Budget’s local protection questioned

Deirdre Newman

The state budget Gov. Arnold Schwarzenegger and legislative leaders

agreed upon late Monday provides some protection to cities and

counties but not as much as the deal originally offered before the

budget process broke down.

The agreement to the $103-billion budget, however, makes it

substantially more difficult for the legislature to take money from

cities as it has often done before. Schwarzenegger should be

commended for maintaining his support of local government during the

contentious budget negotiations, Costa Mesa City Manager Allan Roeder

said.

“We well understand how badly he wanted to have the state budget

adopted on time -- that was a keynote to his campaign, and it might

have been real easy for him to kind of turn local government aside

and say, ‘Gee folks, I tried but I’m not going to hold up the entire

state budget just over your issue,’” Roeder said.

County Treasurer John Moorlach wasn’t so impressed with

Schwarzenegger because the agreement doesn’t change an important

original part of the deal. In exchange for future protection,

counties, like cities, will have to give up a share of the $2.6

billion taken by the state over the next two fiscal years, which

means cuts and dipping into the reserves, Moorlach said.

“That’s a big chunk of change out of our annual budget,” Moorlach

said. “To make an interest-free loan to the state is outrageous and,

in my mind, a request that goes beyond chutzpah because we didn’t

misspend the money. We’ve been balancing our budgets, living within

our means, and Sacramento’s been going up silly hill. And now we have

to subsidize it, which is the worst incentive you want to give to any

municipality.”

The budget plan agreed upon Monday still needs to be approved by

the legislature. While the original deal worked upon with the

governor by the California League of Cities would have prohibited,

under any circumstances, the state taking money from cities after the

2005-06 fiscal year, the new agreement just makes it more difficult.

Under the proposed agreement, the governor would have to deem the

situation a “significant fiscal hardship,” and the legislature would

need a two-thirds vote instead of a majority to reallocate

property-tax revenue. It also prevents the state from borrowing funds

from cities and counties more than twice in 10 years.

The agreement requires the state to pay back all borrowed funds

and, if the state is borrowing for a second time in 10 years, it has to pay back the funds from the first loan before it can borrow more.

The agreement also sets a limit of 8% on the amount of property tax

the state can borrow from local governments.

Newport Beach Mayor Tod Ridgeway has mixed feelings about the

budget agreement. While he said he is pleased the state has a budget

agreement and that it contains some protections for cities, he said

it continues the trend of borrowing against the future. The

agreement’s allowance of the state to borrow from cities and counties

only twice in 10 years shows state leaders are economically

optimistic, Ridgeway said.

“They’re banking on future boom times in the economy, so I think

you had to do something,” Ridgeway said. “And obviously, economies do

in fact go up and down, and this economy is due to go up, I think,

again. During a 10-year time frame, it definitely should.

* DEIRDRE NEWMAN covers Costa Mesa. She may be reached at (949)

574-4221 or by e-mail at deirdre.newman@latimes.com.