The other option would be a federal bailout. I'm sure they'll ask for one because they will be able to play the politics of the "cruel Republicans in Washington taking it out on California for supporting Gore."
I suppose you're right about the timing, though. If Davis can somehow limp through the election without raising taxes, he'll try. The question is how bad will the situation be. My guess is that it will be very bad and that next summer we'll be discussing the potential bankruptcy of California (not that I believe that will happen).
Again, you are right, they will raise taxes, but it will be over their politically dead bodies. Republicans need to start thinking of how they can capitalize on the coming year of Democratic party agony!