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Bond Raters OK State's Borrowing State Finance Director Steve Peace said falling back on such tactics again would be extremely ill advised. "We've pretty much played our last cards," he said. "Wall Street will be waiting very carefully to see what kind of decisions are made." Raymond Murphy, a senior credit officer with Moody's, made clear that one option not available to California is avoiding hard budget choices by simply assuming that the economy will recover next year and tax receipts will surge. "The state really can't, and we don't anticipate will, build a budget on the assumption of an economic rebound of any significant magnitude during fiscal 2004," he said. As negotiations on spending remain stalled, one budget action was pushed through by Assembly Democrats late Wednesday. It was a bill by Assemblyman Mark Leno (D-San Francisco) that would allow local governments to impose an income tax to preserve local services, if such a tax is approved by 55% of voters. "By giving local governments and voters choices, local budgets won't have to be balanced on the backs of critical services," Leno said. Republicans and taxpayer groups criticized the measure, calling it a slippery slope that would result in a major financial burden for the public.
They also questioned the legality of the proposal, and suggested that such tax money could end up paying for services that cities cannot fund legitimately with income taxes.
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