Voters may add $66 billion of government debt

By Michael Connor - Analysis

MIAMI (Reuters) - Americans streaming to the polls to choose a new president amid a buckling economy are also deciding the fates of proposals by states and municipalities to add $66 billion of local government debt.

With tens of millions in 31 states already voting ahead of Tuesday's election, voters are being asked to sign off on such borrowings as $10 billion for a California rail system, $315 million for Alaskan transport, and $2 million for repairs and improvements in some Wisconsin schools.

Some voters are also looking at finance measures with significant implications for tax-free bonds that would raise hurdles for future bond sales or cut income taxes, according to analysts.

Standard & Poor's said 153 state ballot measures will be before voters in 36 states.

"The main credit-related topics continue to be bond authorizations, tax cuts, tax limitations, tax increases and other revenue enhancers, gambling and education," S&P analysts said in a report.

The bulk of bond measures at state, county and municipal levels should pass, even as economic anxieties across the country seemingly dominate electoral politics, analysts say.

"The thing with voters is that they do not see (bond issuance) as something that takes money out of their pockets," said Kristina Wilfore, executive director of the Ballot Initiative Strategy Centre in Washington. "In the past, voters have been willing to agree to borrow."

Four years ago, at the last presidential election, voters approved 91.2 percent of $29 billion of debt measures, in dollar terms, according to data from The Bond Buyer and I-Deal LLC. In 2002, when the U.S. economy also sagged, voters signed off on 87.3 percent of $47 billion worth of ballot measures.

"Voters are generally overwhelmingly receptive to bond measures. The vast majority of them pass," said Jennie Drage Bowser, senior elections analyst at the National Conference of State Legislatures in Denver, Colorado.

MIXED BAG

According to Ipreo, a New York firm which tracks bond referenda, California alone has about $17 billion of state-wide bond measures before voters, including a $5 billion proposal for general obligation bonds to fund energy and anti-pollution projects.

California, the nation's most populous state, is also asking voters to okay two proposals of nearly $1 billion each to sell more GO bonds to benefit children's healthcare and veterans and the $10 billion high-speed rail system proposal.

Pollsters and analysts in California, where voters in Los Angeles and San Diego counties are also deciding school-debt proposals of more than $10 billion, said the state's voters may be overwhelmed in a presidential election that also includes a measure to end gay marriages in the state.

Other big bond measures outside California include local referenda in Louisiana, Ohio and Texas, which come at a time when consumer spending across the country is undergoing its biggest pullback since 1980, according to government data.

"Anything that has do with healthcare or energy tends to be more top of mind for voters than transport or water projects," Wilfore said. "I think it will be a mixed bag."