Frank hits back at state

City Manager Ken Frank took umbrage Tuesday at the state’s raid on Laguna Beach revenues to balance its runaway budget.

Frank issued a bitterly worded news release Tuesday morning denouncing the state’s dip into the city property and gas taxes, followed by controlled — but still irate — public announcement at the City Council meeting.

“I am happy to report that the city has balanced the state budget,” a sarcastic Frank told the council. “Three million dollars: that is what we will be paying in property taxes and gas taxes, according to the best information available. That equals $120 for every Laguna Beach resident.”

The deal forged by the governor and legislative leaders, announced Monday night, was scheduled for a vote Thursday. Two-thirds of both houses are required for passage.

Frank pulled no punches in his written and oral statements. He was obviously outraged that the city is forced to help bail out state leaders, castigating them for their inability to manage their finances in a prudent way, not to mention transparently. State budget negotiations are conducted behind closed doors.

The hit comes almost a month after the city approved an already-stringent budget for fiscal year 2009-10, which Frank had managed to balance despite a $2-million deficit due to reduced revenue and increased labor costs.

Frank said the state’s $2-million dip into the city property taxes was not a total surprise and he could handle that.

But what really incensed him was the probable loss of $1 million in gas taxes, which have been a revenue source for Laguna for 60 or 70 years, Frank said.

“While this is intended to be $500,000 per year for two years, the likelihood is that this rip-off will continue in the future as the state remains unable to balance its budget without accounting gimmicks and usurping money from other governmental agencies,” Frank said.

City losses will be covered by delaying capital improvement projects, not by gutting the general fund, which would mean reducing public safety expenditures, Frank said.

“It will require a significant revision of the project list,” he said.

Frank praised the City Council for its foresight in reserving money during flush years to help “smooth” the city through financial hard times that he predicted were coming.

“While the pernicious state cuts will delay needed capital improvements, the city should be able to continue most basic services for the immediate future by using reserves,” Frank said.

Frank is not alone in his repudiation of the state’s solution to its fiscal fiasco. Los Angeles County Supervisors have threatened to sue.

Other local governments could tag along.

The news of the state’s resolution of its budget woes come just one day before exceptional losses in the public employees retirement fund investments were reported. As of June 30, 2008, California Public Employees Retirement System investment portfolio’s holdings were valued at $239.2 billion.

The value had fallen to $180.9 billion by the end of June 2009.

The losses will have to be made up by the employing governmental agencies. CalPERS has devised a plan to spread the losses over the next 30 years, beginning in mid 2011.

Although the City Council will take the month of August — no meetings are scheduled — Frank will be busy.

He plans to report back to the council in September or October on specific changes to re-balance the city budget — assuming the state legislature approves the budget and its methodology.