LOS ANGELES — California's finances are in a much better place for newly elected Treasurer John Chiang than they were when he became controller eight years ago.
"California has one of the most robust economic recoveries on this planet," Chiang said as keynote speaker at a Town Hall Los Angeles event held Thursday in downtown Los Angeles. "We had a $2.2 trillion economy as of a month ago making California the world's seventh largest economy."
Chiang's tenure as treasurer, which began in January, has been marked by rosy reviews from rating agencies and credit analysts - and even a one-notch upgrade to A-plus from Fitch Ratings on the state's $76.4 billion in outstanding debt. Fitch released the report ahead of the state's plans to price $1.9 billion in GOs Wednesday.
But Chiang said the dark days of 2009, when as controller he had to issue IOUs to vendors, aren't far from his mind.
He recalled how Gov. Arnold Schwarzenegger signed the budget bill late in 2008 just days before Lehman Brothers filed bankruptcy, considered the tipping point that sent the U.S. economy spiraling into a deep recession.
By July 2009, the state was $1 billion short when Chiang released his monthly cash report; and "we did not give tax refunds for 28 days and I had to issue $2.6 billion in IOUs," he said.
Today, the Golden State is in a vastly different place. Chiang said the last four budgets have been timely and the private and public service vendors are getting paid on time. The state's voters passed a rainy day fund measure in November that Chiang said will help prevent anything like the events of 2009 from reoccurring.
The state needs to continue to make improvements if it wants to continue on its current path of fiscal stability, Chiang said.
Among the changes Chiang recommended were reforms to the state's tax structure and finding ways to help finance affordable housing.
Rating agencies often point to the state's dependence on revenues from income taxes, particularly from high-net-worth residents. The result is that the state's fortunes are tied to the ups and downs in the stock market.
Some reforms he recommends would simply recognize changing times.
For instance, he said sales tax is defined as a tax on "tangible" goods under state law. So data sold that is sent on paper would be tangible and therefore taxable, while data transmitted via the internet would not be considered tangible or taxable under today's laws.
Chiang deemed it unlikely that the governor or legislature will extend the voter-approved tax increases enacted under 2012's Proposition 30. The measure, which raised sales tax by 0.25% for four years and increased income tax on high earners, expires in 2018. It has been hailed by credit analysts for closing the state's massive education funding gap.
"The governor has said it was a temporary tax," Chiang said. "I think you have to keep your promises to voters."
He added that if the state doesn't keep its promises, if it gets in trouble and needs to go to voters, it has no credibility.
Chiang views the state's lack of affordable housing not just as a social issue of housing the homeless and working poor, but also something that could hamper the state's future economic growth if recent college graduates move out of state because they can't afford housing. The issue also speaks to the state's ability to retain businesses if it can't provide them with the educated workforce they need, he said.