With all these looming liabilities, the state should be cutting debt, not increasing it. After all, it is not as if Sacramento is short of tax revenues to fund needed infrastructure. In California, state tax revenues rose 19 percent in 2005 and are on course to rise another 7 percent in 2006, according to census data. California’s congested infrastructure is frustrating to all. But voting for more bonds and getting deeper into debt is not a good solution. Instead, states should reprioritize their budgets, devote rising revenues to critical projects and pursue private financing where they can. There is no free lunch with debt-financed spending. When you’re casting your vote, remember that bonds come with just as high a price tag as new taxes do. Chris Edwards is director of tax policy at the Cato Institute. Write to him at [email protected] local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! IN addition to choosing candidates in Tuesday’s election, California voters will directly control government policy by approving or rejecting billions of dollars of bond issues. The state of California has $43 billion of bonds on the ballot to fund highways, schools, and other projects. Cities and counties across the state are asking voters to approve an additional $10 billion of bonds for local projects. California budgeting has become uniquely hooked on debt. The $53 billion in bonds in California represent two-thirds of the $80 billion in bonds on the ballot across the entire country, according to Bloomberg. California used to finance most of its infrastructure with current revenue, but it now finances nearly all of it with debt. For politicians, the appeal of bonds is obvious: They provide funding for favored projects without unpopular tax increases. Federal Reserve Board figures show that state and local debt nationwide jumped from $1.2 trillion in 2000 to $1.9 trillion today. Voters usually approve more than two-thirds of bonds at the ballot box, according to The Bond Buyer. That high approval rate is curious. Don’t people know that more debt means higher taxes? The tax bill might not come due for a few years, but the burden of debt is real. AD Quality Auto 360p 720p 1080p Top articles1/5READ MORESurfer attacked by shark near Channel Islands calls rescue a ‘Christmas miracle’First, consider that yesterday’s decisions to issue debt are imposing a burden right now. Every dollar Sacramento must spend paying off past bonds is money it can’t use for infrastructure upgrades and taxpayers can’t spend on their household expenses. Second, debt financing is more costly than current tax financing because of the interest expenses and related charges. The only real beneficiaries of debt are the middlemen – the tens of thousands of highly paid analysts in the Wall Street municipal bond industry who do the underwriting and trading. These middlemen are costly, and mixing high finance with big government often results in corruption. Indeed, the municipal bond industry suffers from “pay to play” scandals in which bond underwriters use bribes and campaign contributions to win bond business from government officials. A third disadvantage of debt is that it makes state and local finances less transparent. As Wall Street has concocted ever more complex debt deals for the states, it has become nearly impossible for citizens to decipher government budgets. The most important reason that California voters should hesitate to approve bonds is that the state already faces huge government liabilities. California has about $70 billion in unfunded liabilities for retirement health benefits for state workers.