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More red ink expected from revised state budget Meanwhile, Republicans have acknowledged the deficit is too big to balance simply by cuts. GOP leaders in the Assembly have proposed paying off the state's existing debt with $10 billion in bonds, while imposing spending limits and serious cuts. Republicans in the Senate brought forward a similar plan that would impose deep cuts and freeze spending for the next two years. Davis' team is also looking closely at the idea of financing part of the debt. Analysts have proposed creating a new state agency to oversee the sale of bonds and the collection of a new half-cent sales tax to repay the debt over five years. Wall Street bankers have warned California lawmakers the state is fast approaching the limit on how much borrowing could be done without some new tax specifically raised to retire the debt. The Davis plan to create an agency to oversee debt management was shared with a variety of investment banking firms several weeks ago, each of whom also said new taxes were needed. Davis said last week that he has not ruled out the debt financing idea but said a tax increase will be needed to make the idea fly. Republicans, however, continue to insist they will not support new taxes. "We've shown that you don't need tax increases to deal with this budget," said Assemblyman John Campbell, R-Irvine, vice chair of the budget committee. Noting that a major bipartisan agreement to cut about $4.6 billion in state spending over the next two years was reached last week, Campbell said he is optimistic that solutions can be found. "I think the pressure to get a budget done on time is greater this year than it has been in the past."
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