California's finances primed for improvement, ratings agency says

Now that voters have approved Gov. Jerry Brown's tax-hike plan, Standard & Poor's said California's financial future is brighter.

The ratings agency called the taxes the "linchpin" of Brown's effort to fix the state budget, and it said the benefits will last even after the tax hikes expire in coming years.

The plan will increase the sales tax by a quarter cent for four years and hike income taxes on the wealthy by one to three percentage points for seven years. If voters had rejected the taxes, Brown said there would have been nearly $6 billion in cuts, mostly to public schools.

"Proposition 30 helps alleviate the state's chronic fiscal strain," said a report from Standard & Poor's.

The ratings agency said the next few years will provide a "window of opportunity" for lawmakers to make other improvements to state finances. 

"The state faces a predictable budget gap when the temporary taxes expire," the report said. 

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-- Chris Megerian in Sacramento
twitter.com/chrismegerian

Photo: Gov. Jerry Brown discussing the state budget in January. Credit: Rich Pedroncelli /Associated Press