O’Connell, Kildee Urge State Tax Reform : Editor’s Note

A budget crisis in Sacramento has come home to roost in Ventura County, where local spending cuts have affected everything from welfare payments to library hours.

The hit came when the state helped meet its commitment to schools by taking $2.6 billion in property tax money away from counties and cities. The Legislature helped buffer the blow by keeping a temporary half-cent sales tax in place through December. But the transfer still cost Ventura County government $13.8 million.

Voters in November will be asked to keep the half-cent tax in effect. Otherwise, county government leaders have warned, there will be even more cuts in services.

The Ventura County Edition of The Times asked two elected officials--one from the county and one from the state--to sit down together to discuss the issues. They are Supervisor Maggie Kildee, immediate past chairwoman of the board, and Assembly Speaker Pro Tem Jack O’Connell, who represents parts of Ventura and Santa Barbara counties.

Tina Daunt, a Times staff writer, acted as moderator. Here is an edited transcript of the exchange.

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MODERATOR: Some critics argue that the government has not taken the right approach in solving its budget problems. What are the best methods for fixing state and local fiscal woes?

SUPERVISOR KILDEE: I have to confess that I do believe it’s broken. I don’t think we have a very effective method of paying for the services that people in our county want to have. It seems to me that the individuals in the county are paying taxes, and there ought to be enough money to cover the services that they want. There was until a portion of those taxes was taken away.

ASSEMBLYMAN O’CONNELL: We need significant structural reform in government. The state is responsible for many things. There was a policy decision made last year to continue to fund education through the property tax shift. But about $15 billion roughly goes to education. About $13 billion goes to local government. About $3 billion goes to the Department of Corrections. About $2 billion goes to UC (University of California system). About a billion and a half goes to CSU (California State University system). Close to $2 billion goes to the bonds and indebtedness of the state. And there’s about $1 billion in state operations.

So when people say, “You just need to cut”--well, where do you cut? The joke was you could release 110,000 felons, which no one is suggesting. You could close all 10 UC campuses, which nobody is suggesting. You could close all 20 CSU campuses, and you still would not retire the deficit. So most of the state money goes to help education and local government, prisons and higher education.

What we really need to do is identify what level of government is responsible for certain services. Right now local governments have most of the responsibility and very little authority over the level of service most can provide.

KILDEE: In terms of structural reform, we need to sit down and look at the services that need to be provided by government. Then we ought to determine what level of government ought to provide them. Right now, we have cities and the county providing police services and sheriff services. Although we are not overlapping, both government levels are providing these services. We need to determine who is going to be responsible for that and have the money flow to that entity. Not to both entities.

I think clearly library services is an area we must address. It is not a county mandate to provide libraries. It is not a school mandate. It is not a city mandate. It is not a state mandate. Yet, the people of this county have said this is a high priority to them. And yet, because of the property tax shift, we had to cut the library’s budget almost in half in this county.

O’CONNELL: It’s a shame. And it would have been worse had we not continued the half-cent sales tax for six months. That’s a definite revenue stream. We have legislation this year to enable voters to go out and tax themselves per parcel for libraries. Right now libraries are not eligible for benefit assessment districts.

KILDEE: How do you explain to people . . . that they perhaps ought to support a benefit assessment district for the library, when they say to me: “We are already paying our taxes. We had a library last year, why don’t we have a library this year? Why do we have to pay more money?”

O’CONNELL: Well, I give them your home phone number.

KILDEE: (Laughing) Thanks a lot. No wonder my phone has been ringing so much.

O’CONNELL: It’s priorities. We have 100,000 more youngsters in kindergarten through 12th grade this past year and we are expecting over 100,000 more to enroll next week. Our prison population continues to increase. So there are structural problems within the state budget and more demands.

Look at the demographics of the state. We are an aging population; that puts a real strain on the health services. Who is the provider of last resort for basic health care? It’s the county. Yet the state is on the hook to try to help the counties with their high cost of health care. We are all rooting for Hillary (Clinton) to help with cost containment.

