(The Center Square) – The California Treasurer’s Office says taxpayers saved millions of dollars after the agency sold more than $2 billion worth of general obligation bonds earlier this month.
Approximately $2.4 billion of tax-exempt, fixed-rate bonds were sold on March 11, which included $1.4 billion of various general obligation bonds and $1 billion of general obligation refunding bonds.
The bond sales will save California’s taxpayers an estimated $121 million over 20 years, according to the Treasurer’s Office.
The office said selling those bonds generated money for:
Kindergarten Through Grade 12 Schools and Local Community College Public Education Facilities Modernization, Repair and Safety Bond Act of 2024.The California Drought, Water, Parks, Climate, Coastal Protection and Outdoor Access for All Act of 2018.The Safe Drinking Water, Wildfire Prevention, Drought Preparedness and Clean Air Bond Act of 2024.
However, financial experts told The Center Square on Tuesday that the sale of those bonds is merely a refinancing.
“It seems the savings are an accounting exercise,” said Wayne Winegarden, a senior fellow in business and economics at Pasadena-based Pacific Research Institute.
The refinancing “reduced interest costs so it saved money,” Winegarden said, answering The Center Square’s questions by email.
Saving money in interest payments on general obligation bonds is good, Winegarden said. But he added that doesn’t solve the problem of operating state programs with borrowed money.
“The problem arises because policymakers are funding kindergarten programs with debt,” Winegarden told The Center Square.
The Treasurer’s Office did not respond to The Center Square’s request for additional comments. Lawmakers on finance-related committees in the California legislature also did not respond on Tuesday.
A report published earlier this year by the California Debt and Investment Advisory Commission shows that the state’s bond debt exceeds $99 billion, with state and local debt standing at $99.1 billion. Long-term debt across the state consists of roughly $90.1 billion, an increase of 11.6% over the five-year average, according to previous reporting by The Center Square.
Additionally, California faces a $35 billion multi-year structural budget deficit starting in the 2027-28 fiscal year, according to a report from the Legislative Analyst’s Office. The budget deficit is caused in large part by constitutionally-required expenditures related to K-12 and community college spending requirements.
According to the California Department of General Services, general obligation bonds are a form of long-term borrowing that allows the state to pay back with semi-annual payments. The state’s constitution requires that general obligation bonds be approved by the majority of the public. The constitution prioritizes the payment of general obligation bonds above other debt taken on by the state, except for bond debt related to K-12 and higher education.
