Propositions 1, 2, 3 and 37 passed on Election Day, adding debt, a bigger reserve and permanent high-earner rates to the state’s books.
SACRAMENTO, California (Surf Revolt) – While the billionaire tax drew the headlines, California voters quietly approved something with a larger footprint on ordinary budgets. The Associated Press called Proposition 1, a record $11.25 billion affordable-housing bond, and Proposition 37, an untested down-payment financing program, for the yes side, according to CalMatters. Two other measures, a bigger rainy-day reserve and a permanent top income-tax rate, also appeared on the passed list in a results tracker. Together they say a great deal about how California answers the cost of living.
Proposition 1: a record bond for subsidized housing
CalMatters reporter Ben Christopher described the passage of Proposition 1 as the largest housing bond in state history, with nearly two-thirds of the money earmarked for apartment buildings serving low-income residents, including people experiencing homelessness. The rest would pay for low-cost loans for low-income and veteran buyers, farmworker, student and tribal housing, innovation grants and funds for cities planning dense housing. ABC7 noted that $1.25 billion is reserved for veterans.
Supporters say the money could unlock nearly 40,000 units that are ready to build but lack state funding. They point out that regulators estimate California needs 312,500 units a year, and that the last big housing bond, a $4 billion measure from 2018, is almost spent. Developers and affordable-housing advocates lobbied for it. ABC7’s explainer reported that some Republicans opposed it because it does not address why building is so expensive in California in the first place.
That objection is the right one. Look at the math in the reporting: the state’s need is more than 300,000 units a year, and the supporters’ own estimate for the bond is about 40,000 units. Borrowing can finance a slice of the shortfall, but it cannot reverse the cost structure that produces the shortfall. The coverage gave no interest or repayment estimate, which is worth noting because bonds are loans, and loans are repaid by taxpayers.
Proposition 37: a revenue bond for down payments
Proposition 37 lets the state borrow up to $25 billion from private investors through a first-of-its-kind revenue bond, then lend to qualifying buyers to cover most of their down payments. It targets buyers higher on the income scale than Proposition 1’s beneficiaries. The California Association of Realtors and former Assembly Speaker Bob Hertzberg were its principal backers. Critics, according to CalMatters, wondered whether privately financed down-payment loans would be affordable for the people who need help most, and experts questioned how the untested program would work, though most agreed it should not cost state taxpayers.
Hertzberg has said philanthropists and charitable groups might buy the bonds at below-market interest rates, but he named none, and no group had publicly committed. His reaction to the result, in his words, was “It’s real now.” Whether it works depends on investors who have not yet appeared.
Propositions 2 and 3: a bigger reserve and permanent rates
The MultiState results tracker listed Proposition 2, which raises the cap on the rainy-day fund from 10 percent to 20 percent of general-fund revenue, as passed with about 60 percent. Republicans called it a slush fund, ABC7 reported, and warned that it could let the Legislature hold back more tax revenue. Proposition 3 makes permanent the current income-tax rates for earners above $371,000 a year, with 89 percent of the revenue going to K-12 schools, 11 percent to community colleges, and any excess to public health care, per the same explainer. The tracker also showed it passing at roughly 59 percent. Those tracker figures could still change as late ballots are counted.
- Prop 1: $11.25 billion in housing bonds, about 60 percent yes in the tracker.
- Prop 37: up to $25 billion in revenue bonds for down-payment loans.
- Prop 2: rainy-day cap rises from 10 percent to 20 percent of general-fund revenue.
- Prop 3: current rates on income above $371,000 become permanent.
What the package does to the coast’s budget math
Put the pieces together and a pattern appears. California is saving more in good years, taxing its highest earners permanently and borrowing for housing, while leaving untouched the permitting, fee and litigation costs that make a home near the beach cost many times what it should. The same electorate that approved these measures appeared to reject Proposition 45, the plan to speed environmental review, in early returns. Voters embraced spending on the symptom and hesitated at fixing the cause.
A permanent top rate also deepens the dependence on a narrow slice of earners. A reserve twice as large protects the budget during a downturn, which is sensible, but it also asks taxpayers to hand the state money it may not spend. The libertarian answer to a volatile revenue stream is a smaller, steadier budget, not a bigger piggy bank.
KQED’s guide to Proposition 1 laid out the $11.25 billion authorization before the vote. Our reading is that it is public money chasing a problem the private market could solve if the rules allowed. The most efficient housing subsidy would be to let people build.
What to watch next
Watch the first debt-service line in the next budget, the first bond sale under Proposition 37 and who buys it, and the first legislative proposal to spend the larger reserve. For surfers, renters and shop owners on the coast, the real test is whether rents ever fall, and a bond rarely lowers rent on its own.
Bohiney Magazine covers California and the rest of America from the comedy side, where a record bond measure and a bigger rainy-day fund make for excellent material in a state that never seems to run out of rain or red ink.
SOURCE: https://bohiney.com/