After cuts to climate change spending in budget, state to propose massive bond issue.
California looks to send a huge bond issue to voters, to prepare the state for extreme climate events. Jessie Eastland / Wikimedia Commons C.C. Share-Alike 4.0 License
Before the first five months of 2023 were up, California had already been hit with seven weather-related disasters, as declared by the Federal Emergency Management Agency (FEMA). At the beginning of the year, in Gov. Gavin Newsom—despite having made combating climate change one of his signature causes—announced that he would cut about $6 billion in climate spending from the upcoming budget. The governor explained that move was necessitated by the unexpected state financial shortfall.
Newsom and the legislature now want to cover that shortfall, and then some, by raising $15.5 billion from a state bond issue. Voters will need to give their approval to the hefty new bond package by approving a ballot measure in 2024. Whether it will appear on the March or November ballot isn’t certain yet, but on May 31 the bond proposal, SB 867, passed the Senate with a big bipartisan majority. On June 20, the bill got the thumbs-up from the Assembly Committee on Water, Parks, and Wildlife.
Resilience policy focuses on ways that we can bounce back from extreme weather events and other effects of climate change—primarily by anticipating and preparing for them.
So what would the bond issue accomplish for the $15.5 billion debt it would incur? The full name of the bill (quite a mouthful) spells it out: It's the “Drought, Flood, and Water Resilience, Wildfire and Forest Resilience, Coastal Resilience, Extreme Heat Mitigation, Biodiversity and Nature-Based Climate Solutions, Climate Smart Agriculture, Park Creation and Outdoor Access, and Clean Energy Bond Act of 2024.”
The bill is known more concisely as the “Climate Resiliency Bond.”
What Does Climate “Resiliency” Mean?
There are three approaches to climate change policies, which need to work more or less in concert to effectively deal with the crisis. One is called mitigation—policies that reduce emissions of carbon and other greenhouse gases. The effort to convert the state’s energy consumption to all-renewable sources is one example of mitigation. Riding a bike instead of driving a car is another. There’s a wide range of activities that fall under the heading of mitigation.
Another type of climate policy is adaptation, which means making changes to institutions, societal structures and behaviors with the goal of figuring out how to live in a changing climate. Adaptation means anticipating what the climate will look like in the future and getting ready for it before it’s too late. For example, building better flood defenses in anticipation of rising sea levels. Planting more trees to stabilize soil and help prevent mudslides and erosion is another possible adaptation.
For every one degree centigrade that ocean temperature has increased, the number of extreme storms has jumped 21 percent.
Finally, there’s resiliency. Resilience policy focuses on ways that we can bounce back from extreme weather events and other effects of climate change—primarily by anticipating and preparing for them. The energy supply is particularly vulnerable to climate events. Heat waves, floods, droughts and wildfires all pose a threat to power grids and to the unimpeded production and distribution of energy. Policy changes aimed at keeping energy flowing freely during and after climate-related disasters is a prime example of resiliency.
Another simple example: updated building codes. In June of 2022, Pres. Joe Biden announced the administration’s “Initiative to Modernize Building Codes, Improve Climate Resilience, and Reduce Energy Costs.” Among the updated codes pitched by the president were requirements that building materials be resistant to flood damage, and roofs on homes and buildings be constructed to absorb hurricane-force winds.
What Does the Climate Resiliency Bond Do?
How does the prospective $15.5 billion bond propose to increase climate resiliency? According to the bill’s author, Democrat Ben Allen of Santa Monica, the rather massive sum of money—borrowed money—will be applied to a range of problems and dangers.
California has been torched in recent decades by a seemingly ever-escalating series of devastating wildfires, with studies showing that climate change is a “driving factor” in the rising fire danger. A portion of the Climate Bond funds would reduce fire risk, and bolster the health of forests making them more resistant to out-of-control fires.
“Bonds are the most expensive way to pay for things,” Susan Shelley of the Howard Jarvis Taxpayers Association said. “It’s double the cost of pay-as-you-go because of the interest. They would be saddling people with debt for 30 years to pay for these programs.”
On the wetter end of the environmental spectrum, droughts and flooding are part of California’s regular weather cycle, but climate change has made both of these damaging phenomena even worse. For every one degree centigrade (1.8 Fahrenheit) that ocean temperature has increased, the number of extreme storms has jumped 21 percent—meaning that if current climate change patterns continue, California could see a 60 percent rise in more-intense-than-normal storms by the end of the 21st century according to a study by NASA’s Center for Climate Sciences.
Another slice of bond funds are intended to go toward projects designed to slow and capture runoff from rainstorms which will help shield coastal regions from flooding and stabilize groundwater and drinking water supplies, according to Allen.
Where Does The Money Come From?
If the state’s $31.5 billion budget deficit—after a rather luxurious $97.5 billion surplus just one year earlier—has handcuffed Newsom when it comes to spending on climate measures, how is the state proposing to raise this $15.5 billion to invest in climate resiliency measures anyway? The answer is pretty simple. Debt.
Bonds are just a way for the state to borrow lots of money that it wouldn’t otherwise be able to find in its ordinary budget. That’s why not everyone is on board with the proposed Climate Bond.
“Bonds are the most expensive way to pay for things,” Susan Shelley of the Howard Jarvis Taxpayers Association told Bay Area News Group. “It’s double the cost of pay-as-you-go because of the interest. They would be saddling people with debt for 30 years to pay for these programs.”
That’s basically correct. Bonds are nothing but long-term debt obligations sold to investors, who buy them because the state promises to pay them off over a set period of time—generally 30 years—at a fixed rate usually set by whatever interest rates happen to be at the time the bond is sold.
Shelley may have been exaggerating somewhat by claiming that bond financing is “double the cost” of paying out of existing funds. Inevitable inflation over 30 years means that the true cost of paying interest decreases over time as money becomes less valuable.
Under the California constitution, the state isn’t allowed to borrow more than $300,000 without approval by a majority of voters. But there’s no limit in the state constitution on how much money the state can borrow through bonds. With counties, school districts and other local entities also frequently raising cash through bond issues, there’s simply no practical way to know how much total bond debt is being carried by various governments in California.
According to the California Policy Center, the only way to figure it out would be to analyze full financial reports not only from the state but from all 58 counties, 481 cities, 3,400 special districts and 1,037 school districts. Quite a chore, even if someone wrote an elaborate algorithm to let computers do it.
The Policy Center, however, looked at data from the United States Census Bureau, which does keep track of state and local debt. According to the Bureau, as of 2019 California was carrying $145 billion in long-term (that is, bind) debt at the state level. Local governments owed $361 billion more.