California Proposition 26, Bonds for Public School Construction (1984)
Proposition 26 provided $450 million to provide capital outlay for construction or improvement of public schools.
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 probably would be paid off over a period of up to 20 years. The principal portion of these repayments would average $22.5 million per year. In addition, the state would have to pay interest on the borrowed funds. We estimate that if the bonds were sold at an interest rate of 10 percent, the annual cost of these interest payments would average approximately $23.6 million.
The source of funds that would be used to make both principal and interest payments is the state's General Fund.
2. Other Fiscal Effects
Increased Borrowing Costs. Generally, an increase in the amount borrowed by the state tends to raise the rate of interest on borrowed funds. Consequently, the state and local governments could incur higher costs under other bond programs. The size of any such costs cannot be estimated.
Revenue Loss. The interest paid by the state on these bonds would be exempt from the state personal income tax. Therefore, to the extent that the bonds are purchased by California taxpayers in lieu of taxable investments, the state would collect less income tax revenue. It is not possible to estimate what this revenue loss would be.
Path to the ballot
The California State Legislature voted to put Proposition 26 on the ballot via Senate Bill 125 (Statutes of 1984, Ch. 375).