Calif. Panel OKs Ballot Measure for $900M of Veteran's Mortgage Bonds

SAN FRANCISCO — California's Assembly Veterans Affairs Committee this week approved a bill that would place a $900 million bond measure on the November ballot to finance the state's mortgage bond program for military veterans.

The committee's unanimous vote came Wednesday, one day after President Bush signed a bill that is expected to stimulate demand for the program by expanding the pool of veterans who qualify for the loans.

The California bill, which has already cleared the Senate, was moved on to the Assembly's Appropriations Committee.

The bill was introduced this year in the expectation that Congress would enact changes to the laws governing qualified veterans mortgage bonds, according to the committee's staff analysis.

Those changes took place Tuesday, when Bush signed the Heroes Earnings Assistance and Relief Tax Act of 2008.

Among the many provisions of the so-called HEART Act, the measure makes veterans who entered active military duty after Dec. 31, 1976, eligible to apply for veterans home loan programs in Texas and California backed by tax-exempt qualified veterans mortgage bonds, or QVMBs.

California and Texas are among five states authorized to offer tax-exempt veterans mortgage bonds. Their programs, along with those in Oregon, Alaska, and Wisconsin, were grandfathered in when the Tax Reform Act of 1986 otherwise prohibited tax-exempt veterans mortgage bonds.

The Cal-Vet program currently has $102 million in unused bond authorization remaining, but changes to federal law are expected to create new demand, according to the committee's staff analysis.

"With increased demand, the California Department of Veterans' Affairs believes it will run out of authorization and be unable to fill loan requests for veterans through 2010," the staff report said.

California's veterans' bonds carry a general obligation pledge, but the program has always been self-sustaining.

Passage of the HEART Act is the second step in the process of opening the veterans' bond programs to more recent vets.

Congress in 2006 opened the program to younger vets in the three smaller states that participated in the program. But that bill cut the annual QVMB bond allocation for each state, which prompted California and Texas to opt out of the process at the time, said Rusty Martin, deputy commissioner of funds management for the Texas General Land Office, which oversees that state's veterans bond program.

This year's HEART Act opens the program to more veterans in Texas and California, while allowing those states to keep their current tax-exempt allocation: $250 million annually in the case of Texas and $340 million for California.

This year's bill also bumped the allocations for Oregon, Wisconsin, and Alaska to $100 million each.

Texas has been issuing about $120 million annually, even under the restrictive eligibility rules.

"The issue we have is our demand is going to be greater than our allocation for QVMBs," Martin said, adding that California will probably face the same issue. Texas has been issuing about $600 million in veterans' mortgage bonds annually, including taxable debt for more recent veterans, he said.

"It's a good thing for all five states and it's a good thing for veterans in those states," Martin said of the new HEART Act.

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