The Push for Bonds--How Much Debt Is Too Much?

COLUMBIA, Calif. —  This town in the Sierra foothills is as close as anything still standing to a living history of the ambitious and treacherous lives that created California in the rush for gold.

It grew to 6,000 men just weeks after John Walker dipped his pan into the glassy cold water of a nearby stream in 1850 and discovered one of the area’s richest finds. Tent camps quickly became supply stores, saloons and brothels; then banks, hotels and theaters.

Nearly 150 years later, much of Columbia’s Wild West-style downtown--stretching about three blocks--has been preserved as a state park. But years of budget cuts have left most buildings blotched with leaky roofs, broken railings and fences, wood rot and rampant termites.

As California approaches its sesquicentennial celebration, Columbia is on the critical list. Sewell Knapp’s old general store may soon be vacated; its red brick walls are so soft and crumbling that it’s easy to push a finger through.

“If history is important in California, then Columbia is important,” said Harry Wright, who sells leather crafts from the same storefront where Knapp sold saddles and harnesses in 1854.

The budget struggle in Columbia is just one example of a foreboding reality facing state policymakers this year. Despite all the hoopla and high spirits lately about a steaming state economy, California emerged from its last recession burdened with debt--about 30% more than the national average--and a mammoth public construction backlog.

The question this year for lawmakers--and for the voters who will soon be asked to consider more bonds--is a delicate assessment of how much more debt is prudent and how much new construction is essential.

Many of the improvements recommended for California’s roads, schools, universities, environmental preserves, water systems and prisons, in addition to state parks, are making up for years of neglect ordered as the state climbed out of bad economic times.

Last year, the state Finance Department estimated that California needs more than $80 billion in new construction over the next 10 years.

The report said funding for about $30 billion of that amount has been identified from a variety of sources, including federal and local funds as well as special fees. But even with long-term bonds, the report suggests that the state cannot afford to pay all of the remaining $50 billion.

“An enormous number of high-priority infrastructure needs face the state in the coming years,” state Treasurer Matt Fong wrote in a study by his office last October. “Unfortunately, given the current level of state borrowing, we will not be able to fund $15 billion of those projects.”

This year, Gov. Pete Wilson has proposed that voters bite off a $7-billion chunk of the state’s outstanding project list by passing several bonds on the June and November ballots.

His proposals would build four prisons; repair state parks and protect endangered environmental preserves; build elementary and high schools; retrofit colleges and universities for earthquake safety, and improve water conservation and flood protection facilities.

Finance experts say Wilson’s plan represents the maximum debt the state could acquire and still remain under a “danger zone” threshold--identified by Fong’s study as a ratio of debt to the size of the state budget and thus a figure that changes year to year. They acknowledge, however, that if Wilson’s plan is passed, the state’s debt level will remain just under the ceiling until July 2003--posing significant limitations for the next governor and future legislators.

State officials say California has more than $20 billion in outstanding debt from bond sales that helped it survive tough times and expand some of the facilities needed for a rapidly growing population. The debt load has climbed in the last six years to about $612 for every citizen in the state--less than some other big states like New York but still higher than many.

Prisons: There are two ways state officials measure the capacity of California prisons these days--how many inmates they are built to hold and how many can be squeezed into almost every square inch of floor space.

At Tehachapi, the massive lockup in the High Desert, the 6,000 convicts are more than twice as many as anticipated by the original design. Now, like the prison system statewide, Tehachapi is approaching its absolute limit.

Each of the five former basketball gyms is stacked so tightly with double bunks that hundreds of men sleep almost within a body length of a half dozen other criminals. One day last month, the place was so full that a busload of new arrivals spent their first night on the floor of a day room.

“We are finally getting to where people are going to prison for a long time,” said Larry Small, the acting warden at Tehachapi. “But we are coming to a precipice. If there is no more money [for new prisons] this year, it is almost too late. The overcrowding will [force prisoner releases and] start undoing the changes we have made.”

Experts predict that prison bonds will be the most difficult to pass. Nearly 60% of voters rejected the last prison bond in 1990 because, sponsors say, there is little public sympathy for the poor living conditions of criminals.

Eight years later, state officials will now tell voters that the system itself is at a breaking point and that their own safety is in jeopardy if the prisons overflow.

California’s prison population is growing at nearly 10,000 inmates per year--enough to fill two new prisons. Nobody is predicting that the rate will slow down.

Just 13 years ago, California’s 47,000 prisoners were held in 12 separate institutions. Since then, 21 new prisons have been built and the inmate population has tripled to about 153,000.

Right now, without any new construction, authorities expect the existing prisons to reach their absolute limit sometime after 2000.

