LAO Analysis of the 1995-96 Budget Bill, Part IV-B
Major Expenditure Proposals in the 1996-97 Budget

  • Welfare Grant Reductions and Reforms

    Issues for Legislative Consideration

    The state's capital outlay program should be based on a comprehensive plan that identifies and finances the revitalization of existing infrastructure and the development of new infrastructure to address the state's economic and demographic needs. Unfortunately, the state's infrastructure has been steadily deteriorating over the years and the state and local governments continue to be faced with tens of billions of dollars of capital outlay needs.

    In recent years, bonds have been the primary fund source for capital outlay. As a result, the state's debt service burden has increased significantly since 1990--from 2.5 percent of General Fund revenues to 5.1 percent currently. This debt ratio will decline, in the budget year, if no new bonds are approved and sold. However, if the bonds proposed by the Governor are approved by the Legislature and the voters, we estimate that the debt ratio would peak at 5.5 percent in 1999-2000 and decline thereafter. We believe the state could prudently approve and issue additional general obligation bonds, but in doing so it is essential that any additional bonds--including those placed on the November 1996 ballot--be directed to the state's highest priority needs.

    As we have discussed in the past, state capital outlay programs and the consideration of assistance to local governments have not been reviewed and funded in the context of a statewide program. We believe that the Legislature must undertake a comprehensive review of the state's capital outlay needs, set priorities and establish a financing plan to fund these priorities over a multiyear period. Development of a comprehensive statewide plan should be a precursor of the Legislature's deliberations on bond measures--beginning with those that may be placed on the November 1996 ballot.

    Specific Capital Outlay Issues Facing the Legislature. There are several areas within the state's capital outlay program that merit consideration in the near-term. The following is a list of major areas of direct state responsibility that fit into this category:

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