markets unwilling to deliver for California until a budget solution is made, $4.5 billion over two years is a drop in the bucket, and the problem will grow worse. This shows why floating bonds is a horrible way to fund government.
The report cites California’s dependence on bond financing as a chief reason the state can’t meet its infrastructure financing needs. California has increasingly used borrowing through state general obligation bonds to finance infrastructure projects. But the need for infrastructure investment far exceeds the capacity of these bonds, according to the report, Paying for Infrastructure: California’s Choices. Years of declining investment have left the state with crumbling classrooms, congested roads, and an aging levee network that puts many homes and businesses in harm’s way. Problems in the government bond market are making it more difficult to sell the bonds already authorized, and in the long term, large projected budget shortfalls will limit the state’s ability to rely on these bonds to meet California’s future needs.
We can of course see this right now, and the effects are widespread. With the bond markets frozen, environmental projects all over the state have to be shut down, having a very real impact on the environment and public health. Forget the more innovative projects we'd all like to see strengthened with fiscal investment - like the growth of the solar industry and even wave harvesting, the type of green jobs that can save our economy - we're not even going to be able to clean the ocean this year.
If swimmers in Santa Monica Bay bump into trash or bacteria this summer, one culprit will be California's budget impasse.
Hundreds of millions of dollars worth of voter-approved projects have been halted because of the state's financial problems. That includes $12 million that the Santa Monica Bay Restoration Commission was counting on to prevent dirty storm water and filthy runoff from draining into the bay.
"People expect to be able to enjoy the beach and not come home sick," said state Sen. Fran Pavley (D-Agoura Hills), chairwoman of the state Senate Water and Natural Resources Committee.
The money freeze has immobilized construction of new biking trails along the Santa Ana River in San Bernardino and Orange counties. It has stopped plans to tear down the Matilija Dam in Ventura County and restore the sediment-filled Matilija reservoir. It has impeded efforts to boost the populations of salmon and steelhead trout off the coast of Los Angeles and Ventura counties.
These are not small inconveniences. A new report from Brigham Young University scientists shows that cleaner air, for example, has a direct effect on increasing the lifespan of a population. There is a cost to bad borrowing. If we can't fund infrastructure, the ports and the oceans don't get cleaned. Smog reduction projects may shutter. The air gets dirtier. And you die three years earlier.
California's delegation needs to push for General Fund relief in the recovery package, as well as federal guarantees for our municipal bonds, which would frankly jump-start projects faster than anything. If it's good enough for the banks, it should be good enough for California.
UPDATE: OK, the CBPP has a more comprehensive report, and the numbers are much more in line with current needs. They predict that California will get $11.1 billion in increased Medi-Cal spending, and $7.8 billion from a new State Fiscal Stabilization Fund, in addition to the infrastructure spending. That approaches $20 billion over the next two fiscal years.
Now THAT'S better. A fiscal stabilization fund in particular is a great idea.