Synopsis

1. Call to Order/Introductions: Chairperson David Abel called the meeting to order at approximately 10:10 a.m.

In attendance:
David Abel
Carl Anthony
Luis Arteaga
Ruben Barrales
Terry Brennand (for Dean Tipps)
Martha Davis
Robert Foster
Joel Fox
Bill Hauck
John Hunter (for Gary Hunt)
John Maltbie
Sunne Wright McPeak
Rich Morrison
John Pérez
Jean Ross
Kevin Scott
Dwight Stenbakken
Steven Szalay
Carol Whiteside

2. Welcome: Commission Chair David Abel opened the meeting, laid out a concise agenda and called on the Legislative Analyst's Office to get started.

3. Presentation: Reconsidering AB 8: Representing the Legislative Analyst's Office, Marianne O'Malley, who has also served the Commission in an advisory role since its inception, presented the findings of the LAO's new report prepared in response to AB 676 (Brewer).

Ms. O'Malley began by stating that property tax distribution in California is very erratic and that some special districts get as much or more than some counties. She said there are no perfect solutions to this problem of long standing, but offered five alternatives for changing the current formula. The LAO also recommended that the Legislature form a joint committee to address these and other fiscal issues and that funds be set aside in the State Budget to address problems that might arise should a change be made. She opined that it was hard to imagine a formula adjustment being completely revenue-neutral.

The five alternatives:

1. Uniform Rates: Each jurisdiction would be allocated a property tax share based on the services it provides.
2. Local Control of ERAF: Cities and/or counties would be given direct authority over the rate and allocation of a share of the property tax.
3. Property Taxes for Services and Schools: Half of each property's tax bill would go to municipal services and half to schools.
4. Re-Balance Tax Burden: Change local revenue sources to provide a sales tax reduction and create local control over property tax rates.
5. Realignment of Responsibilities: Realign state and local government responsibilities to create more efficient program coordination.

Chairman Abel then asked Ms. O'Malley to compare and contrast the report's findings with those of the Commission. She said the Legislature told the LAO to increase taxpayer knowledge, strive for greater local control and deal with skewed land use incentives. The Commission, she added, focused more on the latter.

Commissioner Szalay noted that sales taxes, redevelopment and equity were not dealt with in the report. O'Malley replied that they were, but not explicitly. She then asked if it was a State goal that every level of local government be equally funded. Szalay replied that a community-level discussion of needs and Desires was needed to determine the appropriate level.

Chairman Abel mentioned the call for a joint committee and asked O'Malley how likely that seemed. She replied that it appeared very likely since Senate President Pro Tem Burton had already begun naming his conferees. The economic and revenue situations also encourage moving forward seriously this year.

4. Presentation: Fiscal and Organizational Challenges of Providing Public Services in Los Angeles County: Research Fellow Chris Hoene of the Public Policy Institute of California reported on an18-month study of Los Angeles County finances. The study's findings were sobering but hardly surprising.

Hoene noted the following basics: health care funding (the subject of a major fiscal crisis for the County in 1995-96) is still a problem; funding levels remain uncertain while service obligations remain largely out of the County's control; the fiscalization of land use is a definite result of the County's situation; fiscal uncertainties make long-term planning difficult.

The County's primary role is as an agent of the State and federal governments, Hoene added. It is burdened by the fact that the cost of the programs it is required to provide usually exceeds the funds provided to pay for them. The County has to cover the gap from a limited pool of discretionary funds that usually amounts to no more than 4% of the annual budget. The study added that the County has no protection against economic shocks and that the large number of local jurisdictions providing services makes it difficult for the public to determine who is responsible for what.

The study suggests that the County needs more fiscal control as well as more revenue sources. It also recommends expanded partnerships with cities and the private sector to increase economic efficiency, greater governmental responsiveness and accountability, and an increased regional focus for both planning and fiscal purposes.

Commissioner Szalay complimented Mr. Hoene on the report, stating that it identifies the basic issues very succinctly. Commissioner Maltbie asked if the Commission's proposal for a State/local compact could help a county like Los Angeles. Hoene felt it would if it carried with it the appropriate level of funding.

Chairman Abel asked, only partly rhetorically, why solving these problems is so hard. Hoene opined that competing interests make it difficult to effectuate change. Abel wondered if Los Angeles County is as "broken" as the report makes it out to be. Hoene said it was and that it would be bankrupt were it not for the booming economy and the federal waiver that bailed it out during the '95-96 crisis.

5. Presentation: The Governor's Infrastructure Task Force: Commissioner Bill Hauck, also a member of the Governor's Task Force, gave a brief report on what was happening with this body that was formed at approximately the same time the Commission was. He said it was working on a tight time schedule with an end point of December 31, 2000.

