Local Governments Cling to One Last Hope

By: Kathleen Les
The State Net Capitol Journal, June 19, 2000

While cities and counties watch their hopes of state help with fiscal relief sinking like a rock, they have still one more life preserver to cling to -- a bill capping the amount of money the state pirates from local governments each year.

This is not the first year a bill to cap ERAF (Education Revenue Augmen-tation Fund) has been under consideration. But it is the first year such a bill has been authored by Senate Pres. pro Tem. John Burton (D-San Francisco), someone with the political clout to put a lid on the nearly $2 billion a year in property taxes the state shifts away from locals to help pay for schools.

"When Sen. Burton takes something on, he follows through," said Pat Leary, a lobbyist with the Calif. State Assn. of Counties. "We are very encouraged that he is the author."

It's been smooth sailing so far for SB 1637. The measure cleared the Senate floor with a unanimous vote. The ride so far has been equally a breeze in the Assembly where the Local Government Committee approved the bill week before sending it on to Appropriations.

Burton himself predicts the measure will have an effortless glide through the Assembly. But his optimism stops there. By his own admission, the governor will not likely give it a friendly reception.

If passed, the measure would cap the ERAF diversion at the 1999-2000 level. In subsequent years, the state would make up the difference between the new base amount and the sum the state would have otherwise realized through increases in local property assessments. Lawmakers would be expected to pluck approximately $230 million more from the state general fund for schools the first year and as much as $740 million three years following, thus allowing locals to reap the increase.

Cities and counties entered the legislative season hopeful that this was the year their financial woes would be addressed. They counted on seeing some of the hefty state surplus flow their way. Burton himself called for as much as $900 million to help bail out locals with the money to be used for a combination of infrastructure incentives and general fiscal relief.

But the Assembly, perhaps in deference to Gov. Gray Davis, shaved the amount considerably, leaving $250 million for local government fiscal relief. That figure now stands at $200 million thanks to the budget conference committee, and even that is slated as a set aside pending a decision by another conference committee on how best to fix the ailing fiscal relationship between the state and local governments.

But the fiscal reform conference committee has failed to hit on a recipe for addressing the financial strain at the local level. At the last meeting two weeks ago, lawmakers rejected outright a consensus proposal crafted by the League of Calif. Cities and CSAC.

The nine-point proposal focused too much on simply handing money back to local governments, said the three legislators present at the meeting, rather than fixing the underlying problem.

"This is a proposal to enhance revenue, not make common sense," said Assm. Dion Aroner (D-Berkeley), committee co-chair, who had stern words for the two municipal groups.

The two associations were clearly disappointed by the reception given their plan.

"We came up with a plan we could both agree to," said CSAC's Leary. "By its nature that's not going to be a big bold plan, but a consensus plan."

However, Leary says the county association is "intrigued" by the legis-lative committee's desire to reassess the patchwork of services locals are asked to provide to determine which ones might be better funded directly by the state.

"That?s exactly the heart of the problem," she said.

Committee members acknowledged the unlikelihood that any substantive reform would land in locals' laps this year. The best that can be hoped for at this point, suggested Assm. John Longville (D-Rialto), is to work out the details of reform in the next few months for expected implementation in subsequent years.

In the meantime, former Assm. Phil Isenberg, who has been retained as a lobbyist by CSAC, remains hopeful Burton will give his all to his ERAF bill. "It was Burton?s idea and he intends to give it a big push," he said.

--KATHLEEN LES