The fax detailing Gov. Gray Davis
’s proposed budget cuts arrived Friday afternoon just at the
right time. The City Council, ending up a regularly scheduled day
of goal setting and budget-cutting philosophy, was waiting to see
how bad the cuts, and especially the shortfall in the Vehicle
License Fees backfill, would be.
The fax detailing Gov. Gray Davis’s proposed budget cuts arrived Friday afternoon just at the right time. The City Council, ending up a regularly scheduled day of goal setting and budget-cutting philosophy, was waiting to see how bad the cuts, and especially the shortfall in the Vehicle License Fees backfill, would be.
The VLF takeaway was $1.2 billion, statewide. Cuts overall came to $20.7 billion. The entire state deficit is said to be $34.8 billion over 18 months.
Earlier in the week City Manager Ed Tewes had instituted a citywide hiring freeze until the economic crisis eases, although staff layoffs did not appear to be on the horizon. A shortfall in the licensing fee could only make matters worse.
Councilwoman Hedy Chang received the fax listing the governor’s cuts from the office of state senator Bruce McPherson, R-Santa Cruz. She was on his staff during his recent unsuccessful campaign for lieutenant governor.
VLF fees are 12.1 percent of Morgan Hill’s 2002-03 general fund revenues. Tewes estimated the VLF backfill at $1.3 million and Morgan Hill’s part of an $800 million suspension of payments for state mandated local programs at $100,000.
Public safety – police and fire services – are primary beneficiaries of the VLF; without it, cities must find the funds elsewhere. Cities will continue to receive VLF funds at the current rate – without the backfill.
Complicating the issue is the fact that cities don’t receive the full revenue from the VLF at today’s rates; they receive revenue from the VLF as they were five years ago when the fees were reduced by then Gov. Pete Wilson. To make up for the shortfall, the governor promised cities that the state would “backfill” the amount lost to the lowered rates. And cities were promised that, if the state did not have the money to “backfill” the fees would be raised again.
In January 2003 the state no longer has the money but there is, not yet, talk of raising the fees.
Besides the VLF cuts, the governor shifted $8.3 billion in social services and health care programs to the counties. Counties are expected, in turn, to pass the resultant cuts on to the cities to help balance their own budgets.
The cuts were accompanied by suggested tax and fee increases. The sales tax might be increased by 1 cent and the tax on a pack of cigarettes may rise another $1.10.
These figures are only the governor’s proposals; state legislators will tear into them, adopt some, raise some, lower others. Legislators have until June 15 to pass a budget cutting proposal, whether the governor’s, their own or a combination of the two.
The Santa Clara County Board of Supervisors met this morning to begin wrestling with its own shortfall. What costs it shifts downward to cities remains to be seen.
Tewes, Councilman Greg Sellers and City Attorney Helene Leichter planned to meet Monday night with Assemblyman Simon Salinas, D-Salinas who represents San Martin and Gilroy and, until this legislative session, Morgan Hill.
However dire the situation appears, Mayor Dennis Kennedy finished Friday’s meeting with a somewhat reassuring comment about city jobs.
“I think we can get through the year using no more than the 40 percent reserves and no layoffs,” he said.
City reserves in the 2002-03, $86.5 million budget began the year at $11,232,426.
Schools hit too
School districts will have to absorb $4.1 billion in cuts to Proposition 98 programs including a $1 billion across the board cut, $1 billion suspending Prop. 98 growth COLAs and $542 million reduction in K-14 categorical programs. The Morgan Hill School District administrators met Monday morning to discuss the situation. Bonnie Branco, deputy superintendent for business services will be in Sacramento today for a briefing from state education officials.
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