CARLSBAD, Calif. - California is on track to issue about $14 billion of general obligation bonds over the next year, even as the state government continues to battle a highly unbalanced budget, Treasurer Bill Lockyer said.
Speaking here Tuesday at The Bond Buyer's California Public Finance Conference, Lockyer said the state's budget woes are likely to persist.
It has been 12 years since California had a "truly balanced budget," and the near-term forecasts are poor, he said. Over the next three years combined, the structural budget gap in the general fund is about $56 billion.
"The Legislature has to continue to figure out how to make $18 to 20 billion in cuts each of the next three years," Lockyer said.
Breaking with many of his fellow Democrats, the treasurer said revenue isn't likely to be part of the solution.
"My general view is we're seeing a tax ceiling in California," he said.
While there are a variety of structural problems that have brought state budgeting to the current crisis, Lockyer wasn't very optimistic about many of the proposed solutions that are floating round.
"Our fundamental problem is the constitutional requirement for a two-thirds vote to pass the budget," he said. "I hope there will be a time we can get that changed."
One of the reform proposals that has garnered attention over the last year is the idea of calling a constitutional convention. Lockyer said that such a convention would just transfer the existing dysfunctions of Sacramento and the Legislature into a new venue.
"I'm not sure we can have a constructive exercise," he said.
Lockyer thought even less of what came out of the recently concluded tax-reform commission, which has proposed less reliance on state income taxes, while replacing both the sales tax and corporate income tax with a brand-new business net-receipts tax, which would operate somewhat like a value-added tax.
The commission was supposed to propose solutions for the highly volatile nature of the state's revenue stream.
"They're right about the problem, but I think they're wrong about the solution," Lockyer said.
Flattening the state's progressive income tax structure is the wrong thing to do in light of increasing income inequality in the state, he said.
And the business net-receipts tax, with its unprecedented nature and inherent uncertainty over how it would be applied to multi-state businesses, would be likely to draw significant litigation based on the interstate commerce clause of the Constitution, according to Lockyer.
The treasurer said he supportive of the efforts of California Forward, a bipartisan group that has put forward a number of ideas - including eliminating the two-thirds requirement to pass a budget.
After the state's $8.8 billion revenue anticipation note next week, it plans to sell about $5 billion of GO bonds in early October, at least some of them in the form of Build America Bonds, Lockyer said. After that, officials expect to be in the market late in the calendar year, and again next spring. California's fiscal 2010 budget assumes $14 billion in bonds.
"That's probably a reasonably accurate forecast," Lockyer said.
In an evening keynote speech, state Controller John Chiang said he is working for some commonsense changes to ameliorate some of the uncertainty that accompanies the budget process.
"One of the reform measures I've wanted is more frequent [revenue] estimates," he said. "I want to get more technical personnel involved in these discussions."
