Budget impasse could hit SM nonprofits hard
CITYWIDE The political battle in Sacramento over the budget is causing some apprehension locally, those relying on state funding fearing the fallout from a seemingly never-ending delay.
Public sectors like City Hall and the Santa Monica-Malibu Unified School District passed their finance plans long before the fiscal year commenced on July 1. But city and school officials are nevertheless keeping a close eye on affairs in the Legislature, wary that any changes in the budget proposal could ultimately have an impact on the projected funding they would receive from the state.
“Until we know what direction they’re taking, we are not making any changes in our estimates for the coming year,”Jan Maez, the chief financial officer for the district, said.
For the school district, which is estimated to receive $30 million from the state this year, the most troubling effect of the budget delay — now entering its 46th day — is it creates cash flow issues, possibly delaying the SMMUSD’s scheduled allowance of $4 million next month.
The district receives a payment every month from September through June, the state funding formula based on factors that include the amount of money the community collects through property taxes and the average daily attendance of students.
While a postponement in the apportionment could cause problems, once the state budget is passed, the district will be fully reimbursed.
“It’s a timing issue for us rather than a budget issue,” Maez said. “We still have payrolls to meet throughout the year and bills to pay.”
Such cash flow problems might not present themselves to Santa Monica College, which has built up a healthy reserve in the past few years, according to spokesman Bruce Smith.
“Fortunately we have enough of a reserve that it should cover at least through the summer and into September if necessary,” Smith said.“We should be in good shape, but hopefully the legislature will pass the budget in the next month or so.”
The college receives approximately 70 percent of its budget from the state.
“We’re kind of prepared for a lot of different (budget) scenarios,” Smith said.
Some of the budget discussions that have taken place in the state capitol have made City Hall nervous, concerned in particular by potential reductions to Redevelopment Agency funding and loss of money from property taxes.
One of the suggestions that has been mentioned would be to permanently shift $200 million in Redevelopment Agency money from the communities to the state, taking a total of about $3 million away from City Hall, which uses the funding to support open space, Downtown infrastructure projects and affordable housing. RDA projects generate $32 billion in economic development activities statewide, $1.6 billion in state and local taxes and creates $310,000 jobs, most of which are in construction, according to Carol Swindell, the director of finance for City Hall.
“By taking money to solve a structural deficit in the state, they are impacting many local economies and impacting economic development opportunities,” Swindell said.
Swindell also raised concerns about a suggestion for the state to borrow 8 percent of the statewide property tax, taking away about $5.4 million from City Hall.
“For some cities in the state, that kind of borrowing could mean the difference between them being able to function adequately or not,” she said.
There have also been discussions on potential cuts to transportation funding, which would result in a $2.1 million slash to Big Blue Bus operations, Swindell added.
The total loss to City Hall if all the suggestions are incorporated into the budget could come out to be more than $10 million.
“At this point … cities throughout the state are very troubled by the fact that these proposals are even being considered and are being very vocal in their opposition to them,” she said.
Assemblywoman Julia Brownley (D- Santa Monica) said the cuts are not being considered under the budget proposal being presented by the Democrats.
“I’m well aware of how important these two funding sources are to local cities like Santa Monica and all the local cities throughout my district,” Brownley said.“It is not something that we as Democrats want to do.”
Democratic leaders said on Thursday that they intend to bring the budget to a vote on Sunday, though they have yet to reach a compromise with Republicans or the governor.
“It’s very frustrating that our counterparts in the Assembly and Legislature have not provided a proposal,” Brownley said.
While the battle brews up north, the delay continues to cause concern locally, including in the nonprofit sector.
John Maceri, the executive director of OPCC, said the hold-up is giving him flash-backs of a previous budget impasse that lasted months.
The organization, which provides homeless services, relies on state funding to help run the domestic violence program, which is already slated to receive 10 percent less from the state this year.
The impasse, which occurred several years ago, went on for so long that the state began issuing vouchers to OPCC instead of payment.
“We bill retroactively (to the state) so we’re already in the rears waiting for money,” Maceri said.
Others nonprofits, like the CLARE Foundation, are waiting to see what the outcome will be.
“Right now the stalemate in the budget is not impacting us,” Nicholas Vrataric, the executive director of the CLARE Foundation, said. “But we are concerned about the budget and outcome specifically because it would come out of our recovery treatment program.”
Maceri said that in times of budget crisis, nonprofits are the most vulnerable.
“We don’t know where we’re going to land and it doesn’t look very good,” he said.
The Associated Press contributed to this report.
Originally published in the Santa Monica Daily Press print edition on August 15, 2008. Read the original PDF.