No on 53

Proposition 53 is a voter-initiated constitutional amendment to change the way certain kinds of bonds are sold by California and its agencies (but explicitly *not* subdivisions like cities, counties, and school districts).
BACKGROUND
In order to discuss Proposition 53, it is first necessary to discuss the difference between two kinds of bonds: general obligation bonds and revenue bonds.
A *general obligation bond* is a bond measure which is backed by “the full faith and credit of the state of California”. Legally, repayment on these bonds is one of the first obligations of the general fund; the state is bound on the repayment and must prioritize repayment over almost everything else.
A *revenue bond* is a bond measure which is backed by *a specific revenue stream*. The bond must be repayed out of that revenue stream before the revenue can be used for anything else, but *crucially*, the debt is securitized: if California defaults on the bonds, the bondholders have no ability to demand payment out of anything other than the revenue stream in question.
The normal use cases for this are things like toll bridges (bonds are issued to pay for the construction, and the bonds are repaid out of the toll revenue), dams (bonds are issued to pay for construction and the bonds are repayed either out of the sale of water or out of the sale of power), and aqueducts (bonds are issued to pay for the construction and the bonds are repaid out of the sale of water).
Under the California Constitution as it stands today, *general obligation bonds* can only be sold after they have been submitted to the voters and the voters have approved the sale of the bond. However, *revenue bonds* do not have to be approved by the voters.
WHAT PROPOSITION 53 DOES
Proposition 53 changes the state constitution so that voter approval would be required before the state or its agencies could sell revenue bonds totalling more than $2 billion (adjusted for inflation) for any one project, and prohibits splitting projects into sub-projects to get around this requirement. It also requires the appointment of independent counsel to defend the initiative in court if the Attorney General and the Governor both decline to defend the initiative.
A WORD ABOUT THE DEFENSE PROVISION
The “appoint an independent counsel” provision is there because both the Attorney General and the Governor refused to defend Proposition 8 in federal court, and their refusal was directly tied to the fact that Proposition 8 was overturned and gay marriage was legalized in the state. That proposition was the first time in half a century that the AG and the Governor had both refused to defend an initiative, and their refusal to do so became a cause celebre in conservative circles in California, triggering a real fear that the Governor and AG could not be trusted to defend future initiatives with which they disagreed. This concern seems to be limited to conservative activist circles (although it probably shouldn’t be), and so inclusion of provisions like this is a reliable indicator of the political affiliation of the authors of an initiative – but, while interesting from a political anthropology standpoint, that really shouldn’t (IMO) be the basis for deciding how to vote on an initiative. 🙂
The provision itself is unlikely to ever go into play, as the scenario envisioned by it only happens once every half century or so, and so it’s harmless; and at the same time, it solves a real problem in federal law (under the precedent set in _Hollingsworth_, if the AG and Governor refuse to defend the initiative in federal court, then *nobody can*; this provision is written in such a way as to explicitly authorize someone to act on behalf of the state, which would allow the initiative to be defended in federal court). In my view, this is an unlikely-to-be-invoked provision that is a very good policy idea, and I would vote for a constitutional amendment to mandate it for *all* initiatives. But a provision which does this *just for a specific initiative* is not a reason to vote for that specific initiative; it’s about *how the initiative is defended if challenged*, not *the merits of the initiative’s policy prosecriptions*.
THE MERITS OF THE INITIATIVE
This is probably the simplest initiative on the statewide ballot in 2016, but it tangles deeply with political philosophy. The question voters are being asked to decide is: “should the voters have to approve the issuance of large revenue bonds”, and ultimately that’s an electoral system philosophy question.
For me, the answer is related to the question: “why do voters have to approve general obligation bonds?”
One argument for voter approval of general obligation bonds is that general obligation bonds *in effect* create a lien against future tax revenue, and the voters should only be legally bound to future taxes with their consent. Under that theory, requiring voter approval for revenue bonds is bizarre; revenue bonds do not constitute a lien against anything other than the specific revenue source tied to the bond; the voters aren’t being bound to future taxes, so why require a vote?
Another argument for voter approval of general obligation bonds is that they (usually) constitute huge projects, and that the voters should in general be consulted before any such huge projects are undertaken; under that theory, the voters should be consulted for large revenue bond projects, too.
Another arugment for voter approval of general obligation bonds is that taking on debt is a *moral* commitment as well as a *legal* commitment, and the voters should be consulted before making such a moral commitment. This extends to revenue bonds because, even if the bondholders have no legal recourse beyond the named revenue stream, the state of California is *morally* on the  hook for the dedbt and can be expected to pay it out of any revenue available to it – so *ethically* the bond binds the voters to future taxes even if legally it doesn’t, and therefore rervenue bonds should be subject to voter approval.
I think, in the end, how you vote on Proposition 53 depends on which theory you hold for why general obligation bonds should require voter approval, and I can’t really offer advice on that score. *I* think general obligation bonds require voter approval because they legally bind the voters to future taxes and so therefore should only be undertaken with voter approval, and so I see no reason to require voter approval of revenue bonds; your mileage may vary.
THE BALLOT HANDBOOK’S ARGUMENT IN FAVOR
The official argument in favor seems to be that, by binding the users of particular services to increased fees, revenue bonds bind voters in a way that’s similar to how general obligation bonds bind voters to future taxes. The idea is that this kind of binding is sufficiently like the binding to future taxes as to require the assent of the bound.
But, it seems to me, if that’s the argument, then the vote should be *among the users of the service*. Which is to say: rather than requiring a statewide vote to approve revenue bonds backed by increased fees on the use of water from the aqueduct, the measure should require a vote of *contract customers for aqueduct water*. That would seem conceptually in line with the theoretical argument behind the measure.
THE BALLOT HANDBOOK’S ARGUMENT AGAINST
One of the points made in the argument against is that this meassure doesn’t contain an exemption for emergencies or natural disasters. That is true; there is no such exemptions in the measure.
The argument for *not* having such exemptions is an old one: such exemptions are regularly abused, and so allowing the exemption nullifies the intent of the measure.
But the argument for having such exemptions is also an old one: if (say) the aqueduct is destroyed in an earthquake, absent an exemption, the repairs to the aqueduct either have to be paid out of *current revenue* (which is difficult to imagine, especially given how constrained the Legislature’s spending is by other constitutional and statutory initiatives) *or* cannot take place until after a statewide election – requiring either a costly special election or, in a worst case, a two year delay before beginning.
It’s not clear to me how likely such emergencies are to be served by revenue bonds; a general obligation bond seems like a more logical choice. But a general obligation bond already requires a vote, so the revenue bond seems like the least bad option under current law … and this measure would take the option away.
———
I will be voting against. I don’t see a valid theoretical justification, it ties the hand of state agencies seeking to solve real world infrastructure problems, and it doesn’t contain an emergency exemption.
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