California Proposition 4: Authorizes Bonds Funding Construction at Hospitals Providing Children’s Health Care. Initiative Statute
Proposition 4 would allow the state to issue up to $1.5 billion in bonds to fund construction at hospitals providing children’s health care.
The bond would ultimately cost the state $2.8 billion to the state, adding $80 million in annual debt service costs for 35 years.
Proponents’ Arguments For
Operators of 13 pediatric hospitals in California contend that they need further infrastructure investment to keep up with demand for the specialized procedures they offer to children with complex and life-threatening conditions.
Opponents’ Arguments Against
The official ballot opponent argues against the measure on the grounds that it would increase property taxes. But since general obligation bonds are repaid with state revenues, the more likely impact would be on sales taxes and income taxes.
Although the children’s medical facilities that would benefit from this measure are nominally non-profit, several have substantial retained earnings. According to state-reported data Reason reviewed in May 2018, 13 California children’s hospitals reported $276 million of net income and over $4.6 billion in net assets. Since a large proportion of children’s hospital revenue comes from government sources, taxpayers have arguably already provided the funds for the proposed hospital improvements. The medical centers could pay for their expansions by spending some of their retained earnings rather than asking voters for more money.
The strong financial performance of California children’s hospitals also supports generous executive compensation. For example, IRS 990 forms show the president of Lucile Salter Packard Children’s Hospital at Stanford receives over $2 million in total annual compensation and the CEO of Rady’s Children Hospital San Diego earns $1.2 million. These compensation packages raise the question of whether the hospitals really need additional taxpayer subsidies.
The Voters’ Guide offers analysis of each of the 11 ballot propositions certified for the election being held on November 6, 2018.