Thursday, July 30, 2009




The latest state budget proposal is called a "heist" and “morally bankrupt” by county officials who fear massive cuts.

Supervisors threaten state with lawsuit

Gov. Arnold Schwarzenegger, left, smiles at Senate President Pro Tem Darrell Steinberg, D-Sacramento, second from right and Assembly Speaker Karen Bass, D-Los Angeles, after emerging from his office to announce an agreement has been reached to solve California's budget problem.


LOS ANGELES — Calling a plan to use local funds to balance the state’s budget a “scheme,” a “heist” and “morally bankrupt,” county supervisors agreed Tuesday to sue the state if that scenario becomes a reality.

Supervisor Zev Yaroslavsky recommended that the county counsel be directed to file legal challenges to any action that extends the state’s redevelopment projects without a finding of blight or any withholding of Highway User Tax Account funds.

“For the state to balance its budget on the backs of the state residents most in need of help, and the counties that serve them, is fiscally reckless and morally bankrupt,” Yaroslavsky said.

County staff acknowledged that the details of the state’s proposals were not clear, but the board’s action was intended to allow counsel to move immediately upon passage of legislation at the state level.

The board’s action anticipates that the current state budget proposal, if passed, would extend redevelopment projects in order to take property tax revenues that would otherwise be returned to local municipalities.

Yaroslavsky said such a move, which he called “unconstitutional,” could cost the county as much as $24 billion over the next 30 years — or an estimated $8.2 billion in value today.

The highway tax fund transfer would cost the county about $109 million this year and $82 million next year, according to staff estimates. Yaroslavsky called the potential taking of highway funds a “heist.”

Supervisor Gloria Molina suggested that political gamesmanship was at play in the state’s current proposal.

“I guess that they are waiting for us to file this lawsuit? Is that part of the game?” Molina asked, calling the state’s plan a “scheme.”

Supervisor Don Knabe said he thought that state officials hoped to trigger a “poison pill” as a result of a lawsuit by the county, which would allow the state to trigger a borrowing under 2004’s Proposition 1A and make the county “look like the bad guy.”

A borrowing under Prop. 1A would apparently allow the state to take local funds without representatives explicitly voting to do so.

The state’s potential moves to raid local funds to balance its budget are estimated to cost the county as much as $852.2 million. County officials stressed that the cuts would affect the county’s ability to deliver health, mental health, public safety and social services.

The proposals being considered in Sacramento would be on top of the $253.1 million the state cut from the county in February.

Assembly Speaker Karen Bass, D-Los Angeles, conceded that the local cuts are painful, but the state had little choice.

“If you cannot raise revenue, the only way you can close the deficit is to cut or do borrowing,” Bass said. “The borrowing that we did on the local level, and I know it was very painful, but the borrowing that we are doing is short-term borrowing and we’re going to do an accelerated repayment. The fact of the matter is, if we’re not able to raise revenue, those are our only two choices. And the cuts we’ve made so far are very devastating.”

Bass noted that without the cuts, the state likely would have had to eliminate programs such as CalWORKS, and “those hit the counties as well and those would have been permanent reductions, and so we really didn’t have any good choices.”

H.D. Palmer of the state Department of Finance confirmed that all of the cuts are on the table as legislators try to close the state’s budget gap.

“Those proposals are under consideration. We’re forced to consider any number of difficult proposals,” Palmer said.

Antonovich said Monday that the state should eliminate wasteful departments and unneeded positions before raiding local funds.

The Legislature is leaving Los Angeles County in a position similar to what happens “after the parade, when we’re left with a shovel to clean up after the horses,” Antonovich said.

The board’s vote was 4-0. Supervisor Mark Ridley-Thomas did not attend the meeting.

The state Legislature has yet to vote on the budget proposal reportedly hammered out Monday by Gov. Arnold Schwarzenegger and the Democratic and Republican leaders of the state Senate and Assembly.

Reductions from county programs being considered include:

• $109 million in fiscal year 2009-10 and $82 million in fiscal year 2010-11 reductions of the county’s share of gasoline tax revenues.

• $53.3 million reduction of projected CalWORKs Single Allocation funds.

• $22.1 million loss from the elimination of funding for the Substance Abuse Crime Prevention Act (Prop. 36) funds.

• $21 million loss from the elimination of funds for the Mental Health Managed Care Program.

• $12.4 million loss from the deferral of AB 3632 Program payments.

• $7.1 million loss from the reduction of Drug Medi-Cal Program Rates.

• And $5.7 million loss from the reduction of HIV/AIDS Treatment and Prevention Program funds.

State leaders are also considering the suspension of Prop. 1A, which would allow the state to borrow $1.98 billion from local governments, said Sharon Harper, chief deputy of the county’s chief executive office.

If enacted, she said, at least $301.9 million in county general fund property tax revenues would be at risk.

Mayor Antonio Villaraigosa also lashed out at the proposed raiding of local funds.

“I think all of us are absolutely outraged that this Legislature, that Sacramento, has been unable to balance its budget to address the meltdown,” Villaraigosa told reporters.

He said the state could take nearly $300 million from the city’s already- strained coffers — including $120 million in gas tax revenue, $124 million in property tax revenue and $50 million in redevelopment funds.

Under Proposition 1A, if the state decides to borrow a portion of the city’s property tax revenues, it would have to pay the money back — with interest — over three years. However, the state is not obligated to reimburse the city for gas tax revenues.

“That is the kind of irresponsible legislating and budget decisions that I think all of us are outraged about,” Villaraigosa said.




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