TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
FROM: ASSISTANT TO THE CITY MANAGER
DATE: JUNE 15, 2004
SUBJECT: REQUEST TO SUPPORT THE LOCAL GOVERNMENT BUDGET PACKAGE PROPOSED IN THE GOVERNOR’S REVISED BUDGET
RECOMMENDATION
Consider supporting the local government package and constitutional amendment proposed in the Governor’s revised budget, and authorizing the Mayor to send a letter in support to key legislators.
BACKGROUND
For years, local governments have been vulnerable to the unpredictability and instability of local revenue sources. Since 1991, the state legislature has diverted more than $30 billion of local property taxes away from cities, counties and special districts--costing cities more than $800 million in FY 2003-2004 and $6.9 billion in the last 12 years. The state has recently shifted costs for state-sponsored programs and delayed constitutionally required reimbursements to local governments for state mandated programs and services. In the last two fiscal years, the state has deferred over $1 billion in required reimbursements to local governments. To prevent future additional state raids of local revenues placing city resources and services at risk, a coalition formed to fight for constitutional reform.
The League of California Cities, California State Association of Counties and the California Special Districts Association joined forces to sponsor the ballot initiative, entitled the Local Taxpayers and Public Safety Protection Act. The initiative would amend the constitution to require a majority vote of the people before the state government would be allowed to take and use local government funds (sales tax, property tax and vehicle license fees) for increased state general fund spending. It also strengthens existing law that says when the state mandates a program, service or added cost to local governments; the state must reimburse the local governments in a timely manner for the cost of providing that program or service.
On the same day the League filed over 1.1 million signatures to place the Local Taxpayers and Public Safety Protection Act on the November ballot, Governor Schwarzenegger proposed an alternative package, which is now incorporated in his May Budget Revise.
DISCUSSION
Offering an alternative package to the officially qualified LOCAL initiative, Governor Schwarzenegger proposes two-years of reductions to local governments ($1.3 billion each year) linked to long-term constitutional protection measure that needs to be placed on the November ballot by 2/3 of the Legislature. LOCAL Coalition supports this compromise package and is working with legislators to ensure its implementation. The League of California Cities is requesting member cities to contact State legislators to approve the local government package and constitutional amendment proposed in the Governor’s May Budget Revise. According to the League of California Cities, there are indications that legislators will push for changes to some aspects of the local government agreement. The League strongly opposes changes to the local government package, which has been carefully negotiated with the governor and our LOCAL coalition partners over many months. Should Council wish to support the Local Government Budget Package in the Governor’s May Budget Revise, Council may wish to authorize the mayor to send letters of support to the "Big 5" Budget Committee members.
Facts about the Local Government Budget Package
Two-Year Budget Compromise.
Agreement includes short-term cuts linked to the passage of long-term constitutional protection measure. Two years worth of cuts ($1.3 billion each year) vs. ongoing $1.3 billion in additional ERAF shifts (as proposed by Governor in January).
- $350 million each year from counties
- $350 million each year from cities
- $350 million each year from special districts
- $250 million from redevelopment agencies
- Counties, cities, special districts, and redevelopment agencies worked with Administration to develop equitable plans for allocating these reductions among all local governments.
Long-Term Constitutional Protection of Funding for Local Services.
If placed on the ballot and approved in November, this measure will prevent the state from taking and using local government funds and would protect local taxpayer dollars that fund vital local services like police and fire protection, emergency medical and health care, parks, roads and libraries. Specifically, this measure would:
- Constitutionally prohibit the state from taking and using local government funds including property taxes, sales taxes and remaining Vehicle License Fee (VLF) funds.
- Ensure timely reimbursement from state for mandated programs and services on local governments. Mandates automatically expire if Legislature fails to provide funding.
- Constitutionally reduce VLF rate from 2% to 0.65% (current effective rate). City and county current VLF "backfill" would be replaced with a like amount of property taxes (less a two-year "contribution" by cities and counties of $350 million each year).
- Require payment of current year’s VLF backfill "loan" in 2006-2007.
- Require repayment by state of deferred unfunded mandate obligations over five years, beginning in 2006-07.
- Guarantee payment of the property tax backfill to cities and counties due to the Prop. 57 "triple flip" (which suspended ¼ cent local sales tax).
- Restore local sales tax to full rate when the Prop. 57 bonds are repaid.
If the Legislature passes the alternative constitutional measure that provides similar protections to the LOCAL initiative, the LOCAL Coalition can legally mobilize existing campaign resources and funds in support of the alternate measure. If the Legislature fails to adopt a measure equal in strength to the LOCAL initiative, the LOCAL initiative will still be on the ballot and the LOCAL Coalition will campaign in support of it.
FISCAL IMPACT
The Governor’s proposed constitutional amendment and local government package would allow cities and counties to keep significantly more property taxes through the VLF "backfill".
PREPARED BY
Gina Park
Assistant to the City Manager
APPROVED BY
Les Evans
City Manager
Attachment: Draft Letter
DRAFT
Date
The Honorable (Senate or Assembly Member)
California State (Senate or Assembly)
State Capitol Building, Room #
Sacramento, CA 95814
Re: Support for Local Government Budget Package
Dear XX:
On behalf of the City Council of the City of Rancho Palos Verdes, I am writing to request your support of and help in passing the Local Government Budget Package as released in the May Revise.
Long-term constitutional protection is the most important priority for local governments and local services. It is the only way to provide predictability and stability for local services and to ensure that there are enough firefighters to answer calls, that parks stay open and that enough police officers and sheriff’s deputies patrol the streets.
To that end, Legislators should support the local government budget package, which is a budget compromise that contains two years worth of cuts to local governments linked to a strong constitutional protection measure that must be placed on the November 2004 ballot.
In finalizing a budget this year, it is important that the legislature do the following to protect local services:
- Enact this package enacted swiftly
- Do not weaken the constitution protections
- Do not add more cuts or reductions to local governments
- Do not alter the allocation formula
Local government leaders are willing to be part of the budget solution one last time, but only if such efforts result in a meaningful reform measure being placed on the ballot. Our coalition has an initiative that will be on the November ballot and we have a strong campaign in place to pass this measure if a budget compromise and alternative constitutional protection initiative cannot be put forth by the legislature.
We believe this package achieves meaningful reform, but we need your help to guide it through the budget process. We respectfully urge your support of this package.
Sincerely,
Peter C. Gardiner
Mayor
Cc: League of California Cities