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LWV California Education Fund Nonpartisan Analysis of

Proposition 206

Veterans' Bond Act of 1996

Legislative Bond Act

The Question

Should the state borrow $400 million through the issuance of general obligation bonds to provide farm and home aid for California veterans?

The Situation

Since 1921, voters have passed 25 Cal-Vet bond measures, a total of about $7.5 billion of general obligation bond sales to finance the veterans' farm and home purchase program. About $250 million remains from these funds. Participating veterans make monthly payments to the Department of Veterans Affairs for home or farm purchase, which (1) reimburse purchase costs, (2) cover all costs, including bond interest, and (3) cover the program's operating costs. General obligation bonds are backed by the state.

The Proposal

Proposition 206 will allow the state to issue $400 million in general obligation bonds to provide home and farm loans for California veterans and provide for costs to be covered by veterans' repayments.

Fiscal effect: If the $400 million in bonds were sold at an interest rate of 6 %, the cost would be about $700 million to pay off both the principal and interest. The average cost would be $38 million per year.

Supporters Say

the Cal-Vet program is self supporting and has never cost taxpayers anything.
Cal-Vet loans generate thousands of jobs and millions of dollars in annual payrolls.

Opponents Say

if veterans default on their loans, taxpayers have to pay.
Cal-Vet is an expensive duplicate of the federal Veterans Administration home-loan program.

(Analysis prepared by the League of Women Voters of California Education Fund.)

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Last updated: October 28, 1996
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