 |
 -0 |
 |
|
||||||||
 |
||||||||
 |
||||||||
|
||||||||
|
||||||||
 |
|
State Weighs a Tax Hike Republicans have accused Davis of trying to use Wall Street as a club to pressure them into raising taxes. The governor said Monday that he is eager for Republicans to hear for themselves from the Wall Street executives. Bankers from several firms are scheduled to make presentations to the GOP caucuses in coming days. "The bankers will present their own views to the Legislature directly, and the Legislature can make up their minds," Davis said. The governor, who met with investment bankers last week, had earlier cautioned against borrowing to pay off the debt, warning that it would just prolong the state's financial problems into the future. But support for borrowing to ease the pain of balancing the budget has steadily gained momentum in the Legislature, where officials are daunted by the challenge of coming up with enough cuts and fee and tax hikes to close the current-year deficit and projected shortfall estimated to be as large as $35 billion combined. Now, Davis says he is open to the idea. "My preference was to get it all behind us, to take the bitter medicine," he said. "The Legislature on both sides of the aisles seems more inclined to using multiple years to solve this problem. I'm not unilaterally opposed to that, but I will only do it in a way that is financially responsible." A New Authority The plan calls for setting up a Fiscal Recovery Financing Authority that would oversee the issuing of bonds to pay off the deficit. The agency's board of directors would include the state finance director, treasurer, controller and other officials. As drafted, the legislation says the temporary 0.5% sales tax increase would be dedicated solely to pay off the deficit bonds. Proceeds from the hike, which would raise about $2.3 billion a year, would go directly to a special Fiscal Recovery Fund separate from the state's troubled general fund. The sales tax varies across the state: It currently is 8.25% in Los Angeles County; 7.75% in Orange, Riverside and San Bernardino counties; and 7.25% in Ventura County. The draft legislation would require lawmakers to annually appropriate receipts from the tax increase to pay off the deficit, but would not allow the Legislature to use that money for any other purpose. The attorney general and the state's bond counsel have preliminarily reviewed the proposal and at this point believe that the annual appropriation would not violate the state Constitution's requirement for a vote of the people before certain types of long-term debt can be issued. "The courts in the large majority of states which have considered the question have recognized that [the bonds] do not violate constitutional debt limits," the draft plan says. It notes that several other states and cities have used such bonds to pay off their deficits, perhaps most notably New York City in the 1970s and New York state in the 1990s. The letters from the firms do not tell Davis that they would require a tax hike to lend the state more money. But they suggest that the state would have a difficult and dangerous time financing its way out of the crisis without such an increase.
Three Goldman Sachs executives — including Kathleen Brown, who was the state treasurer during California's last financial crisis and whose father and brother both served as governor — urged in
|
|
|
