Car tax rollback cuts deep into local budgets

By Carolyn Barbre and Reggie Ellis

Saying that people who can afford to purchase big new sport utility vehicles can afford to pay 2 percent of that cost in state licensing fees won't get you elected governor - or allow you to keep the post as was recently demonstrated in the Gov. Davis recall election.

But keeping it at .065 percent means the administration has to provide $600 million in refunds to 3.3 million drivers who paid the higher car tax after Oct. 1.

As a result, administration officials have notified cities and counties that the state will be $254 million short on the December car-tax payment to local governments. And next month payments to locals go from a third of what they expected to zero through March.

"The shortfall will be devastating upon our General Fund budget this year," said Lindsay Finance Director Kenny Walker. He said, based on a conversation with the League of California Cities on Dec. 8, "We can anticipate another $240,000 cut in this fiscal year." Walker said that is on top of the $134,000 the state has already taken away this year in vehicle fees.

The League of California Cities said that more than 50 California cities, many in the Central Valley, rely on the car tax for more than a third of their total budgets.

Walker couldn't say yet where cuts would have to be made. "We're looking at those numbers now and trying to determine the best course of action. Then we will make a recommendation to the city council, for their determination on what should be done." Walker said 62 percent of Lindsay's General Fund is earmarked for the police and fire. The remaining 38 percent goes to other municipal services.

Walker said only seven percent of the General Fund is for street repairs, the remaining coming from gas and transportation tax, so plans to repair Lindsay streets should not be sidetracked too much. But the city finance director indicated that it may be too soon to act, recalling that Gov. Arnold Schwarznegger had promised not to cut into local funds.

Walker said they would know better in another month or two. "I think the state needs to cap their own spending. I think in Gray Davis' first term the number of state employees grew by the largest number ever, and I think we need to look at areas in the state budget to cut. Heaven knows we've made our cuts, and our level of government is the one that interacts with the citizen. It's our police and our firemen helping citizens."

Tulare County

District 1 Supervisor and incoming board chairman Bill Sanders said the county may lose $28 million by the end of the fiscal year in June.

"This is the most critical situation that local government has ever faced," Sanders said. "We already have a hiring freeze so the next step would be reducing the workforce."

Sanders said the county could borrow against its reserve fund to make up the difference, but that type of action would affect county budgets for years to come.

"The cuts would have to be deep and drastic," Sanders said.

"Non-essential" services such as planning and parks and recreation could be among the first to go. Sanders said other cuts would begin in overtime pay, which could mean services throughout the county could have reduced or limited hours. Sanders, and Tulare County, has been active at the state level for more than a decade. Each year he makes several trips to meet with state lawmakers and officials, make new contacts and to support key legislation. But after 11 years, Sanders said he is losing faith in the system at the state level.

"I continue to see the bickering between the parties in Sacramento and I don't know if it is worth the time to go up there anymore," Sanders said. "I'm going to sit back and wait before wasting another trip. Neither party has done any good in the last 10 years."

As one of his campaign promises, Gov. Arnold Schwarzenegger had promised not to cut into local funds. Finding a way to keep money flowing to cities and counties was supposed to be part of a budget deal that the governor had planned to work out with the legislature last week, but it involved asking voters to authorize borrowing $15 billion to help pay for the car-tax cut. Schwarzenegger also wanted a constitutional spendIng cap and the Legislature failed to come to any agreement on these proposals by the deadline of midnight, Friday, Dec. 5. On Thursday, the Assembly overwhelmingly passed the bond plan. The Senate passed the bond on Friday. The bond measure will now appear on the March 2 ballot. Voters could pass the measure with a simple majority.

Tulare County has been active at the state level through the California State Association of Counties. CSAC, along with the California League of Cities and California Special Districts Association, are all pushing for a ballot initiative on the November 2004 ballot that would protect local funds used from state money grabs. The initiative, named the Local Tax Payers and Public Safety Protection Act, would require voters to approve an legislative action by the state that would take away funds used for local police, fire, health care, parks, libraries, transportation and other essential services.

According to CSAC, the state has taken more than $30 billion in local property taxes during the past decade from local governments to payoff money owed by the state. This forces local governments to either raise fees or taxes to maintain current services, or cut back on critically needed services.

The initiative would also require the state to reimburse local governments for the cost of state mandated programs, something Sanders said has been an increasing problem in the past five to six years.

"We spend several hundred-thousands of dollars on state mandated programs that we don't ever get back," Sanders said.

Despite their efforts, Sanders said change will ultimately have to come from the people.

"When they start noticing that the sheriff's deputy or fireman isn't there when they need him, I'm sure they will let their legislators know," Sanders said. "But unless people start calling and writing them now, we may end up there."


During staff reports at the Dec. 9 Lindsay City Council meeting, City Manager Scot Townsend said the city was really getting concerned. "It's $619,000 we're not going to receive. At the rate they're going, we'll probably end up with a $300,000 gap." But he added that the Governor made it clear "He was goiing to hold cities and counties harmless." Townsend said the city is trying to free up money for street repairs, "but it's looking hopeless - the amount of money we're trying to free up is the amount they are going to take away."

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