To assure that public funds are utilized as efficiently as possible and in a manner consistent with the stated intent of already authorized and proposed future bond measures, firm accountability requirements will govern the expenditure of funds. Prior to any funding being expended from existing or future bonds, the responsible state agencies must develop performance and outcome measures for each program and project that would be funded from the bonds. Regular audits will be conducted to ensure that funds are being allocated according to those outcome criteria and that the implemented programs and projects did in fact achieve the intended outcomes. It is imperative that the public be able to access this information. The voters have an absolute right to know how the bonds they authorized are being spent. Therefore, outcome and performance criteria, as well as audit results, will be made readily available to the public.

Affordability

The single most important indicator of a state’s creditworthiness and ability to carry debt is the existence of a balanced budget capable of handling its debt load without the need to cut other existing programs to pay debt service. While the SGP will increase the state’s debt load over the next 10 years, under this plan state debt service will remain within prudent bounds into the foreseeable future. Last year’s original proposal for a Strategic Growth Plan proposed a 6- percent cap on the state’s debt service ratio (the percentage of General Fund revenue committed to making debt service payments). However, at that time, the state was still facing a structural budget deficit. But this budget does not propose to spend more on ongoing programs than the state receives from ongoing revenues. In 2009-10, the state will have made its final payment on the Economic Recovery Bonds (ERBs). Payment on those bonds is about 1.5 percent of General Fund revenues. The revenue dedicated to paying the ERBs is not dedicated to any other expenditure when the ERBs are retired. Consequently, that revenue could be allocated toward debt service without adversely affecting the ability of the General Fund to continue supporting other state programs. Since debt service in the year prior to repayment of the ERBs will account for slightly more than 5 percent of the General Fund revenue, a debt service ratio of 6.5 percent is affordable. Debt service under the SGP will remain within this affordability limit. Figure 6 displays the state’s debt payments and debt ratio into the future under the SGP.