Voters roundly rejected a proposal to make it easier to pass bond initiatives.
Voters roundly rejected a proposal to make it easier to pass bond initiatives.
W ith so much of Election Day coverage this year focused on the presidential race, there is little room in the limelight left for ballot measures — unless they touch on controversial issues. One rejected ballot measure, however, deserves special recognition: Proposition 5 in California.
Proposition 5, which would have lowered the vote threshold needed for municipalities to pass bond initiatives, was overwhelmingly rejected by voters, 55.8 percent to 44.2 percent. By keeping the threshold to a two-thirds supermajority, Californians have some protections against unsustainable government debt, tax hikes, and municipal bankruptcies. In an otherwise mixed bag of ballot-measure results in the Golden State, the defeat of Proposition 5 is worth celebrating.
The California State Constitution requires local governments to obtain two-thirds voter approval to take on bonded debt or raise taxes for a specific purpose. The two-thirds supermajority threshold serves as a check on local governments. As Jon Coupal, president of the Howard Jarvis Taxpayer Association (which opposed Proposition 5), noted, this threshold stops “whipsaw policy changes” by requiring a broader consensus than a simple majority. It also requires local officials to convince a broad swath of residents that the debt and inevitable future tax increases are justified.
This check, however, has not guaranteed fiscal responsibility. In the wake of the Great Recession, three high-profile municipal bankruptcies occurred in California: Vallejo in 2008 as well as Stockton and San Bernardino in 2012. These bankruptcies resulted from poor fiscal management, including the accumulation of debt, unfunded liabilities, and commitments to expensive contractual projects and labor agreements. With the Great Recession and sluggish recovery, these cities lacked the revenue to pay their expenses and obligations, forcing them to declare bankruptcy.
As of 2024, little has changed for the better. Local governments in California have issued $48.15 billion in debt, and the California Policy Center also found that out of the 482 cities in the Golden State, 21 municipalities are at high risk of fiscal distress.
Furthermore, 189 cities, counties, and school districts have yet to publish their Annual Comprehensive Financial Report (ACFR), which provides pertinent information to taxpayers about the financial health of these entities. While keeping taxpayers in the dark, local officials still had the audacity to ask voters to approve new bond initiatives this year.
If Proposition 5 had been approved, these fiscal woes would have metastasized. By lowering the two-thirds supermajority requirement to 55 percent, local officials would have an easier time taking on debt for infrastructure projects. However, “infrastructure” was loosely defined from “facilities or infrastructure for the delivery of public services,” roads, public transportation, broadband internet service expansion, fire suppression, “protection of property from sea level rise,” as well as “private uses incidental to, or necessary for, the public infrastructure” among other things.
Proposition 5 would have granted local governments the ability to borrow for almost any reason imaginable, with the debt to be repaid through local property-tax increases. As Californians flee the Golden State in record numbers, increasing property taxes will chase out the few families and businesses that remain. As tax bases continue to shrink, local governments will scramble to create new revenue or roll over their existing debt, resulting in fiscal meltdowns for many California municipalities.
Easing borrowing for local governments would also create incentives to increase the number of bond initiatives on the ballot. This pattern occurred after the two-thirds supermajority vote threshold for school bonds was lowered to 55 percent in 2000, resulting in California school-bond-approval ratings often exceeding 75 percent and an increase in the number of proposed school-bond initiatives, with limited oversight on these boards.
As Dominic Pino mentioned just before Election Day, local officials often deploy misdirection when arguing for a bond initiative: They focus voter attention on the intended use of the borrowed money rather than on whether it’s a good decision to finance these projects with debt. Pino urged readers to vote no on every bond initiative. By rejecting Proposition 5, Californians have preserved the ability to say no to growing debt, tax increases, and government mismanagement.