Towns, county reeling over proposed cuts Towns, county reeling over proposed cuts (January 14, 2004)

** Education budget proposal called "masterful compromise."

By Almanac staff writers

City and county officials throughout California are suffering "a bad case of whiplash this week," observed Assemblyman Joe Simitian, D-Palo Alto, as he analyzed the governor's proposed budget unveiled January 9.

The whiplash, he explained, was caused by the proposed bouncing of property tax revenues from town and county coffers to the state's schools.

The proposed transfer of funds has left local government officials, already struggling with severe budgetary shortfalls, looking to their legislators to resist the governor's plan.

If Gov. Arnold Schwarzenegger's budget proposal survives the legislative meat grinder intact, San Mateo County stands to lose another $24 million in property tax revenues, on top of numerous state programs proposed for cuts.

For Menlo Park, which is already in serious budget-cutting mode, the governor's proposal is another piece of bad news to the tune of about $326,000.

Atherton stands to lose about $172,000; Woodside, about $54,000; and Portola Valley, about $30,000.

The governor proposes to take $1.3 billion in property tax revenue from towns, counties and some special districts to partially make up for the proposed $2 billion in cuts to public K-12 schools -- funds they are legally entitled to under provisions of Proposition 98.

Peter Carpenter, a member of the Menlo Park Fire Protection Board, said that "the proposed diversion of local property taxes to help offset the state's deficit makes me think of a high school bully who is afraid to ask his mother for more lunch money, so he just takes it from the little kids."

The governor's campaign pledge not to increase taxes "is a lie if it means you just take property taxes away from local government and leave the local governments to figure out how to raise their taxes or to cut essential services," he said.

The loss of the funds "really threatens the ability of Peninsula cities and towns to provide basic services," Mr. Simitian said on Monday. "A taking of this scope not only threatens the quality of life but the basic abilities of police and fire" services to protect residents, he said.

In essence, Mr. Simitian said, "the governor has proposed to take some money from the left pocket and put it in the right pocket."

The proposed budget also hits poor and lower-income people hard -- a matter of concern to Mr. Simitian. "If you are a person of modest means, these cuts will really have a very unfortunate impact on your health and well-being," he said.

But, he noted, "it's important to remember that this is the beginning of the conversation." The Legislature will spend the next several months debating and dissecting the proposed budget to craft a final budget.
San Mateo County

San Mateo County has already lost over $700 million in local property taxes to the state since 1992, when the state first diverted property tax money to support schools, said Mark Church, the new president of the San Mateo County Board of Supervisors. The latest proposal would take about $24 million more next fiscal year.

These cuts primarily hit the county's most fragile residents -- the poor, the disabled, and the elderly, Mr. Church said. "Unfortunately, they are the ones who are hurt the most with financial cutbacks."

Counties would lose the largest share of property tax revenues from the new permanent property tax shift proposed by the governor. Of the $1.3 billion lost, $915 million would come from counties, $189 million from cities, $98 million from special districts, and $135 million from redevelopment agencies.

The county staff spent much of the weekend analyzing the details of the governor's proposed budget to determine in detail how it would impact county programs. Results, which were not ready as the Almanac went to press, should be available for the Board of Supervisors meeting Tuesday, January 13.

Programs in health and human services are hit the hardest. Reductions of $2.5 billion account for 40 percent of the $6.1 billion in proposed spending reductions, said a report by the California State Association of Counties (CSAC).

Some of the most painful cuts for county residents include proposals for:

** A 15 percent cut in the rates paid to doctors who provide health care under Medi-Cal, the state's program to provide health care to the poor.

** Capping enrollment in Healthy Families, a program that provides health care to the uninsured.

Previous proposals for mid-year budget changes already call for capping the number of people served in several categories, such as documented and undocumented immigrants, children's services, AIDS drug assistance, and genetically handicapped.

Board of Supervisors President Church promised the county will work with other agencies to draft a constitutional amendment that will assure cities, counties and school district enough revenue to carry out their legal responsibilities. "We can no longer tolerate this shell game," he said.
Menlo Park

Menlo Park, which has a general fund budget of roughly $26 million, stands to lose about $326,000 in 2004-05, said City Manager David Boesch, quoting a figure from a League of California Cities report.

