State’s Fiscal Formula: Squeeze Cities, Counties

Reading government budgets is never an uplifting experience, but slogging through this year’s sheaf of California city and county spending plans is especially dismal. A few pages after their typically self-congratulatory prefaces about having balanced the local books for another year, the reader invariably finds the true story, couched in language as subtle as the growl of an approaching thunderhead.

The story is this: Here’s where governors and state legislators have been hiding the costs of their failure to deal responsibly with state finances.

While these officials preen about holding down taxes and preserving state services, their chief way of making themselves look good is sticking local politicians with their bills. They enact standards for welfare and public healthcare, then neglect to appropriate enough money to pay for the county staff necessary to comply. They skimp on the distribution of tax revenue due cities and counties for local services, leaving it to the poor saps with the nameplates in City Hall and at the county administration building to explain to folks why there won’t be a fire ant program or a repaving of neighborhood streets this year.

Sacramento’s current budget battle will probably end, like its predecessors, with the state grabbing billions of dollars in tax revenue raised by cities and counties. Although local officials are also hoping to receive Gov. Schwarzenegger’s support for a constitutional amendment protecting more of their resources from such raids in the future, they know that the amendment won’t fully address the fundamental problem: As long as Sacramento has the authority to apportion tax revenue raised at the local level, it will cover its own political needs first and leave the locals with crumbs.

As Pat Leary, legislative representative for the California State Assn. of Counties, told me: “Sacramento can take away the money, but it’s the county supervisors who have to vote to close the libraries.”

Legislators have been milking this scam for 30 years and Schwarzenegger, a famously quick study, caught on right away. Coveting the glory that would come from cutting the car tax, he stuck mayors and county supervisors with the task of making up the $4-billion annual loss. His “action” program for balancing the state budget was apparently based on knocking all the cities and counties on their behinds.

Los Angeles County faces the closure of 15 libraries and curtailment of service hours at others, as well as the shutdown of two public pools for three months of the year and elimination of hourly parks staff on Sundays. Santa Barbara is slashing its building maintenance fund to the bone. Scores of counties are dipping into their emergency reserves, leaving them vulnerable to the costs of the next earthquake, wildfire or flood.

Service fees (including on business) will be higher, lines longer, public payrolls thinner. As a preemptive answer to readers inclined to lecture me about counties and cities needing to operate efficiently, I say: Call after you pay the new fee for your building permit or camping license, stand on line for 45 minutes to get a document recorded, or drop in at your neighborhood library only to find it padlocked. Taken individually, these are trivial irritations; together, they represent a steady deterioration in the tangible services that are the traditional province of local government.

The localities know that many steps they take to absorb the cost-shifting from the state are self-defeating. In deferring for as long as a decade a $35-million retirement payment due the California Public Employees’ Retirement System, Santa Clara County knows it will eventually receive a hefty bill for interest. But it has little choice.

Likewise, by cutting back on job training, placement services and transportation for welfare clients trying to find and keep the jobs that will help wean them from public assistance, Contra Costa knows the long-term costs to the system will rise.

“As a likely consequence, the number of people unable to work will go up,” says Wendy Therrien, director of the county’s workforce services department.

Schwarzenegger tried to finesse the entire state-local relationship by cutting one of his patented deals with local officials, proposing to take their money now and to write into the state constitution a pledge never to do it again. But his victory celebration proved premature. For one thing, he made so many deals he apparently lost track of what he had promised to whom. Then the Legislature balked at giving up its prerogative to balance its budget on the locals’ backs.

But the real difficulty isn’t Schwarzenegger’s wheeling and dealing or the Legislature’s obstinacy; it’s the governor’s inexplicable reluctance to spend even a nanogram of his glamour and popularity by taking a hard whack at the structural weaknesses in state finance.

Most intelligent policy types in Sacramento know what’s necessary: Taxes have to be raised so Californians pay the real cost of state and local services -- on a current basis, not by folding the deficit into a big mortgage and blasting it into the future. Meanwhile, the property-tax inequities born of Proposition 13 have to be fixed, possibly by starting to reassess commercial real estate.

“Proposition 13 needs to be looked at, and I don’t see any political courage to address that,” says Jane Decker, the deputy Santa Clara county executive.

During his electoral campaign, Schwarzenegger represented himself as Captain Courageous. Today, the question is whether he will ever use his flash and flair to achieve anything other than a bump in Jay Leno’s TV ratings. And if he’s not going to use them to achieve a lasting improvement in the state’s fiscal structure, what good is he?

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Golden State appears every Monday and Thursday. You can reach Michael Hiltzik at golden.state@latimes.com and read his previous columns at latimes.com/hiltzik.