|
Getting your Trinity Audio player ready...
|
The state of California is refusing to give San Mateo County more than $100 million in taxes that the county believes belongs with local governments.
“This is county taxpayer money that we’re talking about and the state is denying us funds that we are rightfully due,” said County Executive Mike Callagy.
It all comes back to two compromises made between the state and local governments almost 20 years ago: the triple flip (which ended in 2015) and the vehicle licensing fees swap. Essentially, in order to fix the Fiscal Crisis of 2003-04, the state cut local funding, but allowed counties to recoup the lost income from each county’s Educational Revenue Augmentation Fund. The state would provide the funds that school districts were missing from ERAF.
However San Mateo County is one of two counties in California in which this plan does not work. When a school district has enough per-pupil funding – either due to increased property taxes or fewer students – more money in the ERAF is given to counties and cities. This is called “excess ERAF.” But since the ERAF is also supposed to fund the lost revenue from VLF and triple flip, an issue arises: what happens when the ERAF does not have enough funds?
If there are not enough funds, the county can take money from schools beyond the minimum contribution the state provides. But because many schools in San Mateo County are “basic aid” – meaning they do not receive funds beyond the minimum required – this is not enough to cover the shortfall.
The impact of this nuance is shocking: the county estimates that cities and the county as a whole are losing over $100 million.
The California Legislative Analyst’s Office warned legislators about this issue in 2012, when the shortfall was less than $1 million, yet it was not addressed. In other years, the state offset this difference.
“Clearly, in the statute, all the counties and cities in the state are supposed to get this payment so the state would just add a specific appropriation [item in the budget] to cover us,” Deputy County Executive Justin Mates said.
Now, as in 2004, California has a massive deficit, $56 billion, and local governments are taking the hit. Instead of covering the shortfall, Gov. Gavin Newsom’s budget uses the money to help reduce California’s deficit. The Governor’s Office directed the Almanac to the Department of Finance, which did not respond in time for publication.
County officials were not happy about the governor’s decision and said they thought the state reneged on its 2004 deal. Audrey Ratajczak, a lobbyist on behalf of the county, told legislators in April, “Not reimbursing the shortfall would be contrary to the 2004 budget compromise in which these payments were guaranteed to us by law.”
However, the California Department of Finance thinks the state has met its obligations. “[The Department of Finance] keeps erroneously saying that ‘they backfilled every lost dollar of VLF revenue’ but it is just not true,” Callagy said.
The legislators’ budget counterproposal, released on May 29, includes the VLF funding, according to San Mateo County’s Chief Legislative Officer Connie Juarez-Diroll. However, the proposal differs significantly from Newsom’s and has not passed either house.
Assemblymember Diane Papan’s district director, David Burruto, told the Almanac that getting VLF funding for San Mateo County is Papan’s main budget priority and discussions are ongoing for a permanent solution.
VLF revenue accounts for 18% – or $41 million – of San Mateo County’s operating funds. “We can account for things like decreased property tax but catastrophic losses like this are just unsustainable,” Callagy said. “This is one of the most significant threats to our budget that we’ve ever experienced.”
San Mateo County was one of five counties that came under fire in 2020 for abusing “excess ERAF” by the Legislative Analyst’s Office. The office claimed the counties were incorrectly shifting funds out of ERAF, leading to the counties incorrectly taking a combined $350 million from schools. The California School Boards Association is currently suing the State Controller over this and the case has yet to be settled.
This is what it looks like when your government overspends and has incurable deficits.
Government doesn’t stop paying bondholders, they stop providing your most essential services. They never kill the programs that few, if any, care about – like research into avian breeding habits in Peru. They cut your police, teachers and close your parks first.