SAN FRANCISCO — Public finance professionals in California are pessimistic about the future of bond insurance, pessimistic about the state budget, and inclined to vote for Barack Obama in November.
At least that was the case for those who participated in the annual Bond Buyer/MBIA live market survey Tuesday at The Bond Buyer’s 18th Annual California Public Finance Conference here.
Panelists were reworking the questions at the last minute to account for the unexpected news that state lawmakers actually passed a budget earlier Tuesday morning.
The record delay in adopting a budget — more than 11 weeks into the fiscal year — and the gimmick-laden document that finally emerged have focused more negative attention on the Legislature than usual, said panelist John Howard, managing editor of the Capitol Weekly newspaper.
“There’s also talk of a constitutional convention, and I don’t remember hearing that before,” he said.
Of those surveyed, 62% said they thought next year’s California budget deficit would be greater than $10 billion.
“I don’t know now and I don’t think anyone else knows if it’s implementable,” panelist Willie Brown, former Assembly speaker and mayor of San Francisco, said of the budget.
A majority of those surveyed, 53%, said the state’s requirement for a two-thirds vote to enact a budget was the biggest problem in the system, while 21% said other reforms such as redistricting reform or open primaries would help.
Brown — who was such a polarizing figure as Assembly speaker that he arguably helped inspire term limits — said they are the big problem.
“You have nothing except real rookies trying to put together a spending package for the state of California,” he said.
The survey found 42% of participants believing that the delays and structural weaknesses of the budget would end up costing California more than $200 million in its upcoming revenue anticipation note offering, expected to be in the $10 billion range.
Panelist Brad Gewehr of UBS Wealth Management was more optimistic, saying the state could well benefit from a rally in the short end of the market. “If it gets the highest rating, I think the fallout from the budget delay will be relatively modest,” he said of the Ran issue.
Participants were also asked what their predictions were for bond insurance market penetration in 2009.
Forty-six percent said it would be between 20% and 30%, while another 41% said it would be below 20%.
Gewehr said the jury is still out because the rating agencies have yet to indicate their final opinion on whether the bond insurance model is viable.
“Insurance or something like it ought to have value in the market,” he said.
The final question asked participants who they would vote for president in November, and 64% said they would vote for Democratic Sen. Barack Obama of Illinois, and 32% for Republican Sen. John McCain of Arizona, a result that almost left Brown speechless, though he quickly recovered to express his surprise at the margin.