Veterans’ Bond Act Of 2008.
Legislative Bond Act

THE QUESTION

Should the state be authorized to sell $900 million in general obligation bonds to replenish funding for Cal-Vet home and farm loans for California veterans?

THE SITUATION

Since 1921, the state has offered veterans long-term, low-interest loans to finance the purchase of homes and farms through the Cal-Vet program. About 420,000 veterans have purchased property through the program. California voters have approved all 26 of the past bond measures to replenish the funding and continue funding for Cal-Vet loans.

THE PROPOSAL

Proposition 12 would authorize the state to borrow $900 million through the sale of general obligation bonds to replenish funding for the Cal-Vet loan program. These bonds would provide funds for at least 3,600 additional veterans to receive loans. The measure requires a simple majority vote for approval.

FISCAL EFFECT

If the bonds are sold at an interest rate of 5 percent and repaid over 30 years, the cost to the General Fund would total about $1.8 billion in principal and interest, with an average payment of about $59 million per year. According to the Legislative Analyst, the Cal-Vet program has been self-supporting, with mortgage payments by veterans paying for the bond debt and all operating costs. However, if veterans’ payments did not fully cover the amount owed on the bonds, the state would have to pay the difference.

WHAT A YES or No VOTE MEANS

A YES vote means that state could sell $900 million in general obligation bonds to replenish funding for Cal-Vet home and farm mortgages for veterans.

A NO vote means that state could not sell these bonds.

SUPPORTERS SAY

• The Cal-Vet loan program has helped hundreds of thousands of veterans invest in homes and farms in California at no expense to taxpayers.
• This program is good for the economy, generating millions of dollars in housing-related jobs.

OPPONENTS SAY

• With home prices declining, state taxpayers could be liable if home buyers cannot make payments or sell their homes.
• This program has indirect costs to taxpayers, since the tax-deductible interest paid to bondholders reduces state tax revenue.

FOR MORE INFORMATION

There do not appear to be any Web sites for either supporters or opponents of Proposition 12.

For more information from the League of Women Voters and others, see Smart Voter on Proposition 12.

The League of Women Voters of California is a nonpartisan organization committed to informed and active citizen participation in government. All citizens, men and women, of voting age are welcomed to join. The League has two roles, citizen education and advocacy. Our election services are carried out by the League of Women Voters of California Education Fund (LWVCEF) and exclude all advocacy.