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Bond issue

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Bond Issue
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School bonds
Bond issues on the ballot
Municipal bonds



Bond basics

Bonds and long-term debt

Types of bonds

General obligationRevenue

Bond issues on the ballot
Average approval/rejection by state

Bond issues by state

Bond issues by year

Local school bonds

A bond issue as it applies to ballots is when a state government, or a local unit of government (city, county, school district) places a question before the voters as a ballot measure, asking them to approve or deny additional proposed spending. School districts and municipalities often make most use of bond election authority, but state governments utilize bonds as well.

Bonds issued by state governments and municipalities are both generally referred to as municipal bonds. Laws and regulations stipulating how and when bond issues go to a vote vary from state to state, and from locality to locality within states.

State legislatures or local units of government may place such a question before the voters in their political jurisdiction because of laws that prevent the unit of government from raising taxes or spending beyond a certain level without the approval of voters, as well as laws that require voter approval for the creation of any new public debt.

Bond basics

In finance, a bond is a debt in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest at a later date, termed maturity. Other stipulations may also be attached to the bond issue, such as the obligation for the issuer to provide certain information to the bond holder, or limitations on the behavior of the issuer.

Bonds are generally issued for a fixed term longer than ten years, and are as such categorized as long-term debt. New debt between one year and ten years is categorized as a "note", and new debt less than a year is categorized as a "bill".

A bond is simply a loan, but in the form of a security. Bonds are issued by corporations, non-profits, the federal government, as well as state and local governments.

In the case of a bond issued by a unit of government, the unit of government receives a loan from a private lender that is secured by the unit of government's assets, including its ongoing ability to generate income through taxation or the revenue from the financed project such as a bridge. The unit of government then owes principal and interest on that loan to the private lender.

Bonds and long-term debt

Bonds (long-term debt) play an important role in both private and public sector finance. State and local governments utilize bonds to finance numerous types of capital and infrastructure projects, such as roads, schools, prisons, and libraries. The use of bonds is increasingly popular with cash-constrained governments because it allows for the financing of projects without having to raise taxes in the immediate.

Issuance of bonds by state and local governments has ballooned over the years. As such, they are becoming increasingly scrutinized by voters across the nation as the subjects of taxes and debt become ever more important in the wake of continued economic trouble. Many state and local governments have laws and provisions that require tax payers approval for the issuance of new bonds or bonding authority.

Combined, state and local governments had approximately $322 billion in outstanding long-term debt in 1980 and over $2.5 trillion in 2008 - a 777% growth.[1][2]


The graph below plots the growth in state and local government long-term debt over the last 30 years.


US State Local Govt Debt 1990-2008.png


Types of bonds

There are two generally used types of bonds - revenue bonds and general obligation bonds. Revenue bonds are bonds whose payback provisions are tied to a specific revenue stream, such as tolls, fees, etc. General obligation bonds are backed by the full faith, credit, and taxing power of the issuing body (state government, city, etc.) and are considered public debt. Given that general obligation bonds have a wider backing (full taxing power), they generally carry lower interest rates than revenue bonds as they are considered a lower risk. That said, both forms of bonds are considered safe investments.

General obligation bonds

Since general obligation bonds constitute public debt, it is very common for states and municipalities to require their issuance be approved by voters at the ballot box.

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An example of a general obligation bond that was approved by voters is Rhode Island Question 3, Transportation Bonds (2004). That bond issue allowed the state of Rhode Island to issue general obligation bonds in order to match federal transportation funds.

An example of a general obligation bond that was defeated by voters is California Proposition 81, Bonds for Libraries (June 2006), which would have authorized the state of California to sell $600 million of general obligation bonds to improve local library facilities.

Revenue bonds

Revenue bonds are not backed by the taxing power of the issuing authority and are instead paid back through earnings from the specific project they were issued for. As such, revenue bonds are not considered public debt. This means that, in general, revenue bonds do not have to go before voters as ballot propositions.

But revenue bonds are not without controversy or scrutiny. In recent years, taxpayer advocates have been calling for voter accountability in regards to revenue bonds as they are perceived as forms of unaccountable forms of government spending with too little checks on their growth and issuance.

Government or quasi-government entities that issue revenue bonds - such as a transportation authorities, water boards, and education commissions - generally have legislative authority to do so and the decisions are made internally.

Here is an example of a revenue bond that was proposed by the Illinois Student Assistance Commission in 2005. In this example, the bonds are being issued to fund student loans. Interest revenue from the student loans are the only source available for payback of the bonds.

