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Proposition 32: Veterans' Bond Act

Last updated Thursday, October 05, 2000

Summary: It's a half-billion dollar bond to provide home-buying loans to California veterans.

Text of Proposition: www.ss.ca.gov/elections/elections_bp.htm

More Information: California Voter Foundation Initiative Watch 2000

Pro sites:

Con sites:

Libertarian Party of California Executive Committee: NO

Libertarians oppose Proposition 32, a $500 million bond act. "Bonds are the most expensive way to finance projects. Plus, voters just approved a $50 million veterans homes bond act in March. There is no excuse for this initiative," Hinkle noted.

Webmaster: NO

Libertarians are opposed to all bond measures for a very good reason -- they get paid back by raising taxes. This bond will cost us $858 million to pay back. Supporters say that all of the cost will be paid for by the veterans who receive the loans, but taxpayers will need to pay if veterans default on the payments. The government should not be in the money-lending business when there are plenty of private banks and other lenders.

Richard Rider: NO

The key weapon in this issue debate is a little-publicized 1998 Legislative Analyst Office report that RIPS the Cal-Vet program, and calls for the phasing out of new Cal-Vet loans by 2007. The report is available on the web at: www.lao.ca.gov/011698_cal-vet_parta.html

Included in the report: The program lost money for the previous five years in a row. Participation by aging wartime vets is quickly declining. The program has lost over $200 million in equity since 1986. Repossessed property inventory has recently grown. Cal-Vet overhead costs are growing even with fewer loans being issued.

Other points:

1. Why are we subsidizing family farm purchases? This is a throwback to the 1920's.
2. There is NO LIMIT on the veteran's income as to qualifying for a loan up to $250,000.
3. Cal-Vet loans supposedly require only 5% down, but apparently only 2% or 3% are required, according to the CA Dept. of Veterans Affairs: www.ns.net/cadva/calvet/calvet.htm
4. Veterans from anywhere are eligible to move to CA and get Cal-Vet loans -- the program is NOT limited to California enlistees or to "wartime veterans." (There are some restrictions on peacetime veterans.) This program encourages even more people to move to California -- most would agree that we don't need such additional government supplied immigration incentives for the Golden State.
5. Military service is a federal program, funded by all taxpayers. It even has a lucrative VA home loan program for veterans. There is no reason for us to add a CA program, putting the CA taxpayers at risk.
6. The one-half billion bond measure will provide housing for only 2,500 veterans.
7. Veterans who can get favorable terms and interest rates on loans can spend more on homes than other citizens, which in our competitive circumstances is unfair to fellow taxpayers.
8. Such subsidized Cal-Vet buying power further bids up the price of already expensive California housing.
9. We must trust the legislature and governor to oversee this plan, decade after decade. Given government's abysmal record of controlling costs, this sounds like a risky proposition.
10. With only 3% or 5% down, veterans have little commitment to the property if bad times (or a major earthquake) hits. They will walk away from the property (these are nonrecourse loans), leaving the taxpayer with the ultimate obligation to pay off the bonds backing the loans.
11. For generations, the vaunted FDIC and FSLIC insured bank and savings & loan accounts without costing taxpayers a nickel -- until the system collapsed, costing taxpayers half a trillion dollars. There is risk in the Cal-Vet program, and government bureaucrats and politicians are the last people we should look to as the taxpayers' risk management experts.
12. My opponent started the debate claiming that anyone opposing this measure was "not prepared to honor the service of veterans," equating opposition to this boondoggle with opposition to veterans. I was able to easily counter this slur by pointing out that I'm a retired Commander in the Navy Supply Corps (reserve) and a Vietnam veteran, and that I considered his assertion ridiculous and insulting. We heard no more of that tactic in the rest of the debate.
13. Since 1973, military members have been volunteers. They knew what they were signing up for -- they were not draftees. And none of them signed up for the military so that they could get Cal-Vet loans -- this is a state giveaway program that does nothing to enhance the quality of our military or encourage retention in the service.

The following quote can be useful. It is from the CA Department of Veterans Affairs: www.ns.net/cadva/calvet/calvet.htm

"We have expanded eligibility so that nearly any veteran wanting to buy a home in California is eligible and have funds for nearly any qualified wartime era veteran, regardless of when they served in the military. Peacetime era veterans do need to meet the criteria for Revenue Bond funds (first-time homebuyers who meet income and purchase price limitations). Remember, there are no residency restrictions. Veterans are eligible regardless of where they entered service."

Marvin Rudin, Chairman, Libertarian Party of Santa Clara County: NO