California voters face billions in bond measures

California voters face a pivotal moment at the ballot box this election season as billions of dollars in proposed statewide and local bond measures test the public’s appetite for new public debt amidst growing financial anxieties.

Processing Content

With roughly $44.5 billion in statewide bond initiatives targeting affordable housing, middle-income homeownership, and medical research alongside dozens of local school and municipal funding requests, next week’s election highlights the sharp contrast between urgent infrastructure demands and taxpayer sensitivity to rising costs.

“When voters are divided and increasingly concerned about additional taxes, it becomes more difficult to build the broad level of support necessary for a successful bond measure,” said Adam Bauer, chief executive officer of Irvine, California-based municipal advisory firm Fieldman, Rolapp & Associates.

Historical voting patterns at the state level reveal distinct voter preferences when evaluating debt measures. 

According to data compiled by Roderick Kiewiet, a political science professor at the California Institute of Technology whose research tracked ballot measures from 1946 to 2024, bonds supporting veterans and K-12 schools enjoy the highest approval ratings, boasting passage rates of 100% across 26 veteran bond measures and 96.4% across 28 school bond measures.

However, expansive state proposals on the current ballot are drawing intense debate. 

Proposition 1, an $11.25 billion affordable general obligation housing bond measure, would allocate $10 billion specifically for affordable rental housing and $1.25 billion for veteran homeownership programs. 

The California Legislative Analyst’s Office estimates the measure would fund roughly 40,000 rental units, and notes that repaying the $10 billion rental housing piece would require drawing between $500 million and $600 million annually from the state’s General Fund over the next 25 years. The veteran homeownership program is structured to be self-funding. Bonds are a common way for the state to fund home building and homeownership Programs, the LAO noted.

Proponents of Proposition 1, including Gov. Gavin Newsom, labor unions, and big-city mayors, argue that substantial state spending is vital to fill funding gaps for shovel-ready projects during an unprecedented housing crisis. 

Mayors across California have repeatedly petitioned state leadership during budget negotiations over the past several years for sustained funding and policy backing to tackle homelessness and housing shortages directly.

In opposition testimony during a June hearing, Sen. Tony Strickland, R-Huntington Beach, raised concerns over ballot packaging strategies, asserting that supporters heavily leverage the popular “veterans” title even though home loans for veterans represent only $1.25 billion or 11.1% of the bond measure.

Kiewiet’s data underscores the motivation to add “veterans” to the ballot title, because 100% of bond measures to help vets pass, while only 50% of generically labeled housing bonds do.

Housing policy is also front and center with Proposition 37, a $25 billion middle-income homebuyer revenue bond measure sponsored by real estate interests and labor unions. 

California Institute of Technology

The initiative would authorize the California Housing Finance Agency to sell up to $25 billion of revenue bonds to finance downpayment assistance loans for middle-class residents purchasing newly constructed homes. The revenue bonds would be repaid entirely through participating homeowners’ mortgage payments, posing no direct cost to general taxpayers.

Another high-profile initiative, Proposition 38, seeks $8.4 billion of GO bonds for immunology medical research. Backers say it will offset federal budget cuts to research. Critics note that it would of the proceeds to a research lab backed by billionaire Gary Michelson, who has pumped more than $50 million into the ballot measure campaign, according to California campaign finance reports.

Volatility concern

Institutional asset managers view the state’s cumulative debt package as a manageable extended runway rather than an immediate market disruption.

In a May credit outlook, institutional asset manager BlackRock highlighted that California’s reliance on cyclical capital gains tax revenues introduces budget volatility. Because robust retail demand — supported by its high marginal state tax rates — has kept state bond yields low, some portfolio managers caution that yields may not adequately compensate investors for general obligation debt risks, driving capital toward localized revenue bonds backed by regional sales taxes.

Joe Gotelli, a senior portfolio manager with American Century Investments, said American Century views large ballot debt packages, like what is headed to voters next week, as manageable. What would be a concern is if the state’s cumulative debt accumulation from tapping the potential bond authority combined with the state’s ongoing volatility became an issue, he said.

“Over the years the state has had varying levels of authorized and unused debt on the GO side,” Gotelli said. “The  $44.5 billion on this ballot is nominally a lot of debt, but it won’t be issued all at once.”

As of Oct. 1 California had $69.9 billion of general fund-supported GO bonds outstanding, with $36.9 billion more authorized but unissued, according to the .

It “gives them the runway to issue debt over longer periods of time to take care of needs like housing,” Gotelli said. “That, in and of itself, won’t cause any consternation with the market,” he said.

Credit analysts will be tracking how California uses its debt capacity balanced against the state’s historic revenue volatility, he said.

Kiewiet also noted that though the state has a mountain of bond authority available, what it has sold actually compares favorably with other states.

At the local level, government and school district bond measures reflect shifting community priorities and economic caution.

Michael Coleman, creator of CaliforniaCityFinance.com, which tracks local tax and bond measure results, notes that this election cycle features 95 school bond measures totaling $18 billion — a sharp reduction from the record $50 billion across 266 measures presented in November 2024. Coleman said the 2024 surge reflected pent-up demand following pandemic-related pauses, whereas current figures align more closely with historical averages.

Coleman notes that many local school bonds are structured as simple extensions of expiring 30-year measures, allowing districts to fund facility modernizations without increasing overall tax rates for property owners. Furthermore, he said, school districts frequently align local bond requests with statewide school facility measures to leverage necessary matching funds.

Voter fatigue and tax sensitivity remain major factors for local officials.

Bauer said roughly one-third of his firm’s school district clients opted against placing measures on the current ballot after tracking surveys revealed increased public polarization about tax burdens. Many districts moving forward are focusing strictly on modernizing existing facilities to address demographic shifts and declining student enrollments.

Experts say local ballot measures often operate independently of national economic sentiment or statewide political dynamics. As local governments navigate statutory tax limits, community trust remains the decisive element in measure outcomes.

“If the local school district or government has done a good job of presenting its case or voters have confidence in the local government, these things tend to pass regardless,” Coleman said.

And state and local elections are more significant to the muni market than federal elections, Gotelli said.

“Affordability, taxation and federal support will be key issues in the coming election,” he said.

Wealth Tax Push

Growing political momentum nationally around wealth and billionaire taxes, such as California’s Proposition 40 “billionaire tax” measure reflects efforts to shift tax burdens to extremely high net-worth taxpayers and cover potential shortfalls in federal funding, Gotelli said.

Proposition 40, which would impose a one-time state tax on billionaires equal to 5% of their net worth, was floated by a statewide nurses’ union along with other supporters to help cover an expected shortfall in state funding for MediCal from cuts to federal funding in the Republican One Big Beautiful Bill Act.

Gotelli expects if the measure passes it could lead a wave of similar efforts in other states. Its prospects, however, are dimming, according to a Public Policy Institute of California .

More popular, polling above a majority according to the PPIC poll, is Proposition 3, which would make permanent an existing state income tax surtax on high earners.

Also on the ballot is a measure designed to counter the state’s revenue volatility. Proposition 2 would require the state to make deposits into its rainy day fund until it reaches 20% of General Fund taxes, up from the present 10%.