As we wrote last week, the state's budget problems have effectively halted many infrastructure projects throughout California. For example, Padua Ave. Park in Claremont has apparently been denied $850,000 the City was counting on for construction because the state agency that provided the City grant money can't come through on its pledge due to the state's freeze on the sale of new infrastructure bonds.
Simply put, investors' lack of faith in California's credit-worthiness is causing the state to have to pay high interest rates on the bonds it sells. That's the cost of having to pay to attract skittish bond buyers. With a $42 billion deficit looming over the next 18 months, the state just cannot afford to pay what the bond market is demanding.
The Daily Bulletin has an article today about some of our area's freeway projects that are on hold through at least June, 2009, because of the state's financial problems, and the article notes that even if Sacramento passes a stop-gap measure to close the deficit for this fiscal year, that doesn't guarantee California's bond problems automatically will go away:
Ty Schuiling, who is San Bernardino Associated Governments' planning director, said the agency's plans are contingent upon the state's ability to issue bonds.
"It's not a sure thing that the projects will be delayed or not," he said.
California's ability to use bond revenues for construction projects is hampered by the state budget crisis.
And even if the Legislature and Gov. Arnold Schwarzenegger agree on a budget plan to resolve a multibillion-dollar shortfall, Schuiling noted that there could still be future difficulties if the financially troubled state cannot sell bonds.
"It's not as if bond funds will be available just by pushing a button," he said.
For investors to begin to believe in California again they're going to have to see some signs that the Legislature and the Governor's office are making some structural changes on the way budgets are done in Sacramento rather than using deficit financing and accounting sleight-of-hand to defer those tough decisions until some vague, far off future.
For Democrats, this means less spending; for Republicans, more taxes. There's just no way of getting around that, people.
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