The pitfalls of ‘realignment’

The budget proposals Gov. Jerry Brown is expected to unveil Monday have had those of us in local government in California holding our breath. Why? Because a key component in his plan to solve the state’s structural deficit will rely on a strategy known as “realignment,” in which state and local governments swap various funding streams and service responsibilities. The stated aim is to restore local administrative control and stabilize unpredictable revenues.

An earlier realignment scheme approved in 1991 by then-Gov. Pete Wilson and the Legislature shifted $1.7 billion in program costs from the state to the counties, and replaced annual state appropriations for local governments with dedicated funding composed of a portion of increased sales tax and revenue from the vehicle license fee. In addition, it tweaked the state and local cost-sharing formulas and eliminated two block grants, all in the name of simplifying and stabilizing the revenue structure.

The net result, at least initially, seemed to benefit local governments. But over time, as subsequent Legislatures reduced the license fee rate and the worst recession in years decimated sales tax revenues, counties found themselves again stretched to the breaking point.

It should come as no surprise, then, that renewed talk of realignment makes those of us in local government very nervous.

We understand that the governor has a tiger by the tail in the $28-billion deficit he’s trying to close. He has been refreshingly candid and transparent about the magnitude of the problem and what it will take to solve it. In recent days, he has reached out to local government — including the county of Los Angeles — and we look forward to working with him and his administration, because we’re all in this together.

However, while realignment sounds great in theory, the devil is in the details. If the state proposes to save itself money by shifting both program responsibilities and the funding for them to local governments, where will the savings be? Can it really be that local governments are so much more efficient that citizens will receive the same or higher levels of public services at substantially reduced cost?

This is why local governments remain wary. Facing a monstrous deficit, the state has every incentive to dump new burdens onto local governments while shorting our ability to pay for them. Plainly put, if the state can’t provide these services without running up $28 billion in red ink, what makes anyone think local governments will be able to without running up huge deficits as well? Indeed, any realignment plan must protect local government against becoming a net revenue loser. Otherwise, it runs the risk of breaking the financial backs of already strapped counties and cities.

We must also beware of the law of unintended consequences. Take two examples:

It is widely expected that the governor will propose massive cuts in human services such as healthcare, CalWORKS and child welfare. It is also likely that the state will shift its responsibility to provide some of these services to the counties. But if the state nearly went broke providing these very services, there is no reason to think that we too won’t go broke trying to do the same. Unless, that is, the Legislature relieves counties of their legal obligation to provide basic services to the most vulnerable among us, a Pandora’s box that no one wants to open.

The proposed state budget is also rumored to assume that county jails will absorb state parolees who violate their parole terms. Historically, those violators would be sent back to state prison, but the state apparently now would have them report to local jails, saving the state money and easing pressure on overcrowded state prisons.

But Los Angeles County jails have a severe overcrowding problem currently monitored closely by a federal judge. Even if the state proposed to fully reimburse the county for housing these parolees (which remains to be seen), we have nowhere to put them without releasing criminals already serving their sentences in our jails.

Proponents of realignment argue that it will restore power, flexibility and discretion to local governments over their own finances. They assert that local governments and their constituencies will be free to choose whether to fund existing programs. But this too strains credulity. Most human service programs and their funding levels are already set by federal and state law for local governments to administer with little or no discretion.

Moreover, Proposition 13 severely limited local governments’ ability to generate revenue by rolling back and capping local property assessments and tax rates. The problem has grown more acute in the ensuing years as the Legislature and voters have imposed new constraints and restrictions, most recently in adopting Proposition 26, which sharply limits local fees.

Any suggestion that realignment would give local governments the tools to pay for these new responsibilities is plainly false.

Where does this leave us? We are anxious to partner with the governor and the Legislature in crafting a realignment proposal that is financially sustainable for local government while allowing the state to work its way through its fiscal crisis. However, we can’t, and won’t, willingly agree to a realignment proposal that threatens to bankrupt local government.

Zev Yaroslavsky and Gloria Molina are members of the Los Angeles County Board of Supervisors, representing the 3rd and 1st Districts, respectively.