If for some reason the student loans do not generate sufficient revenues for repayment, the bonds will go unpaid - as the issuing entity can't tax or raise other revenue to pay them back.

Bond issues on statewide ballots

Below are statistics and analysis of bond issues that have appeared on statewide ballots since 2000. Even-numbered years historically have more statewide measures, bond issue or not, on the ballot than odd-numbered years.

Statewide bond issue results taken from all states (in percentages)
  • Since 2000, a total of 83 bond issues have appeared on the ballot in 29 states.
  • Each year, on average, 13.6% of bond issues on the ballot across the country are rejected, with 86.4% approved.
  • A total of 49 bond issues have appeared on odd-year ballots. On average, odd-numbered years since 2000 have had about 8 bond issue measures on the ballot.
  • A total of 129 bond issues have appeared on even-year ballots. On average, even-numbered years since 2000 have had about 22 bond issue measures on the ballot.

Average approval/rejection by state

Below is a table of states that have had statewide bond issue measures on the ballot since 2000, the average approval of those bond measures, and the average rejection.

State Measures Approveda Approval Defeatedd Rejection
Alabama 2 100% 0%
Alaska 6 100% 0%
Arkansas 7 100% 0%
California 25 88% 12%
Colorado 3 33% 67%
Hawaii 2 100% 0%
Idaho 1 100% 0%
Louisiana 1 0% 100%
Maine 32 94% 6%
Michigan 1 100% 0%
Missouri 2 100% 0%
Nebraska 3 33% 67%
Nevada 1 100% 0%
New Jersey 4 100% 0%
State Measures Approveda Approval Defeatedd Rejection
New Mexico 23 87% 13%
New York 2 50% 50%
North Carolina 1 100% 0%
Ohio 6 83% 17%
Oklahoma 1 100% 0%
Oregon 4 100% 0%
Pennsylvania 2 100% 0%
Rhode Island 32 84% 16%
Texas 15 93% 7%
Utah 1 0% 100%
Virginia 2 100% 0%
Washington 1 0% 100%
West Virginia 2 50% 50%

Bond issues by state

Click the tabs below to browse statewide ballot measures dealing with bond issues.

Note: Although above analysis shows results from 2000, below are all bond issues in Ballotpedia's database.

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One type of constitutional amendment commonly put to a vote in Texas are those dealing with bonds. The Texas Constitution limits the state’s power to create public debt in a number of provisions. Article III, Section 44 states that the legislature may not “grant, by appropriation or otherwise, any amount of money out of the Treasury of the State, to any individual, on a claim, real or pretended, when the same shall not have been provided for by pre-existing law.” Article III, Section 49 forbids the State from creating debt except in certain circumstances , or “otherwise authorized by this constitution”

As such, the issuance of bonds that result in increased public debt require a constitutional amendment.

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Bond issues by year

Below are statistics and analysis of bond issues that have appeared on statewide ballots, by year, since 2000. Even-numbered years historically have more statewide measures, bond issue or not, on the ballot than odd-numbered years. As a result, there are two separate graphs showcasing the data for both categories of even- and odd-numbered years since the year 2000:

  • The highest number of bond issues approved in an even-numbered year was 29 in 2002.
  • The highest in an odd-numbered year was 12 in 2001.
  • The lowest approved bond issues for an even numbered year was 15 in 2006 and 2 in 2011 for odd-numbered years.
  • The highest rejected measures for even-numbered years was 5 in 2004 and 3 in 2003 of odd-numbered years.
  • No measures were approved in 2007 and 2009.
  • An average of 19 measures are approved and 3 are rejected for even-numbered years.
  • An average of 7 measure are approved and 1 is rejected for odd-numbered years.

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Local school bonds

School bonds
& taxes
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Bond elections
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Approval rates
See also: Voting on school bond and tax measures
See also: School bond election

School bonds are commonly seen by voters on the ballot as many localities require voter approval for their issuance. A school bond election is a bond issue used by a public school district, typically to finance a building project or other capital project. These measures are placed on the ballot by district school boards to be approved or defeated by the voting public.

School bond issues on the ballot are different from other areas of the election ballot as state laws require ballot measures to be worded as specific to the point.

School bond measures generally do not receive as much attention as candidate elections or state-wide ballot measures, but they are an important way in which citizens can guide school policy.

The conduct of local school district bond and tax ballot measure elections varies from state-to-state. 40 states require voter approval of bond issues as a matter of course, and in seven more, voters can petition to have bond issues placed on the ballot. Of the remaining three states, one of them, Indiana, uses what is known as the remonstrance-petition process.

See also

External links


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