> ## Content Index > Fetch the complete content index at: https://www.smdp.com/llms.txt > Use this file to discover other available public pages before exploring further. # State cuts worsen city’s existing hard times - URL: https://www.smdp.com/state-cuts-worsen-citys-existing-hard-times/ - Published: 2002-12-23T16:00:00.000Z - Updated: 2026-10-23T01:10:50.000Z - Author: Andrew Fixmer - Tags: Government & Politics, Santa Monica, #archive-import *Service cuts, fee increases lay ahead for residents* City Hall expected the state’s budget mess to have local impact, but it wasn’t expected to be this bad. At an interview last week, Santa Monica City Manager Susan McCarthy and Finance Director Mike Dennis sat down to explain the intricacies of how the state’s $30-billion deficit would hurt Santa Monica. “For the cities, I think the worst is yet to come,” said McCarthy. The state may not give Santa Monica about $5.3 million in redevelopment bond money guaranteed to it under law. However, because of the depth of the state’s budget crisis, almost all of the funds the city gets from the state could be taken back to be used for closing the deficit. For now, McCarthy said she is just glad Gov. Gray Davis hasn’t proposed taking a larger bite out of property, sales and vehicle taxes from the cities. That would have far greater implications, she said. “If that happened, it could affect jobs and services in a very serious way,” McCarthy said. “But even if we’re not too badly hurt this time around, we’re going to feel it the next time.” When the state was in a difficult budget situation in 1992 to 1994, the Legislature approved shifting property tax money to education, which transferred $3.5 million from Santa Monica to its school district. By doing that, the state maintained its constitutional obligation to education without having to raise taxes to pay for it, Dennis said. However, during the last decade of economic prosperity, that money was not returned. Now, if the state chose to do a similar shift, it would have an even greater impact because the cities are already short funds, McCarthy said. Davis may understand that, but the result has been that nearly 57 percent of the proposed $10-billion mid-year budget cuts could be taken from public education. To deal with the $3.5 million in proposed funding reductions from the state, Santa Monica-Malibu Unified Superintendent John Deasy has recommended closing schools for 10 days. That option, which would require state approval, could save the district $3.1 million by not having to pay its employees. It would also spare the district from eliminating positions and eviscerating academic programs. Knowing that, McCarthy said the state must find a way to fund the schools while at the same time not taking more from the cities. “This is a tough time for schools, and nobody is arguing that,” McCarthy said. “But (shifting funds) had a serious impact back then, and it would have a tremendous impact now on municipal services and positions.” Davis is proposing rolling back taxes in other areas. For example, a tax approved by California voters in 2000 on gasoline was intended to help fund road repairs, which had typically generated $300,000 for Santa Monica. In the first round of budget cuts, Davis rolled that money back to $240,000, so the city lost $60,000\. And then earlier this month, he eliminated giving the city any of the tax dollars altogether. Those funds represented about 10 percent of the money the city annually spent fixing its streets. To deal with similar reductions of state funds last year, the city instituted a 3 to 5 percent reduction in every department and made enough cuts to actually finish the year with nearly $2 million in surplus. Making those kinds of cuts this year is not an option, McCarthy said. She said the types of cuts required need policy direction from the City Council and residents. This year City Hall is asking the council to raise taxes and fees in addition to cutting programs and services, McCarthy said. “It’s going to probably take a combination of both to pull us through this,” said Dennis. “We are going to prepare a list of all the recommended places to make cuts and all the places the city could raise its revenues, and present that to the City Council.” “And with input from residents, they will have to decide how we move forward,” he said. Compounding the shortfall in state funding is a budget deficit based on a slowdown of the local economy. Taxes from hotel rooms and from restaurant and retail sales have decreased. Meanwhile, the city’s costs have soared. Health insurance benefits and payments into CALPERS, the state employee retirement system, have skyrocketed within the last year. The result has been that predicted budget gaps have swelled for next year. Previously, Dennis had said the city could be facing an $8.2-million deficit next year and as much as $16 million the year after that. However, he said those numbers could become worse if the economy doesn’t pick up even mildly, and if Sacramento takes away much of the city’s funding. Since then, the economic news hasn’t been improving, McCarthy said. “All you have to do is be a newspaper reader to know we are all in a bad economic situation, “ she said. “Santa Monica doesn’t live in a protective bubble. All that bad stuff is happening here, too.” > “Santa Monica doesn’t live in a protective bubble. All that stuff is happening here, too.” — — SUSAN MCCARTHY Santa Monica City Manager *Originally published in the Santa Monica Daily Press print edition on December 23, 2002.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/122302.pdf?ref=smdp.com)