[BATN] Another Q and A on Arnold's megabondage Date: 07 Jan 2006 11:35:28 -0800 X-Fingerprint: sentto-2486642-28193-1136690042-news=energy-net.org@returns.groups.yahoo.com-69.50 Published Saturday, January 7, 2006, by the Associated Press Governor's bond plan falls under scrutiny Q: What is the governor proposing? A Gov. Arnold Schwarzenegger is urging lawmakers to put $68 billion in general obligation bond measures on the ballot to help pay for $222.6 billion in transportation, flood control, school and certain other public works projects. The governor also is asking lawmakers to authorize the sale of another $800 million in lease revenue bonds, which don't require voter approval and sell at higher interest rates than general obligation bonds. The general obligation bond measures would be placed on ballots between 2006 and 2014. Q: What is a general obligation bond? A General obligation bonds are a traditional way of paying for public works projects. Sale of the bonds needs voter approval and paying them off, with interest, is the first obligation of the state treasury. Q Why can't the state pay for Schwarzenegger's program without borrowing? A A number of legislators support using more of a pay-as-you-go approach to financing public works projects, but the sheer size of the governor's plan would make it difficult to finance just by using year-to-year state revenue. Q How much bond debt does the state have now? A As of Nov. 1, the state had nearly $53 billion in bond debt. Another $37.2 billion in bonds haven't been sold yet because the money hasn't been needed for the programs the bonds will finance. Q How much would Schwarzenegger's plan cost the state in interest? A It depends on the interest rate the state has to pay to bond buyers. For example, a 4.6 percent interest rate paid over 30 years would cost taxpayers about 85 cents in interest for every dollar in bonds sold, according to the legislative analyst's office. Q How good is the state's credit rating? A Not good, although there have been improvements in recent years. California is currently tied with Louisiana as the state with the worst ratings. That means it's paying about two-tenths of a percentage point more in interest on its bonds than states with the highest ratings. Steve Zimmermann, an official with Standard & Poor's, one of the nation's major bond rating houses, says the governor's plan shouldn't result in lower ratings and suggests California's ratings would improve if the state could eliminate persistent budget deficits. Q Would the governor's plan freeze out other bond proposals? A Possibly. Schwarzenegger also is urging lawmakers to approve a constitutional amendment that would limit annual debt service payments to no more than 6 percent of the state's general fund. Administration officials predict that debt service payments, now at 4.5 percent of general fund revenue, would climb to 5.91 percent in 2014 under the governor's plan before declining. Email article texts/URLs for posting to . Manage your subscription by sending a blank email message to: BATN-subscribe@yahoogroups.com to subscribe, BATN-unsubscribe@yahoogroups.com to unsubscribe, BATN-digest@yahoogroups.com to switch email to digest mode, BATN-normal@yahoogroups.com to switch email to normal mode, BATN-nomail@yahoogroups.com to switch email delivery off. See http://groups.yahoo.com/group/BATN for web access & archives.