Hauck noted that an infrastructure finance entity was in place, consultants had been hired to help with planning and the technical sub-committee had already completed its report to the full Task Force. He expressed the hope that a more comprehensive approach to infrastructure planning would be a key result of this effort.

6. Discussion: Fiscal Reform Proposals and Other Business: To start the Commission's final public discussion of reforms, Commissioner Whiteside asked about when the final Commission report would be issued. Chairman Abel opined that it should be done in two to three weeks.

Commissioner Stenbakken suggested that his proposal to encourage increased home rule was not achieving "traction" with the Commission and voluntarily withdrew it. He turned to his other proposal, to place reforms in the State Constitution in order to stabilize local finance. Ms. O'Malley offered that the wording was not consistent with the goal and suggested more precision about the intergovernmental aspects of the issue.

Terry Brennand (representing Commissioner Tipps) expressed concerns with the lack of detail. He cited the Los Angeles County study and a worry that these measures could simply lock in a shortfall. He said that the Commission needed to deal with shared costs and other intergovernmental issues. Commissioner Stenbakken replied that this was a legitimate part of the debate: once you do reform, how do you then provide stability?

Commissioner Szalay opined that placing measures in the State Constitution is not the answer to everything. He added that intergovernmental partnerships are going to continue and the Commission's compact proposal would put them on a more business-like basis.

Commissioner Ross then posed an interesting hypothetical: she asked if the State went through another fiscal crisis such as the one that generated the ERAF shift in the early '90s and cities and special districts were not part of the fiscal mix, would things have been better? Mr. Stenbakken replied that the State probably would have had to make tougher decisions regarding the Budget and taxes. Mr. Szalay added that there would have been more prioritizing going on.

Dean Misczynski of the California Research Bureau offered that, when there have been recessions, there has been no consensus on how to share or spread the pain. The Legislature, he said, will do what it thinks it has to do to achieve a balanced Budget, and without some prior agreements, there is no telling what might happen. Commissioner Stenbakken noted that his proposal to provide stability and predictability stemmed from that concern. Commissioner Maltbie added that there is no magic bullet that will protect locals from all negative contingencies.

Commissioner Whiteside then suggested that the motive behind calling Constitutional protection of reforms and stable local funding be the focus of the Commission's work. She then opined that she would prefer including it in the Guiding Concepts rather than as a stand-alone recommendation. Mr. Stenbakken accepted that amendment and the language regarding Constitutional protection became part of Guiding Concept #3.

Commissioner Fox expressed concerned with including the word "sufficient" in that Concept because it was unclear what it meant and who would make the determination. The group agreed to remove it. Mr. Brennand's concern about too much dependence on service cuts was assuaged by Commissioner Pérez. The Commission finalized the language to Concept #3 (see separate "Recommendations" document).

Commissioner Anthony then raised a concern about there being no Goal in the section of recommendations calling for the Legislature and governor to look at certain issues. At Chairman Abel's suggestion, it was agreed that Commissioner Anthony should develop suggested language for that Goal for submission to the Chair as soon as possible. (That language now appears in the aforementioned Recommendations document.)

Chairman Abel then screened the latest version of the Commission's documentary video that was created for use in educating the public and decision makers on fiscal reform issues. Commissioners commented on it, offering suggestions for how to strengthen it.

Commissioner Morrison then presented his suggestions for amending the proposed language for the regional pool. This language moved the proposal away from spelling out implementation details and toward creating an outline of the kinds of issues and concepts that should be covered in the Legislature's consideration of the idea. After some minor discussion, the Commission adopted the new language (which also now appears in the Recommendations document).

Commissioner McPeak reminded the Commission that their work was not really yet done. She urged Commissioners to push the Legislature to take up the fiscal reform agenda. She also suggested that they participate actively in efforts to educate the public on the issue. Commissioner Whiteside reminded everyone that what had been accomplished was "necessary but not sufficient," that the agenda had been advanced but not completed.

Chairman Abel then declared the Commission's policy business concluded.

7. Presentation: Recognition of the Commissioners: Assembly Speaker Antonio R. Villaraigosa appeared to thank the Commissioners for completing their work "on time and on budget." He briefly discussed the proposed Assembly/Senate conference committee on fiscal reform that he and President Pro Tem Burton were preparing to create, predicting it would begin meeting by the end of March.

The Speaker then presented framed Assembly resolutions to each of the Commissioners present, posing for photos with each of them.

Chairman Abel noted that there was a possibility that the Commission might undertake future meetings, events or projects should it be deemed appropriate or necessary, but that this was the final scheduled meeting.

The meeting was adjourned at approximately 1 p.m.