California Proposition 42, Bonds for Veterans (1986)
Proposition 42 authorized an $850 million bond issue to provide farm and home aid for California veterans through the Cal-Vet program.
The fiscal estimate provided by the California Legislative Analyst's Office said,
1. Cost of Paying Off the Bonds
The bonds authorized by this measure would be paid off probably over a period of up to 25 years. If the bonds are sold at an interest rate of 7.5 percent, principal and interest payments would be about $67 million per year.
Throughout its history, the Cal-Vet program has been totally supported by the participating veterans, at no direct cost to the taxpayer. However, if the payments made by those veterans participating in the program do not fully cover the principal and interest payments on the bonds, the state's taxpayers would pay the difference.
2. Other Indirect Fiscal Effects
Borrowing Costs for Other Bonds. By increasing the amount which the state borrows, this measure may cause the state and local governments to pay more under other bond programs. These costs cannot be estimated.
Lower State Revenues. The people who buy these bonds are not required to pay state income tax on the interest they earn. Therefore, if California taxpayers buy these bonds instead of making other taxable investments, the state would collect less taxes. This loss of revenue cannot be estimated.
Path to the ballot
The California State Legislature voted to put Proposition 42 on the ballot via Assembly Bill 286 (Statutes of 1985, Ch. 972).