California is halfway to having a budget for 2003-04. On Sunday
night the state Senate passed its partial solution to an
unprecedented $38 billion shortfall, with a budget of $70.8
billion. Now it
’s on to the Assembly.
California is halfway to having a budget for 2003-04. On Sunday night the state Senate passed its partial solution to an unprecedented $38 billion shortfall, with a budget of $70.8 billion. Now it’s on to the Assembly.
Sen. Bruce McPherson, R-Monterey – and whose district includes the South Valley, was one of four Republicans who voted for the budget, helping to break a deadlock that has caused the state to be without a spending plan since July 1.
The proposed budget includes no outright tax hikes but leaves the state short nearly $8 billion for next year. It also includes deep cuts of $7.3 billion to cities and counties, the arts and a long list of agencies and borrows almost $11 billion.
Among the afflicted is the City of Morgan Hill. Of $825 million taken from cities and counties statewide, Morgan Hill stands to loose $400,000 from its $16 million general fund and $1.9 million from the Redevelopment Agency, according to City Manager Ed Tewes.
“It’s probably good news that the Legislature is finally coming to grips with the need to pass a budget,” Tewes said. “But it’s not good news that the city will lose $400,000. What’s striking about Senate proposal, is that it still does not balance next year.”
Tewes said the hit to the cities and counties was disproportionate.
“Cities are not a large item in the state budget,” he said, “and their proportionate loss is higher – to my knowledge – than any other program.”
The $400,000, Tewes said, is a three month gap – between June 30 and Oct. 1– when the state will not continue to “backfill” funds lost from the lowered Vehicle License Fee fund. If legal challenges to returning the VLF to pre-boom levels succeed, the loss will continue.
McPherson said he regretted the deep cuts to local budgets.
“They are proposed as a loan the state will pay back, but I doubt the cities put much credence in it,” he said.
The Senate version also takes a one-time chunk – $250 million – from redevelopment agencies statewide.
“Last year’s budget solution included the shifting of RDA money – $600,000,” Tewes said. “This version increases Morgan Hill’s loss to $1.9 million.”
The dire-sounding loss does not seriously affect Morgan Hill’s planned building projects that include an indoor recreation center, Tewes said.
“Because we have a voter-approved cap on the RDA of $147 million,” he said, “if the state takes the money, it will only delay the time it takes to collect that amount.”
In the end, the RDA will collect all the funds the voters approved.
“Our ambitious capital projects program already requires us to take short-term loans,” Tewes said. “We haven’t done this before, to my knowledge.”
Tewes said the city has known for the past two years that a time would come when it had to borrow.
“The indoor recreation center itself will cost $24 million – more than the annual tax increment,” Tewes said. He stressed that the borrowing was ‘short-term’ only, compared to most other cities.
“San Jose (that city’s RDA) is highly leveraged,” he said. “A very large proportion of its annual tax increment goes to pay debt service on long-term investments made decades ago.”
School districts in the state won’t see more deep cuts, but there will be $180 less in per child spending, lowering the amount to $6,887.
“They say they are protecting K-12, but I don’t really know that means,” said School Board President Tom Kinoshita. “There will be no increases but they will not cut it, which means there is nothing we can expand, nothing we can replace. It’s what I call a ‘maintenance of effort.’ “
Kinoshita said there are analysts who will translate exactly what the budget would mean for the district, but his opinion is that there is not much new for K-12 education.
“The PR line is that we’re protecting K-12, things are staying at the same level, but for most of us as parents, that’s not good enough,” he said. “Although it isn’t good news, it is better news than a lot of us anticipated. Unfortunately higher education is taking the brunt.”
SENATOR VOTES YES
McPherson said he made the decision to vote “yea” while on the floor of the Senate.
“It’s ugly,” he said, “but we couldn’t sit on it any longer. This is the best we could do.
“Every day we wait costs California millions of dollars,” McPherson said. “The bond rating is in the tank. We’ve got to reverse the trend and get stability back in the budget.”
Even so, he was not happy with the budget.
“There are so many things I don’t like about the budget, but each side got about as much as they could out of the other. It was much better than the one the Democrats proposed a week ago.”
McPherson said the Democratic version included a slight budget reduction and increased sales taxes by one-half cent.
“Their outyear legislative shortfall would be $12 billion a year as far as the eye can see,” he said. “We approved deeper cuts in spending and no tax increase and the outyear projection is less than $8 billion according to the legislative analyst’s office (a non-partisan position).”
The Senator said the Legislature can control how much they spend but they can’t control how much revenue comes in.
“There won’t be a tremendous high-tech boom to get us out of it (the shortfall),” he said. “We’re chipping away at it.”
McPherson emphasized that the Senate budget proposal does not suspend Proposition 98 that guarantees a voter-approved level of payment for K-12.
“When you include deficiency payments, this budget proposes to spend less than last year,” he said.
McPherson pointed out that during Gov. Gray Davis’ early years, during the boom, the state’s general fund rose 35 percent while the population grew only 5 percent.
“They were on a spending binge,” he said.
Other items McPherson said he particularly dislikes are cuts to county sheriffs’ departments, where they will not be repaid by the state for $38 million in booking fees. Student fees at community colleges will rise from $11 to $18 per unit and the UC and state college systems are upping their fees by 25 percent.
The budget also eliminates $11 million from the Arts Council’s $12 million general fund, leaving it will $1 million with which to support artistic endeavors around the state.
ASSEMBLY NEXT
The Assembly started discussions on the Senate budget on Monday and is expected to vote today or Wednesday. If the Assembly is able to approve the Senate’s version with no significant alterations, the budget will move to the Governor’s office for his signature. If there are significant alterations, the Senate will have to reconvene during its summer recess and wrestle with the issue again.
Getting this far was not easy since state law requires a two-thirds majority to pass a budget and neither party has such a majority. The 27-10 vote barely met the two-thirds number.
Assemblyman John Laird, D-Santa Cruz (Morgan Hill and San Martin) was in committee meetings all day Monday and could not be reached by press time.
“I think we are on the right track,” McPherson said.
Staff Writer Marilyn Dubil contributed to this story.
