Millions Could Be Lost in Tax Shift

Ventura County and its 10 cities could lose up to $75.3 million in state funding because of California’s weakening economy and a deepening nationwide recession, budget managers warn.

Legislators could shift the revenue to help close an anticipated $12.4-billion deficit in the state’s 2002-03 budget, officials say. Sacramento politicians took similar action in the early 1990s when the state was in the throes of recession.

A hit to city and county treasuries that big would trigger deep cuts in dozens of programs, financial managers predict.

In Ventura, it could mean that a long-planned community park would be built but there would be no money to run it. Thousand Oaks’ plan to expand its children’s library could be put on hold.

Oxnard might have to cut an extra day of library service it just approved. El Rio could lose funds for running a planned juvenile hall.

Officials say local governments might be forced to reduce police and fire forces--typically the last place where cuts are made.

“This gives me nightmares,” said Stan Kleinman, Oxnard’s finance director. “We just got back on our feet after the last round, and now there is the possibility of getting knocked down again.”

In addition to a national economic downturn aggravated by the Sept. 11 terrorist attacks, a number of other factors are contributing to the projected $12.4-billion deficit the state will face for the fiscal year that begins July 1. Included are a collapse in stock prices for California’s high-tech companies and costly energy contracts.

Gov. Gray Davis has already ordered cuts in a variety of state programs. But the wide gap between revenue and spending is causing officials to fear a repeat of last decade’s budget raids.

Faced with massive deficits, state officials began diverting billions of dollars in property tax revenue from cities and counties during the 1992-93 fiscal year. The funding shift, for which local governments have never been fully compensated, triggered a ripple effect that threw many local budgets into turmoil.

Many analysts believe the most likely target next year is money the state funnels to cities and counties from vehicle license fees. The state is sending $3.7 billion to local governments each year to make up for recent reductions in annual fees paid by motorists.

Raising taxes would be difficult in an election year, making vehicle license revenue a sitting duck, said David A. Jones, legislative coordinator for the League of California Cities.

“When you do the political math, it’s the one that makes the most sense,” Jones said. “It is a big source of revenue and it comes out of the general fund.”

The Democrat-controlled Legislature is expected to begin debating options during a special budget session in January. Assemblywoman Hannah-Beth Jackson (D-Santa Barbara) said legislators know local governments are dependent on the state funding and will try to prevent reductions.

But Jackson said it may be necessary to adjust the amount of money cities and counties receive because the state deficit is so large.

“What we have to look at is priorities,” Jackson said. “What is critical and important and what is just nice to have? It has to be thoughtfully done.”

Jackson said she might back a move to increase vehicle license fees--something state Senate Leader John Burton (D-San Francisco) has suggested. But many Republicans are opposed to raising taxes, insisting that the state can close its shortfall by trimming fat.

“There are plenty of places that we can look at to save money,” said Assemblyman Tony Strickland (R-Thousand Oaks). “To raise taxes when we are funding things like a goose festival shows that Gov. Davis is not being serious about cuts.”

The state promised local government that it would continue full funding of the vehicle license fee and should not back off from that commitment, Strickland said.

“We shouldn’t be turning to local government to do our dirty work,” he said.

California cities and counties are banding together to discourage the state from tapping revenue. The California State Assn. of Counties and the League of California Cities are working to place a measure on the November 2002 ballot that would require the state to repay any money that is diverted.

Local governments are also lobbying legislators and the governor. They are hoping to avoid a repeat of the early 1990s, when the scarcity of dollars pitted cities, counties and school districts against each other, said Mike Sedell, Simi Valley’s city manager.

“When it came down to the wire, everyone started fighting and making side deals. That’s when the state wins,” Sedell said. “This time we’re going to work together.”

Local governments are also banking on a new dynamic in the Legislature.

Term limits have ushered in a crop of new legislators who have served on city councils and county boards. Many of them watched their own budgets being slashed the last time around, Jones said of the cities’ league.

“We are hoping they remember what it was like,” he said.

In Ventura County, up to 10% of county and city operating budgets could be lost if the state follows through.

Ventura County government alone could lose up to a $50 million, much of it in discretionary funds that can be used on health, welfare and public safety priorities, officials say.

“It’s particularly difficult for counties, which have mandated things [they have] to do,” Supervisor Steve Bennett said. “In the 1990s, funding for libraries and parks was cut. So it will be very challenging to find other areas to cut.”

Oxnard stands to lose the largest amount, nearly $6.5 million. Thousand Oaks faces a potential loss of $4.5 million, Simi Valley $4.3 million and Ventura $3.7 million.

In Thousand Oaks, money for libraries, social services and affordable housing could be in jeopardy as the city seeks to spare public safety departments, Councilman Dan Del Campo said.

“This is not something we are going to sit down and take lightly. They’ve done it before and we never get it back,” he said.

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Potential Tax Shift

Government officials representing Ventura County and its 10 cities are alarmed about a possible tax shift to help close a $12.4-billion state deficit next year. If the state approves the shift, local cities and the county would lose a combined $75.3 million used each year to pay for health, public safety, roads and recreation programs. The following are the areas and their respective state taxes in jeopardy.

Oxnard: $6,492,126

Thousand Oaks: $4,550,558

Simi Valley: $4,374,367

Ventura: $3,747,459

Camarillo: $2,240,528

Moorpark: $1,225,080

Santa Paula: $1,070,561

Port Hueneme: $812,849

Fillmore: $514,986

Ojai: $291,177

County: $50 million

Total for Ventura County: $75,319,691

Source: Ventura County and League of California Cities.