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Local City Councils Balk at State Borrowing Plans
Facing the prospect of no immediate solution to California’s chronic budget problems after Tuesday’s special election, Gov. Arnold Schwarzenegger may soon tap local governments for a loan. On Tuesday, the Santa Barbara City Council most likely will express its distaste for the idea when it will be asked to approve a resolution opposing the borrowing. The city of Goleta may not be far behind.
Up for grabs in Santa Barbara is $2.3 million in property taxes, no small amount when city and Santa Barbara County reserves are looking especially anemic. It represents about 2 percent of the city’s General Fund, which totals about $107 million.
California is required to reimburse local governments for state-mandated activities, according to Senate Bill 90, but Santa Barbara Finance Director Bob Peirson isn’t so sure.
The state doesn’t have a great track record with paying back local governments on items it mandates. Peirson said the city hasn’t been reimbursed in about three of four years for activities such as posting agendas from public meetings, which are required under the Brown Act.
California is allowed to borrow local property taxes in dire financial situations, but can borrow only 8 percent of those taxes and only for three years.
“If they order us to do something, they’re obligated to pay something back,” he said.
It would amount to about $2 billion statewide, but the loan would have to be repaid with interest. That interest rate isn’t specified in the state Constitution, Peirson said, and would have to be determined in the Legislature.
To receive the funds, the governor would have to declare a “severe fiscal hardship,” and the Legislature would have to approve the move by a two-thirds supermajority.
“It’s to allow the City Council to go on record by adopting a resolution against the state borrowing with local taxes,” Peirson said of Tuesday’s council resolution. “The idea is to try and prevent the state from doing this.”
The resolution also puts the city in line with the League of California Cities, which has officially announced its opposition to the state’s plans.
The Legislature is considering allowing cities to borrow based on the fact that the Constitution requires that the state pay them back.
“There is ample evidence the state does not always comply with constitutional requirements,” said the Santa Barbara staff report, citing the fact that the state rarely approves a budget by its constitutionally mandated deadline.
Ninety other cities in California have issued similar resolutions, said League of California Cities regional manager Dave Mullinax, who represents 25 cities in Santa Barbara, Ventura and San Luis Obispo counties.
“All of our cities have gone through a very painful round of budget cycles,” Mullinax said. “Many have burned through reserves, and for the state to come back and take more of our money would be irresponsible.”
This type of borrowing is highly likely if the initiatives fail to pass, he said. The state would face a budget deficit of about $15 million if the initiatives pass and $21 billion if they don’t, a fact that prompted Mullinax to say he felt the budget approved in February hadn’t changed anything.
“We’re just trying to make the real strong statement: Don’t take our money,” he said.
Meanwhile, the city of Goleta is looking at borrowing $475,000 out of property taxes it is owed.
“It will put us in a position where we’re going to have to rely on our strategic reserve,” City Manager Dan Singer said.
The Goleta City Council will take up the matter Tuesday. The direction it takes ultimately will depend on the outcome of the vote.
“It’s still a ‘what-if’ situation,” Singer said.
In Sacramento, state Sen. Tony Strickland, R-Moorpark, who represents Santa Barbara County’s South Coast, told Noozhawk that Schwarzenegger may be using talk of borrowing from local governments for its “shock value” in an attempt to convince voters to back the package of budget propositions on Tuesday’s special election ballot.
“We’ll see what really happens after Tuesday,” said Strickland.
— Noozhawk staff writer Lara Cooper can be reached at .(JavaScript must be enabled to view this email address).
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» on 05.19.09 @ 07:18 PM
How did the people of CA ever get themselves in the position of letting state collect the money in the first place? And even it that made sense in terms of efficiency, how did the voters allow the state to even think it had the power to withold the funds? Is there such a belief that Big Government solves all problems that voters just throw basic intelligence and logic out the window? Whoever has the money has the power (duh). Here’s a little secret: Big Government and Big Labor are virtually indistinguishable in California. Power (and the taxpayers’ money) corrupts.
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