City leaders fear state budget

Suzie Harrison and Andrew Edwards

Depending on who is looking at the picture, the canvas that Gov.

Arnold Schwarzenegger is painting with his proposed state budget has

caused mixed reactions.

“It is just horrible for Laguna,” said Mayor Cheryl Kinsman, a

certified public accountant.

Kinsman first heard Schwarzenegger’s proposal at a League of

Cities meeting she attended Jan. 8 with City Manager Ken Frank. The

speaker was a Sacramento Bee reporter who had attended the governor’s

press conference that afternoon. The information was published the

next day.

“This proposal will hurt us more than any other city in Orange

County,” Kinsman said. “We get the highest per-capita property tax in

the county. The city that receives the highest will lose the highest

amount.

Fortunately, she said, the city has been prudent and won’t go

bankrupt like some other cities might. Other cities have been

floating bonds, acquiring debt to pay for their projects, she said.

“We are almost -- not quite -- a debt-free city,” she said. “That

is extremely unusual. We are a financially sound city, but we will be

hurt by what is going on in Sacramento, severely hurt.”

Kinsman said the governor’s proposal will cost the city at least a

half-million dollars a year indefinitely.

Without property tax funds, city agencies could face cutbacks

across the board, and the city cannot afford to hire new employees.

“I’ll be recommending that all of our departments get some type of

reduction,” Frank said.

He said the city would not be able to fill vacancies for an

assistant director of community development and a police officer’s

job. He is expecting a reduction in police, fire and marine safety

services, as well in public works and planning.

The governor’s proposal comes just weeks after Schwarzenegger

appeased city leaders across the state by promising to return

revenues lost to local governments when he reduced the highly

unpopular Vehicle License Fee.

“It’s frustrating dealing with the state,” Frank said.

There’s a silver lining for the school district. Supt. Theresa

Daem seems optimistic as to how it will affect Laguna.

As a basic aid district, Laguna relies on property taxes for its

revenue. That revenue was threatened last year when Gov. Gray Davis

proposed to redirect some property taxes collected by basic aid

districts into state coffers. Those cuts would have meant a

$6-million reduction for Laguna schools. Schwarzenegger’s proposal

may cut deep into the city budget, but it leaves the basic aid funds

alone.

“It’s a thrill and a relief,” Daem said. “I’m really pleased that

this administration supports his efforts to work things out with

people, being optimistic to solve problems, as opposed to

adversarial.”

Assistant Supt. for Business Norma Shelton said that K-12

education has fared relatively well because the schools are not

proposed to receive the same reductions that they received last year.

“Last year, the state wanted to take away a portion of the local

property tax,” Shelton said. “That was the big issue -- this year

it’s not the case.”

Shelton said that Laguna’s local property taxes basically pay for

everything, and the state gives the district very little as far as

additional funding is concerned.

“The overall effect on Laguna Beach is status quo. We won’t face

further reductions at this point,” Shelton said. “The caveat to all

of this is if the March ballot or proposition for the $15-billion

bond is not passed, then none of this will work.”

The governor’s budget requires two-thirds approval by both houses

of the state Legislature before it is approved.

* BARBARA DIAMOND contributed to this story.