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Legislators Draft Tax-Hike Measures To Help Pay for Repairs

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California lawmakers are awaiting updated earthquake-damage estimates and an indication of how much federal aid the state will receive, but officials said last week that increased taxes will be necessary to help pay for the damage from last month's Los Angeles-area quake.

Bills began circulating last week in the state legislature with the promise of more before lawmakers take action. "There has been some talk, but blessed little action,'' an aide to the Senate Revenue and Taxation Committee said, expressing relief that lawmakers are not responding prematurely to the crisis as they have before under similar circumstances.

Officials said any new tax measure would suspend the provisions of Proposition 98, the law that requires a portion of all state revenue to be dedicated to education. What likely will be temporary taxes will flow exclusively to disaster relief.

Lawmakers said the state, which has been plagued by financial problems during California's long economic downturn, likely will pay for the bulk of repairs not covered by federal assistance.

President Clinton last week said he would seek more than $6 billion in federal aid for the Los Angeles area; however, damage estimates continue to be between $15 billion and $30 billion, with little covered by insurance.

Statehouse Action

While state officials are expected to authorize higher taxes to pay for rebuilding, they are considering several options.

Among the tax plans floated by lawmakers last week are:

  • A temporary sales-tax increase that would boost the rate by a quarter of a cent for two years, similar to the plan lawmakers approved after the 1989 earthquake in the San Francisco area. An aide to State Sen. Tom Hayden, who introduced the bill, said the tax would raise $750 million to $1 billion annually.
  • A gasoline-tax hike that would raise funds to repair streets and highways.
  • Bond measures ranging from a ballot measure for more than $200 million, for which the state already has capacity, to a vote on raising the state's bonding capacity by up to $2 billion to dedicate to earthquake relief.

Observers said last week that it is too early to tell whether lawmakers would favor a single tax effort or a combination of the alternatives. Gov. Pete Wilson has signaled interest in increasing bond capacity, which would avoid a tax hike in the months before he faces a tough re-election campaign.

One Senate aide said lawmakers may be reluctant to pursue the bond route because of its higher long-range costs.

"We would be burdening future generations; plus, I don't know how wise it is to pretend that another disaster won't happen before the bonds are paid off,'' the aide said.

Meanwhile, officials are looking into the pace of recent work in retrofitting state highways to withstand earthquakes. After the quake, there were charges that many retrofitting projects remained to be done despite funds set aside by lawmakers.

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