Treasurer Bill Lockyer: California’s Unsung Champion of the Underserved

[courtesy of California Progress Report]

By Samuel S. Kang
Legal Counsel
The Greenlining Institute

California is facing a record budget deficit of over $15 billion. Many of the state’s poorest communities have already started to make painful cuts to vital services like education and public transportation. Despite all the debate in Sacramento, good ideas seem to be in short supply.

Governor Schwarzenegger, for example, is proposing ideas that largely burdens low and moderate income families to close the gap, such as increasing college tuition, mortgaging the state lottery, and increasing the sales tax. Each of these ideas has been soundly criticized by legislatures and non-partisan fiscal watchdogs. All the while, the Governor has conveniently overlooked tax loopholes that allow California’s wealthiest residents avoid paying sales tax on their new yachts.

One idea, however, has the potential to help maintain vital public services while saving California’s taxpayers billions of dollars. That idea has now turned into a reality under the courageous leadership of State Treasurer Bill Lockyer.

Mr. Lockyer has been leading a national movement to go after Wall Street profiteers who are fleecing state and local governments out of billions of dollars every year through the municipal bond market. Not exactly a sexy issue. But Wall Street has been ripping off California’s taxpayers for years on the hope that politicians would be too afraid to deal with such a complicated scheme. Undaunted, Mr. Lockyer took on Wall Street and is winning a battle that will garner billions of dollars for California’s taxpayers that would have otherwise been lost.

California Fleeced out of Billions of Dollars

So what is a municipal bond? When a government wants to build new schools or more roads, it often sells taxpayer-backed bonds to help pay for these projects. As the borrower, the government promises to pay back on the bonds with a secured interest rate. The interest rate is supposed to measure the risk of the government defaulting, or not repaying, on the bond.