Prop 41 – Re-Allocation of Bond Authorization From One Veterans Program To Another, Better One

Recommendation: Strong Yes.

Long-time readers of this blog (or its predecessors) are aghast: Is that really a “strong yes” on a bond measure? Collect yourselves; it is. The reason is that this is an unusually smart bond measure. Also, as our title suggests, while this is correctly identified as a state bond measure, thanks to our surprisingly fiscally conservative state legislature, we view it as more of a re-allocation of already authorized bonds from one program to another.

First, unlike most initiative-created bond measures, this one is not created by an outside special interest group seeking to shift more money away from the ever-shrinking discretionary funds managed by the legislature. Rather, this initiative finds its roots in Assembly Bill 639, sponsored by State Assembly Majority Leader John Pérez and passed both the Assembly and the State Senate unanimously. So, this is bond measure that has been planned for and is supported by our legislature as opposed to one that is being foisted upon them (as is the case for most bond measures).

Second, the legislature actually did plan for this measure. They identified an underutilized Cal-Vets program Created in 1922 and most recently funded by initiative in 2008. That program has about $600 million in authorized but unused bonds intended to help vets. So, the legislature de-funded $600 million in that program and passed AB 639 creating Proposition 41 to authorize the same $600 million in bonds be used for a smarter program. We at PolitoMuse are not fans of micro-managing our legislatures, so we would argue that it should be sufficient that the legislature has unanimously found the new program to be superior for us to support it. Nevertheless, the information in the voter guide and on-line suggests that the new program is more specifically directed toward low and very low-income veterans, whereas the old one is not. We think that is sensible. It appears that the problem with the old program was essentially that the vets, who qualified for it, didn’t need it because they have sufficient resources to qualify for market loans. Those that needed it, because they lacked financial resources, couldn’t qualify (see e.g. http://www.latimes.com/opinion/editorials/la-ed-vets-housing-bonds-20130915-story.html).

There is one key difference in the “new” bonds issued through Proposition 41 as opposed to the old ones they are replacing. The old Cal-Vets program used monies collected from the vets to repay the bonds. So, while taxpayers were technically obligated by the bonds issued, they did not actually have to repay them; that was done by the vets who were beneficiaries of the program. Of course, this also meant the program could only be used by those who could repay the debt – hence the reason that the old program was under-utilized. The new program does not require the beneficiary to be able to fully re-pay the debt. So, presumably taxpayers will actually shoulder some if not all of the repayment obligation.

We think it is appropriate for taxpayers to help pay to house low-income (defined as earning no more than 80% of income earned by local families) and very low-income (defined as earning no more than 30% of income earned by local families) vets in California. We like that unlike the prior program this one will help homeless vets – a huge and ever-growing problem in California. (We’ll avoid the obvious rant about how reprehensible it is that brave men and women, who have endured combat and the associated physical and emotional scars, come home only to be forced to sleep on the streets.)  Also, we note that there are countless studies that show that paying to house very low-income individuals is far less expensive (i.e. more fiscally sound) for state and local governments when compared to allowing those individuals to remain homeless. Here is one study that shows that the total cost of “supportive housing” is about $600 per month while the aggregate costs to governments in dealing with the same individuals when they become homeless skyrockets to $2,897 (See http://www.economicrt.org/pub/Where_We_Sleep_2009/Where_We_Sleep.pdf). So, from both a moral and a financial standpoint, this program seems to make sense. Add to this analysis the fact that this program is intended to work with local governments, non-profits, and private investors, to leverage their monies and expertise, resulting both in better results and increased economic activity (funding increased construction etc.) and this would seem to be something of a “no-brainer.” This point also eliminates another of our common “pet peeves” regarding bonds – this proposal uses bond monies to build assets (here buildings and houses) generally, that is a more responsible use of borrowed money (as opposed to using borrowed money to simply fund continued salary or other operating costs in a program).

The US Department of Housing and Urban Development (HUD) issued the most recent “Annual Homeless Assessment Report (AHAR) to Congress” in 2013 (https://www.onecpd.info/resources/documents/ahar-2013-part1.pdf) That study found that California has the highest percentage of homeless population in the U.S. and that after years of decline, the total number of homeless in California suddenly increased in 2013.  It is widely anticipated that as veterans continue to come home from the recent wars, those numbers will continue trending up.  Meanwhile, the number of homeless shelters in California declined.

Finally, we readily dismiss the single individual – Gary Wesley – who provided the argument against this proposition. His suggestion is that to address the present problem of homeless veterans the U.S. should avoid going to war in the future. Unless Mr. Wesley has a time machine, we don’t think that is sound policy.

VOTE YES

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