Where would the $326,000 come from in Menlo Park's budget? Mr. Boesch said it's tough to say at this point because property taxes are deemed unrestricted revenue and therefore can be spent on a variety of services, such as police, recreation and libraries.

Of the governor's proposal, Mr. Boesch said: "This was a bit of a surprise because it seemed like the governor had made reference to holding cities and counties harmless. ... A lot of people are reeling."

Mayor Lee Duboc, who with her City Council colleagues has been lobbying state legislators and the governor not to cut city funding, sounded more resigned.

"Of course I don't like it ... (but) we're pretty prepared that it wasn't going to be rosy," she said of the budget proposal.

The city is already expecting to lose about $450,000 in vehicle license fee money in 2003-04 because of the three-month gap in receiving the VLF backfill from the state, Mr. Boesch said, adding that he still feels uncertain about whether Menlo Park will receive the backfill in 2004-05.

City officials have already been reducing services and positions in Menlo Park's budget to keep spending on par with revenues, with some employees taking early retirement or resigning. Mr. Boesch said that this belt-tightening mindset will continue and that layoffs -- which were considered last year but not called for -- will remain a possibility.

Mr. Boesch has said for months that one of the biggest concerns in the city's budget is the rapid rise of retirement costs for city employees. This week, he said it is likely that Menlo Park and other cities would look into renegotiating union contracts, especially in light of the higher retirement benefits cities put into place during the economic boom.

"I've got to believe that's got to be a topic of conversation going forward," he said. "It's going to be a function of 'how acute does the pain have to get?'"
Atherton

The governor's proposal to shift property tax revenue from local governments to schools would represent a hit of approximately $172,000 to Atherton's property tax funds, the town's largest single source of revenue, said City Manager Jim Robinson. Atherton's annual general budget is about $7.6 million.

"It's a significant impact for the town, obviously," he said.

A big concern is whether the "revenue shift" would be a one-time loss, or would be ongoing. The loss of $172,000 could represent more than 1-1/2 police officer positions, or several major road improvement projects, among other things, said Mr. Robinson.

Atherton is already grappling with the loss of about $125,000 the state has not paid to reimburse Atherton for the loss of vehicle license fee income, he said. This latest proposed hit "would represent a continued loss of revenue in era when revenue streams are not growing," he said.

Nevertheless, he said he doesn't want to overreact to something that is still just a proposal.
Woodside

Woodside stands to lose an estimated $54,000 in property tax revenues under the governor's proposal, said Town Manager Susan George. It would bring the grand total of property tax revenues shifted from the town to the schools to $300,000, or about 23 percent of property taxes, she said.

Ms. George said she doesn't plan to recommend any immediate budget cuts as a result, but she will recommend the Town Council come out in vehement opposition to the proposal.

"We can tread water for a while as we fight back and watch to see what the outcome is," she said.

Woodside's current $5.3 million budget includes an additional $100,000 in potential cuts that the Town Council can trigger if necessary.
Schools

Superintendent Anne Campbell of the Portola Valley School District called the education budget proposal announced by the governor January 8 as a "masterful compromise" for the education community and the state.

Under the plan, education will receive $2 billion in 2004-05 from the $4 billion increase that education is entitled to under Proposition 98. The $2 billion covers a cost of living adjustment and enrollment increases for 2004-05. The remaining $2 billion will be restored in the 2005-06 year, according to the agreement.

Superintendent Ken Ranella of the Menlo Park City School District said he doesn't know the details of the "brokered deal" that is going to support education. He plans to study the budget proposal over the next few days and make a report at the school board meeting on Thursday, January 15.

He said Business Manager De Modderman also would make a presentation about the proposal's impact on the Menlo Park district budget at the same meeting. It begins at 7 p.m. in the district board room, 181 Encinal Ave., Atherton.

Staff writers Marion Softky, Renee Batti, Rebecca Wallace, Andrea Gemmet and Marjorie Mader contributed to this report.

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