By Jon Coupal | “I’ll gladly pay you Tuesday for a hamburger today.” That was the catchphrase of J. Wellington Wimpy, simply known as just “Wimpy” on the “Popeye” cartoon show. For good reason, the proprietor of the diner rejected Wimpy’s request because of his reputation for not paying on Tuesday.
The inability to repay one’s debts can come with severe consequences, as anyone who has borrowed money from a loan shark can attest. California, despite record revenue coming into the state treasury, has a real problem with debt. High on that list, of course, is the state’s multi-billion-dollar unfunded liabilities for its pension obligations. But we have a problem with bond debt as well.
State-issued bonds can be a legitimate method to finance public projects that have a long useful life. But key to bond financing is a clear and predictable plan to repay those bonds.
California is now on the verge of adopting a second massive boondoggle plagued with financing issues. We are all familiar with the notorious high-speed rail project that was sold to voters as a safe and economical alternative to air travel between Northern and Southern California. A third of the money was to come from the private sector, a third from the feds and the rest from the sale of Proposition 1A bonds. All three of those revenue sources have disappeared in a puff of smoke and, instead, the HSR project is kept on life support through “cap-and-trade” revenue that didn’t even exist when voters approved the original bond.
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