MODERATOR: Assemblyman O’Connell, why did you support the proposal to shift the money away from the counties?

O’CONNELL: I was against that in January when the governor said we are going to take $2.6 billion. Period. That is a major hit. Then the governor said he would continue the sales tax for six months and he would let the people decide. We did some mandate relief. They are difficult to quantify, but there is some mandate relief. That lessened the hit significantly on the counties. Without that, we would have had some smaller counties that are not as fiscally well-managed as Ventura County flying their flags upside down.

MODERATOR: But it all hinges on the passage of the half-cent sale tax. Do you believe voters will approve it?

O’CONNELL: Jack does and Jack is supporting it.

KILDEE: The Board of Supervisors passed a resolution in support of the half-cent sales tax. But people are disillusioned and it’s hard to overcome that. I hope it passes. If it doesn’t, that’s $29 million we will lose. It’s not a new tax, it’s a continuation. We were hopeful that at the state level, it would have been continued. But that could not happen. So, we’re taking to a vote of people.

MODERATOR: Why didn’t the Legislature simply vote to make the tax permanent, as county officials had requested?

O’CONNELL: It’s called the two-thirds vote. You want to talk about structural problems. There are three states that require a two-thirds vote to pass the budget. We went through 64 days last year (without a budget), and it was a major headache and a black eye all the way around.

We should change it to a simple majority. Congress has a simple majority, the Board of Supervisors, every school district, every city. This “super majority” is very difficult. It’s one-third plus one--who many times want gridlock for their own agenda--who can block budgets. And that’s why we couldn’t do it.

MODERATOR: If the tax fails, Ventura County officials estimate that they could be forced to cut some departments by 25%. Assemblyman O’Connell, will there be any efforts by the state to help local governments offset the loss?

O’CONNELL: I would anticipate a special session by the Legislature to try to address the issue. I think the state has to. It’s a moral obligation. Everything will be back on the table, including school funding. It’s in education’s best interest that the sales tax continuation is approved. I try to make that pitch to all my education buddies. Because, again, you look at the state budget pie. It’s not going to be a fair request to ask the counties at midyear to cut $750 million in total. To spread that pain, everything is going to be on the table--including K through 14, including higher education, including prisons. I would be floored if we don’t have a special session in November if the tax is unsuccessful. I think it’s going to pass. It’s a continuation of a current tax dedicated to local government, dedicated to protective services. I think people will support it.

KILDEE: People certainly have been supportive of keeping money available for public safety. We have indicated that that is what our intention will be locally if the tax is continued.

O’CONNELL: My preference would have been that we continue the tax for a year with no vote of the people. But I have to deal with political reality and that takes 54 votes--two-thirds. We didn’t have that. And it was a success story the budget was passed on time, actually with three hours to spare. That helped our bond rating and it sent a positive message to Wall Street. I think that the business community saw that the state is slowly back on the right path. It says we are back up and running again.

MODERATOR: Recently, we’ve seen businesses leaving the state and citing government restrictions, such as air pollution controls. What does government need to do to keep businesses from going elsewhere?

O’CONNELL: The budget passage on time helps. We did significant workers’ compensation reform this year with a minimum quantifiable savings of $1.5 billion with a mandated rollback from insurance companies. The employers will see the benefits greatly. We are looking at regulatory relief and modification of the State Environmental Quality Act. I’m carrying one of the bills that is designed to streamline the SEQA process. I’m for environmental protection, but not for duplication. We need to put the psychological welcome mat out for business.

KILDEE: On the local level, we need to continue to work on regulatory reform and permit streamlining to avoid duplication. It is rather slow going sometimes to make those changes, but in Ventura County they are being made.

The Council on Economic Vitality, which is made up of business representatives and government representatives from the cities and the county, was formed a couple of years ago. One of the main goals of that council was to reduce the number of permits, streamline the processing and look at merging agencies.

We have what we call a score card, where each of the cities or the businesses in the county can share with others some of the good things they have made happen for businesses. We talked for half an hour last week about the good things that were taking place in this county.

