Time to Say No to Borrowing Another Billion
California can't afford Prop. 3 hospital bond
By Adrian Moore

California Gov. Arnold Schwarzenegger says he may go begging to the federal government for a $7 billion bailout so the state can pay its bills in the coming weeks. And yet the state still wants to borrow $16.8 billion through the various bond initiatives on the ballot, including Proposition 3.

Prop. 3 asks for $980 million to expand children's hospitals - undoubtedly a great cause. It's such a wonderful cause that California taxpayers borrowed three-quarters of a billion dollars for it just four years ago.

In 2004, voters passed Proposition 61, authorizing $750 million in bonds to help children's hospitals. As of June 1, 2008, just over $400 million of Proposition 61's funds had actually been awarded to eligible hospitals. That leaves nearly $350 million unspent. Why?

Including interest payments, Prop. 3 will cost taxpayers $2 billion. The state budget deficit is $15 billion. Schwarzenegger may borrow another $7 billion from the feds.

And thanks to bond initiatives like this, California has been on a wild borrowing spree for years.

The state's authorized general obligation bond debt has nearly tripled over the last six years, from $42 billion in 2001-02 to a massive $120 billion in 2007-08.

Borrowing is way up because state lawmakers don't want to make difficult budget decisions.

When times are tough, families cut costs. We stop eating out, carpool, or cancel cable TV service to save money. Politicians just ask for higher credit limits.

Legislators could free up some funds for escalating hospital construction costs and the need for advanced medical technologies, or just make children's hospitals a higher priority in the annual budget.

Instead they want to put this on the credit card.

Eight private and five University of California children's hospitals stand to reap the rewards of Prop. 3. The Chronicle reports the private hospitals are spending about $900,000 each, $7.2 million total, to pass Prop. 3. Why not spend that $7.2 million caring for kids?

Because they think it's an investment. Each of the eight private hospitals would get about $98 million if Prop. 3 passes. In this economy, with $750 million in bonds recently approved for children's hospitals (and more than $300 million still unspent), taxpayers should say no.

It is time to cut up the credit cards and pay as we go.

Adrian Moore, Ph.D., is vice president of research at Reason Foundation. An archive of his work is here.

Related Studies

California General Election: Voter Guide
 » Press Release
 » Full Policy Brief (.pdf)

Analysis of California's Propositions 7 and 10: Renewable Energy Mandates and Handouts
 » Full Policy Brief (.pdf)

Analysis of California's Propositions 8: Limits on Marriage
 » Full Policy Brief (.pdf)

Redistricting in California: Competitive Elections and the Effects of Proposition 11
 » Full Policy Brief (.pdf)

Drowning in Debt: Bond Measures Threaten California's Already Precarious Debt Situation
 » Full Policy Brief (.pdf)

The Nonviolent Offender Rehabilitation Act: Prison Overcrowding, Parole and Sentencing Reform (Proposition 5)
 » Full Policy Brief (.pdf)

The California High-Speed Rail Proposal: A Due Diligence Report
 » Press Release
 » Full Study (.pdf)
 » Policy Brief (.pdf)
 » More Materials from this Study

More Studies

Related Commentary

Review of the California High-Speed Rail Business Plan
 » Full Text

Measure Q: The Wrong Train
 » Full Text

Just Say 'No' to More Bond Debt
 » Full Text

California Is Headed for a Real Fiscal Train Wreck
 » Full Text

Time to Say No to Borrowing Another Billion
 » Full Text

California Needs Credit Cards to Pay Monthly Bills
 » Full Text

California's High-Speed Rail Plan Is Flawed
 » Full Text

High-Speed Rail Will Add to State's Budget Woes
 » Full Text

California Focus: High-Speed Rail Measure on Wrong Track
 » Full Text

California's Proposition 7 Is Flawed
 » Full Text

More Commentaries