Budget Agreement Puts California Dream on Hold

<p>It appears California has passed a budget that includes huge cuts to healthcare and education and closes state offices for three days a month. No mention of specifics in this NYT article, but it doesn't sound good...</p>

<p><a href="http://www.nytimes.com/2009/07/22/us/22calif.html%5B/url%5D"&gt;http://www.nytimes.com/2009/07/22/us/22calif.html&lt;/a&gt;&lt;/p>

<p>$2 Billion in cuts to higher ed...yikes!</p>

<p><a href="http://news.yahoo.com/s/time/20090721/us_time/08599191186200%5B/url%5D"&gt;http://news.yahoo.com/s/time/20090721/us_time/08599191186200&lt;/a&gt;&lt;/p>

<p>I am really happy my child is not at ANY state school right now! There will be huge fallouts if the Cal grant program is under/not funded. I didn't see anything specifically mentioning it, but I'm sure alot of kids in CA would NOT be in college w/o those grants.</p>

Democrats were able to block Schwarzenegger from using the budget crisis to eliminate California's safety net for its poorest and most vulnerable citizens. The governor had originally proposed eliminating the state's welfare-to-work program, the CalGrant program that helps thousands of low-income students attend college and a health-insurance program covering poor children.


<p>Sue, the second article implies that Calgrants survived...but with such steep cuts to the university budgets, I have to wonder how many kids simply won't have a spot to use them!</p>

<p>CSMFO STATE BUDGET UPDATE (CA Society of Municipal Finance Officers)
July 21, 2009 </p>

<p>Early last evening the Big 5 emerged announcing an accord to fix the 2009-10 state budget deficit.</p>

<p>The suspension of Proposition 1A and borrowing just shy of $2 billion from cities, counties and special districts property tax revenues is included. Since the legislative leaders declined to offer details prior to briefing their respective caucus members, we should assume, unless we discover to the contrary, that the borrow will be the 8% across-the-board proposal offered by the Department of Finance some months ago. We are told that the suspension of Proposition 1A will be coupled with some form of a loan program for local agencies to access, but again, no details.</p>

<p>Both houses are expected to vote on the budget accord Thursday, and as you know, suspension of Proposition 1A requires a 2/3rds vote within each house. Nothing is a done deal around here until it’s a done deal, but the legislative leaders should very optimistic last night that each house will, in fact, deliver the necessary 2/3rds votes.</p>

<p>The budget accord also takes the local share of the gasoline tax and $1.7 billion in funds from redevelopment agencies. Both the League of California Cities and the California State Association of Counties vow to sue the state over these takes (Please see the League’s Press Release attached for additional details). The budget plan also would provide for a long-term extension of redevelopment plans, which is somehow tied to triggering the take of the local share of the gasoline tax.</p>

<p>To recap:
Local Government impact is ~$4.3 billion.
Prop 1A borrowing is $2 billion.
Two-year borrowing of local gas tax is $1 billion per year.
Local redevelopment agencies take is ~$1.3 billion.
Prop 1A and HUTA raids would be triggered if RDA proposal to impose a 10% tax increment take does not materialize ($3 billion estimate annually).
CSMFO will continue to provide its members with information as it is available.</p>


<p>League of California Cities Condemns Proposed State Budget as Reckless Ponzi Scheme</p>

<p>SACRAMENTO — California’s legislative leaders and Gov. Arnold Schwarzenegger have agreed on a proposal to “balance” the state budget with illegal raids of local government gas tax, public transit and redevelopment funds, according to recent court decisions and a legal analysis obtained by the League of California Cities, as well as a “loan” of local government property taxes that is unlikely to be repaid. By relying on illegal mechanisms and fund shifts, this budget resembles a Ponzi scheme that the League of California Cities condemns in the strongest possible terms.</p>

<p>The classic Ponzi scheme works on the "rob-Peter-to-pay-Paul" principle. Money from new investors is used to pay off earlier investors until the whole scheme collapses. Meeting in secret, the Big Five have put together a state budget that relies on unconstitutional seizures of local taxpayers’ funds or “loans” from local taxpayers to finance today’s state operating expenses. This recipe for disaster passes off responsibility for repayment or complying with future court orders to reimburse local governments to future governors, legislatures and taxpayers.</p>

<p>As they have in the past, courts are expected to enjoin the state from implementing its unconstitutional raids of local gas tax, public transit and redevelopment funds. Further, given California’s negative fiscal outlook, the League believes it is illusory to maintain that the state will be in a position to repay the “borrowed” property tax funds in a few years.</p>

<p>League President and Rolling Hills Estates Mayor Judith Mitchell reacted strongly to the budget proposal. “Cities across the state have suffered deep revenue losses and acted responsibly to cut spending by laying off staff, shutting public facilities, and eliminating programs. While some at the state level will try to pass this proposed state budget off as a major breakthrough, city leaders know it only passes the buck and the problem to the future. As an elected official who took an oath to protect and defend the state constitution, I am embarrassed that any state officials would propose a blatantly unconstitutional budget that promises to fail within weeks of its adoption.”</p>

<p>“This budget proposal is a reckless Ponzi scheme because it depends on unconstitutional seizure of billions in local revenues that the voters dedicated to specific purposes and questionable borrowing provisions,” said Chris McKenzie, League executive director. “It also puts government’s most important responsibility—protecting public safety—at risk because it takes local property tax revenues that should be used to patrol the neighborhoods of the cities of California and to respond to the many fire, police and emergency medical calls that cities in California receive. We have assured state officials we will see them in court the day after a budget is signed if it contains illegal provisions.”</p>

<p>Established in 1898, the League of California Cities is a nonprofit statewide association that advocates for cities with the state and federal governments and provides education and training services to elected and appointed city officials.</p>