Voters in four states will decide bond issues this fall. Here’s why most of them will likely pass.
Voters in four states will decide bond issues this fall. Here’s why most of them will likely pass.
This fall’s election will find voters in California, Maine, New Mexico and Rhode Island voting on bond measures. They range from $10 million to $10 billion.
California voters are deciding on the biggest-ticket items, including a $10 billion bond for climate resilience and another $10 billion bond for schools. If they approve those measures, the state can then sell bonds to people and companies. The state pays the bondholders back later with interest.
“The money that’s generated will be used to fund the things that are in the bond legislation,” said Emmett Institute on Climate Change and the Environment Deputy Director Julia Stein at the University of California, Los Angeles School of Law.
Stein said even though the bonds are large, they’re polling well. Because bonds — even large ones — are easier for voters to get behind than a tax increase.
“They kind of push things out into the future a little bit,” she said. “It’s future citizens of the state that are paying for the bond, not you, today, right now.”
Counties, municipalities and other government entities can issue bonds too. Voters tend to approve them because they pay for attractive new capital improvements.
“If it’s a school district, could we get new buses? Will we build a new gymnasium? Do we get new computers? That sort of thing,” said Tammy Patrick, chief program officer for the National Association of Election Officials.
Politicians like them because it means they’re a relatively reliable, popular way of getting money to do stuff. “It could very well be that those who’ve been elected don’t want to make the decision, and they want to refer it to the people, so that the people get to decide where the money gets spent,” she said.
Once a bond is approved, there is almost always a market for it. The upside for bondholders is low because the interest rate on these bonds tends to be low. But the risk is even lower, which makes bonds attractive to large financing organizations.
“Bonds are backed by the general taxing authority of state governments. So very safe. It’s very likely that they will get paid back eventually. So it’s not a very risky investment,” said ballot measure writer Jackie Mitchell of Ballotpedia.
The quick money that comes with bond measures can also come with consequences later. When buying a house, the homeowner end up paying more than the house cost, because of the years of interest that racked up. Bonds are a loan too, so they work similarly. Plus, just because a homeowner buy a house doesn’t mean they’ll be able to afford it.
“A state or local government could issue too many bonds or be in too much debt. And if they rely on future tax revenue to pay for bonds, then in the future, if tax revenues fall, then the government could potentially struggle to repay that debt without cutting services or increasing taxes,” said Mitchell.
Mitchell says in the past 15 years, states put 128 bond measures on their ballots. And voters have passed all but nine of them.
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