Gird Counties Against Downturn

A Senate-Assembly committee is putting the final touches on a $100-billion state budget that distributes billions in surplus state funds to schools, transportation programs and other high-profile competitors for money. But California’s 58 counties, possibly the most deserving of all groups, may be left in the dust. Early on, lawmakers earmarked for the counties as much as $1.5 billion in new aid. That shrank to $500 million as the Senate-Assembly conference committee began its discussions last week. Now, there are signs are that the counties may get as little as $250 million in one-time assistance, the amount proposed by Gov. Gray Davis in his budget.

That would be a mistake. With no new revenue-raising options, counties are not cashing in on the roaring economy the way the state and cities are. And the counties were hurt worse than any other California governments in the recession of the 1990s. The state took $2.5 billion in county property tax revenues to help pay its own bills.

A decade later, other entities that were forced to absorb cuts have been paid back or restored to pre-recession levels. Not the counties. The state is still taking the same chunk of county property tax money, which has grown to $3 billion this year with the rise in local property values. The cumulative county-to-state tax shift now totals more than $22 billion--including $7.5 billion from Los Angeles County--and is growing. The least the state can do is to allow the counties to keep the annual growth in property taxes, about $300 million a year.

Davis is loath to spend any of the surplus on ongoing programs except for education. He doesn’t want the state stuck with permanent higher spending if a recession hits. This generally is a prudent course, but in the case of the counties Davis is being overly cautious. If there is a downturn, it’s the counties that will be hit the hardest. They are responsible for running the programs that grow rapidly in bad economic times--welfare, health care, mental health, child protective services and the like.

Many counties, including Los Angeles, were on the brink of bankruptcy during the last recession. They are more likely to go belly up the next time. As the auto mechanic says on the radio ad promoting preventive maintenance, “You can pay me now, or pay me later.” A state government that is bloated with surplus dollars faces just that choice.