ANALYSIS BY THE LEGISLATIVE ANALYST

Proposition 61

Children's Hospital Projects. Grant Program.
Bond Act. Initiative Statute.

BACKGROUND

Children's hospitals focus their efforts on the health care needs of children by providing diagnostic, therapeutic, and rehabilitative services to injured, disabled, and sick infants and children. Many children receiving services in these hospitals are from low-income families and have significant health care needs.

PROPOSAL

This measure authorizes the state to sell $750 million in general obligation bonds for capital improvement projects at children's hospitals. The measure specifically identifies the five University of California children's hospitals as eligible bond-fund recipients. There are other children's hospitals likely to meet the eligibility criteria specified in the measure, which include providing at least 160 licensed beds for infants and children. Figure 1 lists these children's hospitals.

For more information regarding general obligation bonds, please refer to the section of the ballot pamphlet entitled "An Overview of State Bond Debt."

The money raised from the bond sales could be used for the construction, expansion, remodeling, renovation, furnishing, equipping, financing, or refinancing of children's hospitals in the state. Eighty percent of the monies would be available to nonprofit children's hospitals and the remaining 20 percent would be available to University of California children's hospitals. The monies provided could not exceed the total cost of a project, and funded projects would have to be completed "within a reasonable period of time."

Children's hospitals would have to apply in writing for funds. The California Health Facilities Financing Authority (CHFFA), an existing state agency, would be required to develop the grant application. It must process submitted applications and award grants within 60 days. The CHFFA's decision to award a grant would be based on several factors, including whether the grant would contribute toward the expansion or improvement of health care access for children who are eligible for governmental health insurance programs, or who are indigent, underserved, or uninsured; whether the grant would contribute toward the improvement of child health care or pediatric patient outcomes; and whether the applicant hospital would promote pediatric teaching or research programs.

FISCAL EFFECTS

The cost of these bonds to the state would depend on the interest rates obtained when they were sold and the time period over which this debt would be repaid. If the $750 million in bonds authorized by this measure were sold at an interest rate of 5.25 percent and repaid over 30 years, the cost to the state General Fund would be about $1.5 billion to pay off both the principal ($750 million) and the interest ($756 million). The average payment for principal and interest would be about $50 million per year. Administrative costs would be limited to CHFFA's actual costs or 1 percent of the bond funds, whichever is less. We estimate these costs will be minor.

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