Infrastructure Funding

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How does the state pay for infrastructure?


Over the past decade, we estimate that about 60 of the state’s infrastructure spending was borrowed using bonds. The remaining roughly 40 percent of the state’s infrastructure spending was paid up-front, almost all from special fund revenues, such as taxes on gas.

Sources of the State's Infrastructure Spending 2005-06 Through 2014-15

For more information, see our publication A Ten-Year Perspective: California Infrastructure Spending (PDF).

 


What are bonds?


Bonds are a way that governments and companies borrow money. The state sells bonds to investors to receive “up-front” funding for projects and then repays the investors, with interest, over a period of time. The two main types of bonds used by the state are general obligation bonds and revenue bonds. The state repays general obligation bonds using the state General Fund. The state repays revenue bonds typically using revenue from the fees or other charges paid by the users of the project (such as from bridge tolls). In some cases, certain revenue bonds are paid using the state General Fund. For example, lease revenue bonds are a special kind of revenue bond that the state repays with the rent payments made by the department that occupies the facility. For more information on bonds, see our publication Overview of State Bond Debt (PDF).

 


What is the process for spending bond funds?


Approval of Bonds. Under the California Constitution, state general obligation bonds need voter approval before the state can use them to pay for a project. General obligation bonds can be placed on the ballot by either the Legislature or by the voters through the initiative process. State revenue bonds, including lease revenue bonds, do not need voter approval under existing state law.

Appropriation of Bond Funds. After bonds are authorized, most bond programs still require future legislative action to appropriate funding before state departments can begin spending or distributing the funds. Spending for a limited number of bond programs is continuously appropriated, meaning that a legislative appropriation is not required before bond funds can be spent.

Completion of Projects and Bond Repayment. After bond funds are appropriated, the state is responsible for carrying out the projects itself or distributing the funds to local governments to complete the projects. It is also responsible for selling the bonds, which are repaid by the state over time.

The Bond Spending Process

 


What general obligation bonds have voters passed in recent years?


Since 2000, voters have approved about $112 billion in general obligation bonds that are supported by the state’s General Fund. The large majority of these bonds are for education, transportation, and resources and environmental protection. 

General Fund-Supported State Infrastructure General Obligation Bonds Approved by Voters Since 2000

(In Millions)

Proposition Number

Date

Total Amount Authorized by Voters

Education (K-12 and Higher Education)

47

November 2002

$13,050

55

March 2004

12,300

1D

November 2006

10,416

51

November 2016

9,000

Subtotal

($44,766)

Transportation

1B

November 2006

$19,925

1A

November 2008

9,950

Subtotal

($29,875)

Resources and Environmental Protection

12

March 2000

$2,100

13

March 2000

1,884a

40

March 2002

2,600

50

November 2002

3,345a

1E

November 2006

3,990a

84

November 2006

5,283a

1

November 2014

7,545

Subtotal

($26,747)

Other

14 (Libraries)

March 2000

$350

16 (Veterans Housing)

March 2000

50

41 (Voting)

March 2002

200

46 (Housing)

November 2002

2,100

61 (Hospitals)

November 2004

750

71 (Stem Cell)

November 2004

3,000

1C (Housing)

November 2006

2,850

3 (Hospitals)

November 2008

980

41 (Veterans Housing)

June 2014

600

Subtotal

($10,880)

Total

$112,268

aReflects amount authorized by voters as adjusted by Proposition 1 (2014).

 


How much of the state’s bonds have been sold and are still outstanding?


As of September 2016, the state has about $84 billion of General Fund-supported bonds outstanding—that is, bonds that it has sold and on which it is making principal and interest payments. Of this amount, $74 billion are general obligation bonds and $10 billion are lease revenue bonds.

 


How much of the state’s approved bonds haven’t been sold yet?


As of September 2016, the state has $30.2 billion in General Fund-supported bonds that have been authorized by voters or the Legislature, but have not yet been sold. Of this amount, $26.6 billion are general obligation bonds and $3.6 billion are lease revenue bonds. Close to 80 percent of these authorized but unissued bonds are for resources or transportation-related projects. Most of these bonds are expected to be sold in the coming years as projects need funding.

Authorized but Unissued General Fund-Supported Bonds

Purpose

General Obligation Bonds

Lease Revenue Bonds

Totals

Resources and Environmental Protection

12,036

310

12,345

Transportation

11,055

11,055

Corrections

3

2,818

2,820

Housing

1,448

1,448

Stem Cells

1,005

1,005

Education (K-12 and Higher Education)

617

104

720

Other

428

367

795

Totals

26,591

3,597

30,188

 

For updated information on authorized but unissued bonds, please visit the California State Treasurer’s Office’s Public Finance Division website.

 


How much does the state spend to repay its bonds?


In 2015-16, the General Fund’s infrastructure bond repayments totaled close to $6 billion. One indicator of the state’s debt situation is its debt-service ratio (DSR). This ratio indicates the portion of the state’s annual General Fund revenues that must be set aside for debt-service payments on infrastructure bonds. The state’s DSR has varied over time and is now about 5 percent of annual General Fund revenues.

General Fund Debt-Service Ratio

For more information, see The 2017-18 Budget: California’s Fiscal Outlook.