You talk about a psychological message. It seems to me if we can make that kind of thing apparent for the rest of people in this county, then, little by little, we begin to change our thinking from one of “everyone is leaving because of government” to one of “government is working with business to make it better so they stay.”

O’CONNELL: The small business is really the piston that drives the economic engine of this state. We need to be more sympathetic to the needs of the small-business person. And we are trying at the state level.

For me, the real challenge in this economic recession is taking a negative situation and turn it into a positive. At Vandenberg Air Force Base, we are really promoting the commercialization of space. At Camp Roberts, we are looking at making the 21st CSU campus, which I had mixed emotions on because I wanted the Ventura County campus to be 21st. There is a base they are talking about closing in Sacramento; they are talking about making it into a commercial airport.

MODERATOR: Some people complain that Proposition 13, the property tax initiative of 1978, is outdated and unfair. Does it need to be revisited?

KILDEE: I think Proposition 13 was very important in the life of this state because it caused all elected officials to really reassess what was happening. The citizens correctly saw that the state had a very large surplus. I wasn’t involved in politics when that happened, so I can’t really speak for what happened then. But I think that the intent of Proposition 13 was a good one. As the years go by and as times change, I don’t think we need to change the intent of Proposition 13. But we may need to look at what is actually happening now.

I don’t think when we passed Proposition 13, that the citizens envisioned that local property taxes would be taken away to pay for things other than local services, like being directed to the schools. My neighbors may pay more property taxes for the same house than I pay, because I’ve stayed in the same house for so long. How to deal with that equity issue? I don’t know. But I think it’s out there.

O’CONNELL: We have to deal with political realities, and political reality is that there is not support for modification of Proposition 13 in Sacramento. I don’t see it in the foreseeable future. It’s sacrosanct.

KILDEE: I think that’s true. I don’t know that the people of the state want it changed. The people of the state seem to want to be able to have services provided by the government that we have always had, and they want to pay the property taxes that we have always paid. And we might have been able to manage that had we not found ourselves in an economic recession.

At the local government level, we have tried to cut back on services that are not required. We have cut back on the number of people who are providing services. Our employees are doing more with higher caseloads than we have before. We have not granted raises. We have frozen merit increases. We have tried to make sure that county government is as slim as we can be.

Boy were we surprised, though, that the Superior Court judges would get an increase. We ended up tying our salaries to judges so we weren’t in this mess where we had to set our own. Then the legislators immediately turned around and gave them a raise. So that meant we had to go through the exercise of turning it down.

O’CONNELL: We abolished 74 agencies and commissions. We are looking to see if we can consolidate many others, such as the State Board of Equalization and the Franchise Tax Board. There’s a joke here that someone suggested that we consolidate Fish and Game and Highway Patrol and call it Fish and Chips. We have cut every state agency 15% for a second year in a row. The Legislature had its budget cut about 37%. We haven’t had a pay raise in the past four years and I haven’t taken the last two per diem increases. Although it’s a small amount of money, hopefully it sends a signal that everyone is trying to tighten their belts as much as possible.

KILDEE: We need to make the information public enough so everybody knows there is this effort going on to change the way we do things.

I’ve always been a believer in sitting down and talking together to find a solution. Not to just pontificate out on a street corner, saying “If they would just do it differently, we would be OK.” That’s not the way it works. It’s when Jack and I can sit down and talk about the constituents that we share, we can find solutions to those problems.

O’CONNELL: You talk about the future. To my 7-year-old little girl, the future is five minutes from now. I guess to me the future is probably the November election on the half-cent sales tax. It’s not the cure-all. It’s a Band-Aid election. But it’s a necessary Band-Aid. The future to me is past Nov. 2 and looking at trying to restructure so we can identify more clearly the appropriate responsibilities and services government can provide. In the long-term future, it is helping the economic recovery of the state. I believe when we come back we are going to be stronger than ever because of many of the changes we have made. When that will happen, I don’t know. My crystal ball is a little hazy. I hope it’s sooner instead of later--or it’s going to make our jobs even more difficult.