Then, or maybe even before, officials say, the courts will intervene and tell the state that overcrowded conditions are so inhumane that officials will have to release prisoners before their sentences are served.

Already, in places like Tehachapi, authorities acknowledge a significant increase in the brutality of prison life under overcrowded conditions.

Tehachapi guards no longer even bother with paperwork for every fight. They record only the brawls that require guards to use weapons--batons, rubber bullets or gunfire--to break up. Last year, that happened 477 times at Tehachapi.

“At some point, and we are at that point now, there is going to be a rush,” said Small, the acting warden. “I would hate to see us lose [control of] a prison because of this overcrowding.”

Water: There are nearly 33 million Californians today, a jump of about 10% since 1990, according to state demographers. The population is expected to reach 40 million by 2006.

More people use more water. So Wilson wants to spend part of the $1.3-billion water bond to build more water storage capacity.

A five-year study released by the Wilson administration in January predicts crisis--especially for Southern California--without billions of dollars of water improvements.

In simple terms, the problem is that about three-quarters of California’s water falls on the northern half of the state and can reach the arid south only through one of the nation’s most elaborate plumbing systems.

The report says the last major improvements to that water system were funded in the 1960s when the population was half of its current size. “Water is California’s modern-day gold,” said California Resources Secretary Douglas Wheeler.

Schools: In public schools, California is trying to reduce the size of many classrooms at the same time its statewide enrollment is climbing. Enrollment is up 28% since 1982 and is anticipated to grow almost 20% more over the decade that began in 1996.

Much of the dramatic change is in suburban communities like Northern California’s Elk Grove, where growth is exploding.

Where there are new homes, there are new children and a need for new schools.

The future site of the Arthur C. Butler elementary school in Elk Grove is a wooden framework in the midst of a gravel and dirt field. In the fall, it will open to students; in three years it will be filled to capacity.

“Come what may, we need that state bond to be on the ballot,” said Dave Gordon, superintendent of the Elk Grove School District.

Elk Grove has built 18 schools in the last 10 years, as its student population has more than doubled to about 40,000. School officials expect to build 34 more schools by 2010, when the student population is forecast to reach 80,000.

This year there is a lot on the line for Elk Grove students. The district already has a multiyear plan for building new campuses. But the money to pay for it will depend on a local bond proposal in March--which requires a two-thirds majority to pass--and the success of Wilson’s statewide school bond or a similar version this year.

Any interruption in the cash flow could cause the schools to grow crowded or make the eventual construction more costly, officials say.

The good news for Elk Grove is that education is shaping up as the most popular issue on the political radar this year. Political consultants say chances are good that voters will approve a school bond and--with the economy still doing well--they will probably pass several others as well.

The Environment and State Parks: In some cases, this bond is needed to avert permanent loss. For example, there are hundreds of untouched coastal bluffs and beachfronts that might be lost forever to development if the state does not act soon on purchase options it obtained more than 20 years ago.

Back then, when the California Coastal Commission was formed to regulate oceanfront development, authorities won the purchase options as a trade-off for approving construction elsewhere. Now, nearly 800 of those original options--many in the rapidly developing coastal areas like Malibu and Orange County--are set to expire and return to the landowners.

Wilson’s $800-million environmental bond would help acquire some of those coastal property options. It would also protect endangered species habitat and contribute about $200 million to a pair of federal agreements--one to improve conditions at Lake Tahoe and the other to prevent the logging of California’s last old growth redwood forest near the Oregon border.

The same bond would spend about $310 million on repairs at many of the state’s 264 state parks. Much of it is for structural repairs, like the leaky roof of the old town pharmacy in Columbia.

A day after a rainstorm, there were puddles on the bare wood floor and on the rows of shelves filled with the state’s largest collection of authentic Old West remedies: Jitter Tablets, Abolition Oil, Lung Balsam.

“This stuff is priceless,” Sharon Grout, a state park ranger, said. “We can’t let it go.”

Harry Wright agreed: “This is just a plain different world. I personally can still walk down the street when the fog is out and it’s twilight, and I feel like I’m back 150 years.”

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California’s Debt Picture

Despite an improving economy, California is among the states with a significant debt burden.

State: Debt per capita

New York: $1,840

New Jersey: $1,136

Illinois: $741

Florida: $690

Georgia: $669

California: $612

Ohio: $559

Pennsylvania: $529

Michigan: $360

Texas: $312

1997 National Median: $422

Source: Moody’s Investors Service

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The state Department of Finance estimates that California needs $80 billion in new construction over the next 10 years. Here is how the money would be spent (in billions):

Roads and Housing: $28.65

State Parks and Environment: $7.49

Higher Education: $10.46

K12 Education: $21.99

Youth & Adult Correctional: $9.16

Other: $2.28

Source: State Department of Finance