State lawmakers gave a relatively warm response Tuesday to Orange County's tentative moves to put a half-cent tax hike on the ballot, but warned that county leaders will have to aggressively push for voter approval if they want the Legislature to provide aid.
The Board of Supervisors' vote comes at a key time in the county's negotiations with state officials, particularly Democrats who have been pushing the county for weeks to put a tax increase on the ballot.
Orange County officials will participate today in a daylong hearing of a bipartisan Assembly select committee looking into the county's investment debacle. On Thursday, several county officials will appear before the Senate special committee investigating the bankruptcy.
The Orange County contingent's pitch to the two committees could set the tone for negotiations in the days ahead over just what sort of aid the state can offer.
Democrats have been saying the Legislature is willing only to help Orange County schools, but other Capitol insiders are now raising the possibility of the state providing as much as $500 million in the form of a short-term loan or guarantee of some sort.
That infusion of cash could come in handy. Even if Orange County voters approved a sale tax increase on the ballot June 27, the extra revenue wouldn't come in time to meet the more than $1 billion in bond debt the county owes this summer. County officials have talked about negotiating with Wall Street to roll over the bond debt for a full year. If that proposal failed, a temporary state loan might be essential to bridge the gap.
Democrats continue to insist that state help hinges on Orange County approving a sales tax increase.
"They have no choice," Assembly Speaker Willie Brown said Tuesday after learning of the supervisors' decision. "They can bellyache all they like about not really wanting to raise taxes, but they're not going to get anything from the state until they do everything they can on their own to solve their problems, and that includes raising taxes."
Other lawmakers said state aid--as well as loans from Wall Street--could also hinge on whether the supervisors step forward as boosters of a tax increase and try to sell the proposal to Orange County voters.
"I can't measure it exactly, but this certainly must make many legislators think that the supervisors are beginning to face up to reality a little bit more," said Sen. Lucy Killea (I-San Diego). "I particularly think people up here will be pleased if the supervisors push for it hard with the voters. I think it will take that kind of endorsement from them to give the measure the momentum it needs."
Sen. Quentin Kopp (I-San Francisco) applauded the supervisors' vote, but warned that the Orange County leaders will have to steel themselves for the likely avalanche of criticism from low-tax advocates in the county.
"I don't think demonstrations or threats should deter them from proceeding," Kopp said. If they cave in, he said, "the disingenuousness of the supervisors would be transparent."
Scott Johnson, chief counsel to the Senate special committee on the bankruptcy, added that "it's not good enough that they put this on the ballot. They have to support it wholeheartedly."
Johnson said he suspects that members of the Senate committee will implore Orange County officials on Thursday to move swiftly. "The time for debate is nearly past," he said. "The time for action is now."
To that end, some officials in the Assembly hinted that today's hearing will include the release of a legal opinion by the legislative counsel that could prove to be something of a bombshell amid Orange County's travails over the tax increase.
The legal opinion reportedly suggests that the Orange County supervisors could approve a tax increase without a vote of the people, a notion that has been floated by some Capitol insiders in recent weeks.
State statutes require a vote of the electorate for sales tax increases, but the legislative counsel's opinion says that the law is in direct conflict with a provision of the California Constitution prohibiting a referendum on tax decisions.
Although a move by the supervisors to unilaterally impose a sales tax hike would quickly draw a lawsuit, some Capitol insiders say a legal challenge from anti-tax forces is inevitable even if the question is placed on the ballot.
"Why not just have the supervisors do it and expedite the legal fight?" one Capitol official said.
However the county tackles the tax issue, it remains unclear just how much support the idea will get from Republican lawmakers in Sacramento, particularly conservatives from Orange County. Some grudgingly concede that a tax might be necessary, but contend that the county needs to exhaust all other possible remedies.
"I'm very skeptical of a tax increase," said Sen. John R. Lewis (R-Orange). "At the very least, I think it's premature. I'm afraid that if the county moves too quickly, it will be at the expense of not implementing other cost-saving measures," such as selling county assets and tapping into pools of money reserved for future projects.
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A half-cent increase in Orange County's sales tax would boost the rate to 8.25%, the same as Los Angeles County and the highest rate in Southern California. Current sales tax rates compared: County: Rate Los Angeles: 8.25% Orange: 7.75% Riverside: 7.75% San Bernardino: 7.75% Ventura: 7.25% San Diego: 7.00% Source: State Board of Equalization