Time to Say No to Borrowing Another Billion

California can't afford Prop. 3 hospital bond

California Gov. Arnold Schwarzenegger says he may go begging to the federal government for a $7 billion bailout so the state can pay its bills in the coming weeks. And yet the state still wants to borrow $16.8 billion through the various bond initiatives on the ballot, including Proposition 3.

Prop. 3 asks for $980 million to expand children’s hospitals – undoubtedly a great cause. It’s such a wonderful cause that California taxpayers borrowed three-quarters of a billion dollars for it just four years ago.

In 2004, voters passed Proposition 61, authorizing $750 million in bonds to help children’s hospitals. As of June 1, 2008, just over $400 million of Proposition 61’s funds had actually been awarded to eligible hospitals. That leaves nearly $350 million unspent. Why?

Including interest payments, Prop. 3 will cost taxpayers $2 billion. The state budget deficit is $15 billion. Schwarzenegger may borrow another $7 billion from the feds.

And thanks to bond initiatives like this, California has been on a wild borrowing spree for years.

The state’s authorized general obligation bond debt has nearly tripled over the last six years, from $42 billion in 2001-02 to a massive $120 billion in 2007-08.

Borrowing is way up because state lawmakers don’t want to make difficult budget decisions.

When times are tough, families cut costs. We stop eating out, carpool, or cancel cable TV service to save money. Politicians just ask for higher credit limits.

Legislators could free up some funds for escalating hospital construction costs and the need for advanced medical technologies, or just make children’s hospitals a higher priority in the annual budget.

Instead they want to put this on the credit card.

Eight private and five University of California children’s hospitals stand to reap the rewards of Prop. 3. The Chronicle reports the private hospitals are spending about $900,000 each, $7.2 million total, to pass Prop. 3. Why not spend that $7.2 million caring for kids?

Because they think it’s an investment. Each of the eight private hospitals would get about $98 million if Prop. 3 passes. In this economy, with $750 million in bonds recently approved for children’s hospitals (and more than $300 million still unspent), taxpayers should say no.

It is time to cut up the credit cards and pay as we go.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets. Moore leads Reason's policy implementation efforts and conducts his own research on topics such as privatization, government and regulatory reform, air quality, transportation and urban growth, prisons and utilities.

Moore, who has testified before Congress on several occasions, regularly advises federal, state and local officials on ways to streamline government and reduce costs.

In 2008 and 2009, Moore served on Congress' National Surface Transportation Infrastructure Financing Commission. The commission offered "specific recommendations for increasing investment in transportation infrastructure while at the same time moving the Federal Government away from reliance on motor fuel taxes toward more direct fees charged to transportation infrastructure users." Since 2009 he has served on California's Public Infrastructure Advisory Commission.

Mr. Moore is co-author of the book Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield, 2008). Texas Gov. Rick Perry said, "Speaking from our experiences in Texas, Sam Staley and Adrian Moore get it right in Mobility First." World Bank urban planner Alain Bartaud called it "a must read for urban managers of large cities in the United States and around the world."

Moore is also co-author of Curb Rights: A Foundation for Free Enterprise in Urban Transit, published in 1997 by the Brookings Institution Press, as well as dozens of policy studies. His work has been published in the Wall Street Journal, Los Angeles Times, Boston Globe, Houston Chronicle, Atlanta Journal-Constitution, Orange County Register, as well as in, Public Policy and Management, Transportation Research Part A, Urban Affairs Review, Economic Affairs, and numerous other publications.

In 2002, Moore was awarded a World Outsourcing Achievement Award by PricewaterhouseCoopers and Michael F. Corbett & Associates Ltd. for his work showing governments how to use public-private partnerships and the private sector to save taxpayer money and improve the efficiency of their agencies.

Prior to joining Reason, Moore served 10 years in the Army on active duty and reserves. As an noncommissioned officer he was accepted to Officers Candidate School and commissioned as an Infantry officer. He served in posts in the United States and Germany and left the military as a Captain after commanding a Heavy Material Supply company.

Mr. Moore earned a Ph.D. in Economics from the University of California, Irvine. He holds a Master's in Economics from the University of California, Irvine and a Master's in History from California State University, Chico.