City, county coffers could take hit from Dept. of Finance
plan
A state proposal to borrow up to 8 percent of property tax
revenue from local governments to help shore up California’s budget
deficit is being met with some skepticism from Hollister and San
Benito County officials, who are already dealing with budget
concerns.
City, county coffers could take hit from Dept. of Finance plan
A state proposal to borrow up to 8 percent of property tax revenue from local governments to help shore up California’s budget deficit is being met with some skepticism from Hollister and San Benito County officials, who are already dealing with budget concerns.
With the recent failure of a slate of propositions that Gov. Arnold Schwarzenegger said would help bridge a growing budget gap, the state Department of Finance has told cities and counties throughout the state to prepare to send some money to the state.
In anticipation of that, the Hollister City Council this month passed a resolution opposing the borrowing of local property tax revenue, which could total more than $400,000. The County of San Benito’s share could reach $1.6 million.
“We try to run a fiscally responsible city government but the state comes to us and says, ‘We can’t live within our means and we need to borrow,'” said City Councilman Victor Gomez. “We have our own issues that we have to deal with. Since 2001, our rainy day fund has gone down from about $12 million to $2 million. It makes it hard for us because we don’t have anybody to go to.”
Gomez, who is the vice president of the Monterey Bay area League of California Cities, said he and other elected officials in the region are concerned about the state’s threat to raid local coffers – even with the promise of repayment down the road.
“We’re not seeing the state’s fiscal responsibility,” he said. “We’re seeing a lot of overspending. There are things that we want to do [on a local level] but it’s a business we run. We’re not going to spend more money than we have – plain and simple.”
Although the state hasn’t yet made a formal request for the transfer of money to the state, Hollister City Manager Clint Quilter said he is “assuming they’re serious.”
“They haven’t been too reticent about taking money in the past,” he said, noting that the state’s estimate of what it would borrow from Hollister is $423,000.
The council’s resolution decrying the proposal will be sent to the governor as well as state representatives in the Senate and Assembly, Quilter said.
Proposition 1A, passed a few years ago, limits how often the state can borrow money from local governments and it requires that the money be repaid with interest.
However, officials say, the money is still gone from local coffers for a period of time, which limits budget flexibility.
Quilter said that if the state does require the city to transfer a portion of its property tax revenue, he’ll recommend that the amount sent away be borrowed from another city fund until the state makes its repayment.
“There’s nothing that says that state won’t figure out a way not to pay us back, either,” he said. “If we can borrow from another fund, that’s useful in the short term, but that’s money we won’t have for something else for three years.”
Susan Thompson, San Benito County’s administrative officer, said she is confident that the protections set forth by Prop. 1A will ensure that the state repays the money it borrows.
“It’s a cash-flow issue,” she said. “It’s not an issue that requires us to make cuts on its own because it’s a loan that we expect to be repaid.”
Despite the county having “healthy cash reserves,” Thompson said there are bigger issues related to the state’s budget woes, such as a proposal to stop the state’s reimbursement to local governments of property tax revenue losses related to the Williamson Act. Under the act, counties such as San Benito offer reduced property tax rates to owners of agricultural land as an incentive to keep those lands used for agricultural purposes. The resulting loss of revenue is reimbursed by the state.
“It’s a really good way of supporting agriculture and maintaining ag acreage,” she said. Eliminating the state’s reimbursement could cost the county $650,000, which Thompson said “would require real reductions in our budget.”
Another concern is Schwarzenegger’s proposal to eliminate funding for Proposition 36 programs, which encourages drug diversion programs instead of jail time for certain offenders.
“If that’s eliminated, the mandate to provide the service stays, but it shifts the costs to local governments,” Thompson said. “That program keeps people out of jail and has good outcomes for some people. That [proposal to cut funding] concerns us, but I can’t quantify how much it would cost.”
What’s more, proposals to reduce certain state welfare and aid program benefits could also have a negative affect, “though how that’ll affect our community remains to be seen – I can’t imagine it’ll be good,” she said.
County supervisors are not expected to hold budget hearings until Aug. 3, Thompson said, in the hope that the state budget picture will be clearer by then.
“Until we know what we’re dealing with, we can’t react very well,” she said. “Our strategy is to prepare our budget with the best information we have and have a Plan B ready to go when the other shoe does drop.”
Quilter said that while the state’s budget situation “is fairly bleak,” city staffing reductions in recent years helped address some budget concerns.
“We laid off a lot of people before,” Quilter said. “I think it may not be as bleak for us as it is for other cities, but it’s certainly not ideal.”
