Prop. 57’s passing sets minds at ease

June Casagrande and Deirdre Newman

City leaders breathed a sigh of relief Wednesday with the news that

Proposition 57, the governor’s economy recovery bond, won voter

approval.

For the last two months, Newport Beach’s department heads have

been submitting their proposed spending plans to the city’s budget

office as officials prepare for upcoming budget talks. Had

Proposition 57 failed, everyone would have had to go back to the

drawing board, chopping their spending plans to try to brace for the

unknown, but certainly huge, cuts in revenue the city can expect from

the state.

“If it had failed we would have had to start the whole thing all

over again, and who knows what was going to happen,” said Dennis

Danner, director of the city’s Administrative Services Department,

which prepares the annual budget.

If Proposition 57 hadn’t passed, city officials say they’re sure

they would have lost more than the $4 million per year in car taxes

that the state pays to the city, though Gov. Arnold Schwarzenegger

never specified how he would pay the state’s bills without the bond.

It’s likely the city would have lost out on even more state revenue,

though it’s impossible to know where the state officials would have

made cuts, Danner said.

Even with the governor’s plan approved by voters, the city is

losing out on some money that used to come from Sacramento. For

example, the city expects to have to pay an additional $1.3 million

this year to the state education fund, bringing its annual payment to

about $7.4 million with increases likely in the coming years. The

fund, known as the Educational Revenue Augmentation Fund, was passed

in the early 1990s to require cities to pay a portion of the state’s

costs of education.

Danner’s office will submit a draft budget to Newport Beach City

Council members by April 30. The spending plan will be only slightly

higher than last year’s $156-million package. Talks will take place

for several months before the council approves a final budget in

June.

“We could not prepare a budget based upon [Proposition] 57

failing,” City Manager Homer Bludau said. “It would be catastrophic.”

Costa Mesa finance officials said they don’t expect the state to

take as much of the city’s funds now that Proposition 57 has passed.

The city already anticipates the state will take an additional

$855,000 of the city’s property tax revenue based on Schwarzenegger’s

preliminary budget proposal, on top of the $3.6 million it already

takes per year, said Director of Finance Marc Puckett. But even that

could change when the governor’s revised proposal comes out in May,

Puckett cautioned.

“The legislative analyst has stated that some of the economic

assumptions that were used to develop the governor’s proposal may not

in fact hold up and may not result in the state revenues they were

counting on to balance their budget,” Puckett said. “If in fact

that’s the case, the state may look to the cities to take additional

money to try to balance their budget.”

* JUNE CASAGRANDE covers Newport Beach and John Wayne Airport. She

may be reached at (949) 574-4232 or by e-mail at

june.casagrande@latimes.com. DEIRDRE NEWMAN covers Costa Mesa. She

may be reached at (949) 574-4221 or by e-mail at

deirdre.newman@latimes.com.