Since 1921, the voters have approved a total of about $7.5 billion of general obligation bond sales to finance the veterans' farm and home purchase (Cal-Vet) program. As of July 1996, there was about $250 million remaining from these funds. General obligation bonds are backed by the state, meaning that the state is obligated to pay the principal and interest costs on these bonds.
The money from these bond sales is used by the Department of Veterans Affairs to purchase farms, homes, and mobilehomes which are then resold to California veterans. Each participating veteran makes monthly payments to the department. These payments are in an amount sufficient to (1) reimburse the department for its costs in purchasing the farm, home, or mobilehome, (2) cover all costs resulting from the sale of the bonds, including interest on the bonds, and (3) cover the costs of operating the program.
This measure authorizes the state to sell $400 million in general obligation bonds for the Cal-Vet program. The Department of Veterans Affairs advises that these bonds would provide sufficient funds to enable at least 2,000 additional veterans to receive loans.
The bonds authorized by this measure would be paid off over a period of about 25 years. If the $400 million in bonds were sold at an interest rate of 6 percent, the cost would be about $700 million to pay off both the principal ($400 million) and interest ($300 million). The average payment for principal and interest would be about $28 million per year.
Throughout its history, the Cal-Vet program has been totally supported by the participating veterans, at no direct cost to the taxpayer. However, if the payments made by those veterans participating in the program do not fully cover the principal and interest payments on the bonds, the state's taxpayers would pay the difference.