Bond-rating agency sees fork in road for California finances
A leading bond-rating agency outlined on Friday a stark choice for California voters -- approve higher taxes for a "striking improvement" in state finances, or reject them and send the state back into the red.
The analysis from Standard & Poor's was included in a report examining the state's new bond offering.
Gov. Jerry Brown wants voters to approve $8.5 billion in tax hikes in November and has threatened to cut nearly $6 billion in spending if the taxes are rejected. Most of the money would be sliced from public schools.
The Standard & Poor's report noted that the "trigger cuts" won't fully cover the loss in revenue.
"Without the additional tax revenue, the general fund would face a $2.5-billion deficit even
after implementing severe midyear cuts to education," assuming the state meets all its other budget benchmarks, the report said.
That deficit could be somewhat cushioned with a nearly $1-billion reserve, but the state would likely end the fiscal year with a deficit for the fifth consecutive year.
H.D. Palmer, a spokesman for Brown's Department of Finance, said the state would still be able to pay its bills on time if the tax plan fails, but there could be more cuts.
"We would have to propose additional solutions on top of the trigger cuts to stay in balance," he said.
-- Chris Megerian in Sacramento
Photo: Gov. Jerry Brown outlining his budget proposal for reporters in the Capitol in January. Credit: Rich Pedroncelli / Associated Press