Gov. to Speed Local Funds

Under pressure to pay cities and counties the billions they stand to lose from the car-tax cut he enacted last month, Gov. Arnold Schwarzenegger thinks he has found a way to circumvent the Legislature and order the payments to continue immediately, administration officials said Wednesday.

The governor will invoke an obscure state law that administration officials say allows his director of finance to order emergency payments for various programs when they run over budget.

The law typically has been used to fund cost overruns in the state prison system and health-care services. The administration is arguing that the money local governments could lose this year from the car-tax cut is also an emergency that must be dealt with immediately.

If the tactic succeeds, the governor and Legislature would have to cut $2.65 billion from other programs by June 30 to keep the budget in balance. Schwarzenegger will propose today that the car-tax money be made up by $1.9 billion in current year cuts that his administration presented to the Legislature last month, and $1 billion in higher-than-expected tax receipts as a result of the improving economy, aides said.

Cities and counties have warned that the loss of the vehicle license fee money could result in immediate layoffs of police officers and firefighters and in station house closures, jeopardizing public safety. A dozen local governments have authorized their attorneys to file lawsuits against the state to get the money.

Schwarzenegger’s policy decision was announced by a senior administration official at a news conference that had been billed as an informational briefing. Rob Stutzman, administration communications director, said his aides did not want to identify the senior official who spoke at the briefing because it was intended for background purposes only.

Democrats immediately challenged the idea to make payments to local governments.

“It’s of doubtful legality,” said Senate President Pro Tem John Burton (D-San Francisco). “He’s skating on very thin ice.”

The governor, Burton said, “made promises to the locals, so I guess he’s trying to keep them. But when we go to appropriate $3 billion in a deficiency, I don’t know where he’s going to get it.”

Burton, the most powerful Democrat in the Legislature, said he was angry when he learned that state Finance Director Donna Arduin briefed the press on the move before discussing it with legislative leaders.

“My biggest beef is the lack of courtesy,” he said. “What it does, it doesn’t augur well for future relationships.... The major part of this I learned from the press.”

Before making the tax cut, Schwarzenegger had promised that cities and counties would not lose any money through the action. But legislative leaders refused to appropriate the makeup funds without an agreement on what programs would be cut.

Assemblywoman Jackie Goldberg (D-Los Angeles), who serves on the joint legislative budget committee, called the move “a very dangerous precedent and a very dangerous thing that he’s doing.”

Goldberg said that, typically, the committee’s staff would review requests for money from departments that have run short.

“I’ve never heard of a governor doing anything without at least sending it to the legislative committee,” Goldberg said.

But officials at state Controller Steve Westly’s office said they would send local governments the checks after Schwarzenegger makes the order today.

“The state has a legal obligation to continue the backfill and to ensure that local governments are kept whole,” said Rick Chivaro, chief counsel to Westly. “The administration’s proposal accomplishes this legal objective through the end of this fiscal year.”

In recent days, local officials have mounted a strong lobbying effort aimed at getting Schwarzenegger to keep his promise and to warn of the consequences.

Several mayors said Wednesday that they were invited to Sacramento today to be briefed on the plan. Los Angeles Mayor James K. Hahn’s office said he was coming to the capital today for a briefing from Schwarzenegger on plans for repaying the car tax money.

Fresno Mayor Alan Autry said he had received no official word or invitation. But Autry, an early supporter of Schwarzenegger’s campaign who had criticized the governor earlier this week for a lack of action, exulted when informed of the decision late Wednesday night.

“Let me tell you something -- that’s leadership,” Autry said.

Some Republican legislators also were pleased.

“I’d say it’s a pretty smooth response on a very vital issue,” said Assemblyman Tim Leslie (R-Tahoe City).

Administration officials say that the potential loss of revenues to local police and fire services -- and the failure of the Legislature to appropriate the money -- constitute a legitimate emergency, and that they are left with no choice but to take action.

The law defines an emergency as “conditions of disaster or extreme peril that threaten the health or safety of persons or property.”

Under the administration’s interpretation of the law, the controller must start sending the checks to the cities and counties beginning with the next scheduled payment Dec. 26, and the Legislature has until March 1 to pass a bill with cuts in government services or tax increases to make up the $2.65 billion the move will cost the state.

The governor’s plan would cover payments to local governments through the end of this fiscal year. In January, he will propose a budget for fiscal year beginning July 1 that starts with a $14-billion deficit; about $4 billion of that is the full-year cost of the car tax payments.

The governor also will use a new law written into the budget this year to cut various state programs by 5% on his own authority. Those cuts, which will trim only $150 million of the cost of the $2.65-billion payment the governor is ordering, are to be unveiled today. The rest of the cuts require legislative approval.

Administration officials said the end result of the combined actions will be that local governments will not lose a penny of their vehicle license fee payments. Initially, projections showed the loss to local governments would be $3.6 billion this year. But a dip in car sales earlier in the year resulted in fewer vehicle license fees being paid than originally projected.

On Dec. 26 local governments will receive $40 million if the administration is successful with this action.

Budget analysts, meanwhile, said the governor’s move could prove legally problematic.

“This would certainly be unprecedented,” said Jean Ross, executive director of the California Budget Project, a group that researches the effect of budget actions on low-income Californians. “I don’t believe that the authorization [to make emergency payments] was intended to take care of situations of this magnitude.”

*

Times staff writer Joe Mathews contributed to this report.