State May Raid Cash From Cities, County


Obama vs. Schwarzenegger:  White House Threatens to Rescind Stimulus Funds

Schwarzenegger’s office was advised this week by federal health officials that the wage reduction, which will save California $74 million, violates provisions of the American Recovery and Reinvestment Act. Failure to revoke the scheduled wage cut before it takes effect July 1 could cost California $6.8 billion in stimulus money, according to state officials.

Call it a threat or a grim reality. Whatever it is, it’s not being welcomed at city halls across California.

The governor’s office suggested this week that if the May 19 budget-reform measures are rejected by voters, the state will have to borrow $2 billion from cities and counties.

The proposal, which comes as polls show little hope for the ballot measures, is being met with horror by local governments that face red ink of their own.

“Our budget gap is so big it’s beyond anything we could have imagined already,” said Santa Cruz City Manager Dick Wilson. “If the state adds this additional burden, it’s overwhelming. … It’s appalling beyond words.”

Under the state proposal, the city of Santa Cruz could be forced to hand over as much as $1.6 million next year, adding to an existing hole of $6.5 million. With a total budget of $75 million, the city is already having to make concessions — like giving up operation of two museums and a community center and asking employees to take pay cuts — which Wilson said would become more severe should the city lose more money.

The May 19 election includes five measures that would generate $6 billion through new taxes, borrowing and funding shifts. The most recent poll, released Thursday by the Public Policy Institute of California, echoes earlier surveys and shows none of the five measures has more than 43 percent support.

With the state facing a projected $8 billion shortfall even if the measures pass, the Schwarzenegger administration is considering an array of budget-balancing options that include borrowing from local governments.

The state, under voter-approved Proposition 1A, is permitted to take up to 8 percent of the property taxes collected for cities and counties as long as the money is repaid, with interest, in three years.

That would mean a grab of up to $16.7 million from governments in Santa Cruz County, the bulk of it, or $9.1 million, coming from the county government, according to numbers crunched Thursday by county Auditor-Controller Mary Jo Walker.

Schwarzenegger officials did not return calls for comment.

Some were calling the governor’s proposal a desperate, last-ditch attempt to get voters to support the ballot measures his office has long been championing.

“Instead of them saying, We’re here to finally get control of spending,’ now the theme is, If we don’t do it, watch out,” said Larry Gerston, political analyst and professor at San Jose State. “The proponents are really scrambling right now to come up with a way to get people out to vote … and get them to see the light from their point of view.”

Assemblyman Bill Monning, D-Monterey, though, empathizes with the governor’s situation.

The first-term lawmaker who represents Santa Cruz County said that if the ballot measures don’t pass, few options remain for steadying the state’s finances. Republicans, Monning said, won’t agree to higher taxes, which would leave the state with no choice but to proceed with program cuts and even borrowing from local governments.

“This is a realistic assessment of what the state faces,” he said. “I don’t think it’s a scare tactic.”


May 19 Ballot MEASURES

Proposition 1A: Establishes a spending cap and a reserve fund and extends a number of taxes.

Proposition 1B: Provides money to schools in light of past cuts.

Proposition 1C: Permits state to borrow up to $5 billion against future lottery proceeds.

Proposition 1D: Redirects Proposition 10 money, which was approved by voters to fund child services through cigarette taxes, to other purposes.

Proposition 1E: Redirects Proposition 63 money, which was approved by voters to fund mental health services, elsewhere.



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