Prop 3: Can California Afford to End Beneficiary Pays?

Local Costs for Water Supply are $27 billion a year

The Public Policy Institute of California estimated that the California water sector spent an average of $27 billion a year from 2008-2011 on water supply and wastewater treatment, about 84% of which was spent locally.

Water Sector Spending, 2008-2011 Source: 2017 CVFPP Highlights

Natural Resources general fund expenditures are $3.6 billion a year

In 2018-2019, general fund expenditures for Natural Resources total $3.6 billion. Due to ballooning Natural Resources bond debt, debt service is about 33% of general fund expenditures in the Natural Resources area in the 2018-2019 budget.

From 2000-2009, voters approved $19.6 billion in bonds primarily for water supply, water quality, and flood protection – almost quadruple the amount issued from 1990-1999.

If Proposition 3 is passed, Natural Resources bond debt authorized since 2000 will reach $40 billion, more than Transportation bonds, which total $29.9 billion.

The Treasurer’s Debt Affordability reports show that since 2000, California’s general obligation bond debt has quintupled — going from $17.9 billion in 2000 to $89.6 billion in 2018.

Debt service went from 3.0% of general fund expenditures in 2002-2003 to 6.4% in 2017-2018.  The increase resulted in a shift of $4.3 billion in 2017-18 general fund expenditures to debt service from 2002-2003.

Proposition 3 will require $433 million a year in debt service, and $580 million at the peak. Proposition 68 will require $200 million a year in debt service. The funds will likely come out of other areas of the budget.

California’s final 2018-2019 budget agreement provides an example of potential impacts of the shift of $633 million in general fund revenue which would be needed to pay for Proposition 68 and Meral’s proposed bond. Over the amount proposed in the May Revision, the Los Angeles Times reported that California counties got an increase of $250 million for homeless services, and state health, emergency and social service programs got a $100 million increase. The University of California system got an increase of $100 million, and California State University system got an increase of $200 million. This was a total of $650 million.

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