The November ballot asks voters to authorize about $44 billion in bonds for housing, down payments and medical research, but only two of the three would be repaid from the state’s general fund.
Californians almost always say yes to bonds. Since 2000, voters have approved 23 of the 26 statewide bond measures put before them, CalMatters has calculated. This year there are three on the ballot, totaling roughly $44 billion, and they are built so differently that the same “yes” means very different things for the state budget.
The state already spends about $6 billion a year repaying roughly $80 billion in outstanding bonds, and voters and lawmakers have approved another $40 billion that has not yet been sold, according to CalMatters. In its overview of state bond debt, the nonpartisan Legislative Analyst’s Office puts current debt payments at about 3 percent of general fund revenue, below the historical average of about 4 percent. If Propositions 1 and 38 both pass, the analyst estimates, they would add about $1 billion a year combined, or roughly half a percent of the general fund.
Proposition 1: $10 billion for housing, plus veterans’ loans
Proposition 1, placed on the ballot by Senate Bill 417, would let the state sell $11.25 billion in general obligation bonds. According to the analyst’s review, $10 billion would be repaid from the general fund, at a cost of $500 million to $600 million a year for about 25 years, or roughly 15 percent more than paying cash. The other $1.25 billion would fund home loans for veterans, which the veterans repay.
Most of the money, about $7.2 billion, would go to building, rehabilitating or buying apartment complexes for low-income renters, mostly through loans to affordable-housing developers. Smaller shares would go to homeownership programs, farmworker housing, UC and CSU student housing, tribal housing and local pilot programs.
The analyst estimates the bond could produce up to 40,000 rental units, about 2,500 farmworker units, about 1,200 student beds, and help for up to 40,000 households, about 2,100 of them veterans’ households.
Gov. Gavin Newsom, the state Democratic Party, Airbnb and major labor unions support the measure. The California Republican Party is officially neutral. Several Republican lawmakers voted against the underlying bill in June, arguing that its title, the Veterans and Affordable Housing Bond Act, overstated how much of the money would go to veterans.
Proposition 37: up to $25 billion, repaid by buyers
Proposition 37 is the unusual one. It would let the California Housing Finance Agency issue up to $25 billion in revenue bonds and lend the proceeds to first buyers of newly built homes, covering up to 17 percent of the purchase price, with buyers putting down at least 3 percent. Households earning up to twice the area median income would be eligible, according to the analyst’s review, which projects no direct costs to state or local governments because the bonds would be repaid from the loans.
Its champions are Bob Hertzberg, a former Assembly speaker, and the California Association of Realtors, CalMatters’ Ben Christopher reported. Eric McGhee of the Public Policy Institute of California estimated it could help anywhere from 60,000 to more than 1.8 million buyers. Edward Pinto of the American Enterprise Institute warned that second-mortgage bonds would be a riskier investment; with ordinary mortgage rates above 7 percent, he told CalMatters, investors “are going to want a fair amount more than that.” The San Diego Union-Tribune’s editorial board has called it a gimmick.
Proposition 38: $8.4 billion for research
Proposition 38 would authorize $8.4 billion in general obligation bonds for immunology and related medical research, costing $500 million to $600 million a year for about 20 years, or about 10 percent more than paying cash, the analyst estimates.
Half the money would go to a nonprofit research institute affiliated with the University of California. CalMatters has reported that only one institute now appears to meet the criteria: the California Institute for Immunology and Immunotherapy, whose principal funder, the billionaire Gary K. Michelson, wrote the measure. At a September news conference, Robin Swanson, a spokeswoman for the Yes on 38 campaign, said it was “very likely” the institute would qualify. A UCLA official told the UC Regents on Sept. 16 that the institute had three employees, CalMatters reported, far fewer than the 51 it had planned to hire by 2025. The measure exempts the institute from state public records and open meetings laws; a campaign spokeswoman, Claudia Briggs, has said it would publish annual reports and face state audits instead.
In a written response to questions from the Inquirer, Ms. Swanson said the measure is endorsed by both the California Republican Party and the California Democratic Party and by patient groups including the Michael J. Fox Foundation for Parkinson’s Research, the Alzheimer’s Association and Blood Cancer United. On the other half of the money, she wrote: “Half of the funds will be awarded competitively to nearly two dozen leading universities and nonprofit research institutions across California.” She added, “Grant allocations will be decided by scientists and researchers.”
On the institute’s readiness, she wrote: “The California Department of Public Health will determine which institute will receive half of the bond funds, and will only award grants if an institute meets the requirements. If an institute isn’t deemed ready, it won’t receive funds.”
Supporters also argue that the state needs a hedge against federal research cuts under the Trump administration, which has said its changes to federal science funding are meant to rein in overhead costs and refocus grants on its priorities. Opponents object to concentrating half the money in one institute. The yes campaign has raised more than $66 million, at least $61.2 million of it from Mr. Michelson and his policy institute; the no side has raised about $8,800, according to CalMatters.
Who did not answer
The Inquirer sought comment on Sunday from the Legislative Analyst’s Office, the state treasurer’s office, the Yes on 1 campaign and the No on 38 campaign. They did not respond by publication.
Graham Ostrowski covers the governor, the Legislature, state agencies and the state budget for the Sacramento Report. More from Graham Ostrowski
