BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 1572
Author: Wyland (R), et al
Amended: 7/1/08
Vote: 27 - Urgency
SENATE VETERANS AFFAIRS COMMITTEE : 5-0, 3/25/08
AYES: Wyland, Denham, Wiggins, Correa, Negrete McLeod
SENATE APPROPRIATIONS COMMITTEE : 16-0, 4/14/08
AYES: Torlakson, Cox, Aanestad, Ashburn, Battin, Corbett,
Dutton, Florez, Kuehl, Oropeza, Ridley-Thomas, Runner,
Simitian, Steinberg, Wyland, Yee
NO VOTE RECORDED: Cedillo
SENATE FLOOR : 38-0, 04/21/08
AYES: Aanestad, Ackerman, Alquist, Ashburn, Cedillo,
Cogdill, Corbett, Correa, Cox, Denham, Ducheny, Dutton,
Florez, Harman, Hollingsworth, Kehoe, Kuehl, Lowenthal,
Machado, Maldonado, Margett, McClintock, Migden, Negrete
McLeod, Oropeza, Padilla, Perata, Ridley-Thomas, Romero,
Runner, Scott, Simitian, Steinberg, Torlakson, Vincent,
Wiggins, Wyland, Yee
NO VOTE RECORDED: Battin, Calderon
ASSEMBLY FLOOR : 75-0, 7/3/08 - See last page for vote
SUBJECT : Veterans Bond Act of 2008
SOURCE : Department of Veterans Affairs
CONTINUED
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DIGEST : This bill enacts the Veterans Bond Act of 2008
which authorizes, for purposes of financing a specified
program of farm, home, and mobilehome purchase assistance
for veterans, the issuance of bonds in the amount of $900
million, and provides for submission of the act to the
voters at the November 4, 2008, general election.
Assembly Amendments make clarifying changes on placement of
this measure on the ballot, adds coauthors, and adds an
urgency clause.
ANALYSIS : Since 1921, the voters in California have
approved approximately $8.8 billion of general obligation
bond sales to finance the veterans' farm and home purchase
(Cal-Vet) program. The last bond measure approved for the
Cal-Vet Program was in November 2000 in the amount of $500
million. To date, there are approximately $102 million of
these authorized bonds remaining unsold, however, the
Department of Veterans Affairs (DVA) projects that these
bond proceeds will be depleted in 2008. Under current
federal law, only veterans who served at least one day of
active duty prior to 1977, and who apply for a loan within
30 years are eligible for the Cal-Vet Program. This
effectively limits the use of these bond funds to Vietnam
era veterans, and the 30-year time limit has resulted in a
rapidly declining pool of eligible applicants. However,
pending federal legislation (H.R. 3997 "The Heroes Earnings
Assistance Relief Tax Act of 2007") will make today's
wartime veterans eligible for Qualified Veterans Mortgage
Bonds (QVMB) by eliminating the 1977 eligibility date. If
that legislation is enacted, the DVA anticipates a surge in
the number of applications for the Cal-Vet loans increasing
from veterans who are now returning to California from the
Iraq and Afghanistan conflicts, which will further exhaust
the funds that are currently available.
The revenue from these bond sales is used by DVA to
purchase farms, homes and mobile homes which are then
resold to California veterans. Each participating veteran
makes monthly payments to DVA. These payments are set in
an amount sufficient to do all of the following:
1.Reimburse DVA for its costs in purchasing the farm, home,
or mobile home.
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2.Cover all costs resulting from the sale of the bonds,
including interest on the bonds.
3.Cover the costs of operating the program.
The current interest rate for a Cal-Vet home loan is 5.5
percent for a 30-year loan while the national average for
all other 30-year fixed rate loans as of March 20, 2008 is
5.87 percent. The maximum loan amount for a single-family
home funded with QVMB is currently $521,250 and is based
upon the Fannie Mae conforming loan limit, plus 25 percent.
The Cal-Vet Program has historically been fully supported
by participating veterans. If, however, payments made by
program participants do not fully cover principal and
interest payments on the bonds, because general obligation
bonds are backed by the state, the difference would come
from the General Fund. This, however, has not been
necessary since the inception of this program. The default
rate on the Cal-Vet home loans is very little as compared
to conventional home loans (there were only five in total
last year). These loans are not sold on the secondary
market, and because the DVA holds the papers on the homes,
if there is a foreclosure, they then sell the home to
recoup the loan proceeds. In the rare event that there is
a short sale, the DVA has a mechanism in place referred to
as "loan loss reserves" which is a set-aside that is
required by their independent auditors and can be used to
further prevent any costs to the General Fund.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2008-09 2009-10
2010-11 Fund
Veterans Bond $900,000* Bond
Ballot costs $192 - $294 General
*Total debt service costs will be $1.86 billion assuming a
5.5 percent interest rate during a 30-year period. The
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annual debt service payments will be approximately $61.9
million.
Ballot costs to the Secretary of State include printing and
mailing expenses and average between $64,000 and $98,000
per page depending on the total size of the ballot.
Assuming this bond requires three additional pages in the
November ballot for the title, summary, arguments, and the
text of the proposition, costs could range from $192,000 to
$294,000.
SUPPORT : (Verified 7/7/08)
Department of Veterans Affairs (source)
California Association of County Veterans Service Officers
Department of Finance
National Guard Association of California
Western Center on Law and Poverty
ASSEMBLY FLOOR :
AYES: Adams, Aghazarian, Anderson, Arambula, Beall,
Benoit, Berg, Berryhill, Blakeslee, Brownley, Caballero,
Carter, Cook, Coto, Davis, De La Torre, De Leon,
DeSaulnier, DeVore, Duvall, Dymally, Emmerson, Eng,
Evans, Feuer, Fuentes, Fuller, Furutani, Gaines,
Galgiani, Garcia, Garrick, Hancock, Hayashi, Hernandez,
Horton, Houston, Huff, Huffman, Jeffries, Jones,
Karnette, Keene, Krekorian, La Malfa, Laird, Leno,
Levine, Lieber, Lieu, Ma, Maze, Mendoza, Mullin,
Nakanishi, Nava, Niello, Parra, Plescia, Portantino,
Price, Ruskin, Salas, Saldana, Silva, Smyth, Solorio,
Spitzer, Swanson, Torrico, Tran, Villines, Walters, Wolk,
Bass
NO VOTE RECORDED: Charles Calderon, Nunez, Sharon Runner,
Soto, Strickland
TSM:nl 7/7/08 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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