Speaker's Commission
State Seal

Counties, Cities Seek to Bar State Budge Raids

By Julie Tamaki and Nicholas Riccardi

Los Angeles Times

October 26 2001

Finances: Groups plan a ballot measure. They fear local funds will be tapped to counter soaring deficit.

SACRAMENTO -- With the state facing a possible $14-billion deficit, California cities and counties want voters to prevent Sacramento from raiding local coffers to balance the state budget.

The California State Assn. of Counties and the League of California Cities are working to place a measure on the November 2002 ballot to discourage the state from tapping revenues earmarked for local governments by requiring that any money taken be repaid.

At stake are billions of dollars raised via property and sales taxes as well as vehicle license fees, among other revenues. Steve Keil, legislative coordinator for the association of counties, said his group also is exploring the option of asking state lawmakers to send a measure directly to voters. That would save cities and counties the time-consuming, expensive process of gathering signatures to qualify an initiative for the ballot.

Given the state's growing deficit, finance officials from Beverly Hills to Riverside and Ventura counties say they fear a repeat of the budget raids of the early 1990s.

Faced with massive deficits, state officials began diverting billions of dollars in property tax revenues from local coffers during the 1992-93 fiscal year. The funding shift, for which local governments have never been fully compensated, triggered a ripple effect that threw many local budgets into turmoil.

"The first place they come to is the local governments, to balance their budget on our backs," said Los Angeles County Supervisor Zev Yaroslavsky. "In just a matter of weeks or months, when they're back in session and facing a $20-billion deficit, they're going to be looking at every source of revenue we have."

Los Angeles County officials are most worried about the state withholding $600 million in vehicle license fees. The money helps fund the sheriff's, health, children's welfare and public defender agencies. The county is not alone in using discretionary funds to bolster law enforcement and health care, which could complicate state efforts to raid local coffers in light of the terrorist attacks and anthrax scare.

"When an envelope filled with talcum powder can result in a tactical alert, cutting back on that front would be moronic," Yaroslavsky said.

Riverside County Treasurer and Tax Collector Paul McDonnell said the county spends the bulk of its $375-million discretionary budget on public safety.

Gov. Gray Davis, who received a campaign endorsement Thursday in Monterey Park from the California State Sheriffs Assn., has exempted public safety and health from a variety of proposed spending cuts and a state hiring freeze that he imposed.

Nonetheless, law enforcement and health officials are moving to bolster their funding. Each group is pushing for a one-quarter-percent increase in state sales taxes to cover rising costs associated with terrorism threats.

Tim Yaryan, a lobbyist representing Los Angeles police and county sheriff's deputy groups, said the quarter-percent increase could raise $1 billion a year to purchase gas masks for peace officers, bolster their ranks and train them to respond to acts of terror. The money would be divided among various local and state agencies.

"I would think it's something people want because they want to feel safe and secure," said Yaryan, who hopes that state lawmakers will convene a special session and approve the proposal so it can appear on the March ballot.

"We see a real need for the uninsured to get primary care," said Beth Capell, a lobbyist for Health Access of California, a coalition of more than 200 community, consumer and labor groups. "The first two weeks you're affected with smallpox the symptoms are similar to those of the flu."

Davis has not taken a position on the proposal, but Jon Coupal, president of the Howard Jarvis Taxpayers Assn., said his group opposes the efforts to raise taxes.

"Unfortunately we are now beginning to see in the wake of the Sept. 11 tragedy the usual cast of characters wanting to raise taxes," Coupal said. "They're hiding behind the terrorist attacks to push their agenda. We think that is certainly unfortunate and not appropriate."

California's weakening fiscal condition has already touched local governments. Slumping state revenues prompted Moody's Investors Services to consider lowering the credit ratings of the state's county governments, which could make it more expensive for municipalities to borrow money.

"We do need to borrow money for capital projects," said John F. Johnston, chief executive of Ventura County. "A negative credit rating is going in the wrong direction."

The budget crunch may be particularly difficult for Los Angeles County, which almost went bankrupt in 1995, partly as a result of the property tax shift. The federal bailout that has kept the county solvent since then has been shrinking, and further cuts in federal health spending could leave the county up to $300 million short in two years, even without state cuts. The deficit balloons to nearly $1 billion by 2005.

The post-Sept. 11 crash has caught Los Angeles County in an even more awkward position, because its health department has been struggling for months to come up with a way to cut costs to survive the looming deficits. The shortfalls could be so bad that even before the terrorist attacks, county officials were saying they might have to close some hospitals.

Spooked by the new budget picture, county supervisors Tuesday delayed finalizing their budget for the current year until December. Supervisors delayed $27.5 million of urgent capital projects, including the demolition of derelict buildings at Rancho Los Amigos Medical Center, and a 75-cent-per-hour pay raise for in-home health care workers, until they have a better picture of the budget in December.

State cuts also can affect counties by trimming the amount Sacramento contributes to social service programs. A concern for Los Angeles officials is the $300 million extra in state funds over five years that Davis agreed to give the county health system last year.

To hedge against cuts, the county has gathered about $170 million in reserves. But county officials said that is one-time money generated by the recent economic boom, and such a windfall will probably not be seen in a recession.

"The state needs to cut the fat in Sacramento and not confiscate local property tax dollars to feed itself," Los Angeles County Supervisor Mike Antonovich said. "The state needs to go on a diet, like cities and counties went on a diet" in the last recession, he said.

Los Angeles County Chief Administrative Officer David Janssen said that during recessions that the public relies more on health care, welfare and child support services.

Home | About the Commission | Commissioner Biographies
News | Press Coverage | Testimony | Agendas
Meeting Schedules | Minutes | Links

Speaker's Commission on State/Local Government Finance
in collaboration with the
Metropolitan Forum Project
811 West Seventh Street, Suite 900
Los Angeles, CA 90017
(213) 629-9019