SM stands to lose $2.7M in revenue next year
CITY HALL — Officials here reacted with “cautious optimism” Wednesday to a proposal unveiled by Gov. Arnold Schwarzenegger intended to spare local governments from the state budget ax.
The agreement — reached between Gov. Schwarzenegger and local officials from around the state — proposes protections for California’s cities and counties, but allows for the state to hold onto $2.6 billion in local revenues over the next two years.
For Santa Monica, that means losing an estimated $2,716,305 in the coming fiscal year and the same amount in 2005-2006, according to an analysis performed by the California League of Cities. In 2007, Santa Monica will receive an estimated “backfill” of $1,593,816.
City finance director Steve Stark said those numbers may fluctuate because the amount of money cities will be out of pocket ranges from 2 percent to 4 percent of their general fund, according to the parameters of Schwarzenegger’s deal. City Hall has budgeted $4.2 million this year for uncertainties from Sacramento and Stark said none of that money has so far been used.
The one certainty, said City Manager Susan McCarthy, is uncertainty.
“It means that we have two more years of subsidizing the state. These are revenues that come from the local community that the state retains,” she said. “Sacramento looks to local government as the fall guy... They have a huge problem and there isn’t a magic solution.”
Guarded optimism has become the mantra at City Hall, as sales tax and other revenues have increased over the last year, while the state funding crisis looms.
City Hall revised its projected $353 million budget for this year to $381 million in the middle of the year, due to a recovering local economy. The fiscal year ends June 30 and copies of the proposed budget for next year are currently being printed. Details will be released Tuesday.
The agreement put forward by Gov. Schwarzenegger is an improvement for local governments over what was outlined in his January budget — and because of the safeguards it proposes down the line, it was endorsed by the executive committee of the California League of Cities.
Under the new proposal, $350 million of the $1.3 billion annual loss will be carried by cities; $350 million by counties; $350 million by special districts; and $250 million by redevelopment agencies.
Also part of the plan is to make permanent the current vehicle license tax cut and put on the November ballot a constitutional amendment that would guarantee local government’s property, sales and vehicle license fee revenues not be siphoned off by Sacramento problems.
“With this agreement, I am keeping my promise to cities and counties to ensure that local governments have a reliable revenue stream to pay for local services,” Gov. Schwarzenegger said in a prepared statement. “This agreement is another example of the new spirit of cooperation and a new respect between state and local governments in California...
“We protected local governments when I repealed the car tax, and then restored funding for local services,” Gov. Schwarzenegger added. “We worked together to pass Propositions 57 and 58, to tackle the inherited debt and end deficit spending. We worked together to reform workers’ compensation which will free up more local funding. I applaud everyone who worked so hard to make this happen. This is a victory for local government, for people who rely on local services and for all Californians who want their leaders to work together.”
Originally published in the Santa Monica Daily Press print edition on May 13, 2004. Read the original PDF.