Officials criticize state budget

The deal Gov. Arnold Schwarzenegger and state legislative leaders have reached to close California’s $26-billion budget gap involves borrowing $4.4 billion from city and county governments, including Newport Beach and Costa Mesa.

The plan, which state legislators are expected to vote on later this week, includes taking $2.1 billion in property tax revenues, $1.3 billion in redevelopment agency revenues and $1 billion in gas taxes from local governments in the state, Newport Beach City Manager Homer Bludau said Tuesday.

Under the plan, the state would have to pay back the money to city and county governments in three years.

“It’s very disappointing that budget cuts at the state level only amount to about half of the state deficit and they continue to propose borrowing money to put together a patchwork budget that doesn’t really resolved budget issues at the state level,” Bludau said. “Cities and counties have been affected just as much as the state, but we have balanced our budgets — now they’re telling us we must be partners in pain.”

It was not clear Tuesday exactly how much money each city would lose, but the League of Cities estimates that it will likely be millions. If the state borrows 8% of each city’s property tax, it would amount to $3.4 million for Costa Mesa and $5.8 million for Newport Beach. Each city is also expected to get more than $1 million in gas tax funds, which could potentially be stripped.

The League of Cities calls the legislative leaders’ budget deal a “Ponzi scheme” and has threatened to sue the state to keep it from taking local funds, saying that it’s unconstitutional and that the state doesn’t have the right to take the money.

Costa Mesa has passed two resolutions pledging to support the league in its possible legal action.

“I’ve seen the legal analysis regarding the gas tax funds, and I’m not a legal expert, but it seems pretty conclusive that the state does not have the legal authority to simply take those revenues,” said Costa Mesa City Manager Allan Roeder.

Gas tax money has to be set apart from a city’s general fund to be used only on transportation-related projects like road maintenance and sidewalk repair. If Costa Mesa loses that money, it could mean delays in repaving alleys and mending sidewalks, Roeder said.

As for the property tax losses, they may be harder for the city to swallow because they come directly out of the general fund, where major cuts have already been made to eliminate a large projected deficit.

Newport Beach would likely pay money out to the state from its roughly $75 million in reserves to avoid budget cuts, Bludau said.