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Local News

Local Officials, State Workers Brace for the Worst Amid Budget Impasse

Legislators could tap local cities' revenue sources, and state employees face a wage cut.

California’s 2008-09 budget impasse has legislators in Sacramento grappling with one another, local officials are waiting to see if their revenues are going to be used to balance out the state’s messy finances, and 200,000 state workers are bracing for a hit that could take their pay down to federal minimum wage.

One of the things at stake is a projected $2.5 billion in local funds and transportation taxes that legislators may borrow from cities, counties and special districts to help cover the $15.2 billion budget shortfall.

“It’s terrible,” Santa Barbara Mayor Marty Blum said. “We would have to make more cuts across the board.”

Santa Barbara is estimated to be out nearly $4 million in revenues if the plan goes through. The city just went through a $4 million budget shortfall. Having already tightened its belt, further large hits to the budget would result in the need to “make some very difficult decisions.”

“We try to control our own destiny as a city within our income, so when something like this happens, it completely destroys all possibility of good planning,” City Councilman Roger Horton said.

Under California law, the state can borrow money from its local municipalities but would have to pay back the amount in three years plus interest. The state is allowed, under Proposition 1A, to borrow up to 8 percent of nonschool property tax twice in 10 years. Currently, that would amount to about $3 billion.

What concerns David Mullinax of the League of California Cities, one of the associations that helped craft Proposition 1A, is the idea that the state is using the borrowed money to get out of debt without resolving the nearly $7 billion structural deficit that keeps throwing the state budget out of balance.

“It doesn’t make sense to even borrow it if it just puts the problem off for three years,” he said.

A big part of the problem, Mullinax said, is the deadlock between the Democrats and Republicans putting the budget together.

“The Democrats are putting forth a budget that includes a lot of tax increases,” said Mullinax, explaining that Republicans, who are more in favor of borrowing the money, oppose the idea of new taxes.

“Each side is trying to box the other side in right now,” he said.

Meanwhile, Goleta Mayor Pro Tem Roger Aceves is preparing to send a letter to Sacramento urging legislators not to suspend any local funds. Goleta is expected to suffer a dip in its budget during the next three years in addition to the projected $698,000 in funds the state might withhold.

“Any change or reduction would force us to refocus on how to use our money,” he said.

The county made some preparations and adjustments for an event such as this, 2nd District Supervisor Janet Wolf said. However, the county can ill afford to forgo the projected $13.5 million in revenues.

“We’ve already had to make some very painful cuts this year,” she said. “Any further cuts would be really unfortunate.”

Equally as nervous are state workers who might find their paychecks frozen at the federal minimum wage rate of $6.55 an hour or lose their part-time employment, if legislators don’t pass a budget soon. The condition was imposed upon the deadlocked legislators by Gov. Arnold Schwarzenegger, who plans to sign his executive order next week if the overdue budget is not together.

State Controller John Chiang says he will ignore the executive order, but state workers across California are still left wondering what will happen. University of California officials sent a systemwide memo Friday, promising “every effort to ensure that employee salaries will continue to be paid at current levels and that all labor contracts will be honored until an agreement is reached on a state budget.”

The Legislature is expected to vote on a budget Tuesday.

Noozhawk staff writer Sonia Fernandez can be reached at [email protected]

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