California can raid local redevelopment funds
From AP and Staff reports/
Posted: 05/05/2010 01:01:08 AM PDT
SACRAMENTO -- Gov. Arnold Schwarzenegger on Tuesday won the right to raid local redevelopment funds to help close California's budget deficit, but it will likely do little to save the state from having to make deeper cuts to education, social services and health care for children and the poor.
Sacramento County Superior Court Judge Lloyd Connelly ruled that the state can take more than $2 billion from local redevelopment funds and transfer the money to school operations. Local governments objected to diverting the money, which generally is used to promote public works projects and rehabilitate downtowns.
"We dodged a bullet," said Schwarzenegger's spokesman, Aaron McLear. "This would have added $2 billion to our deficit."
California is projecting a revenue shortfall of roughly $20 billion in the fiscal year that starts in July, and that number is likely to go up, meaning the governor and state lawmakers will have to consider raising taxes or, more likely, make deeper spending cuts. Teachers, labor groups and social service advocates are already gearing up for battle before Schwarzenegger releases his revised budget later this month.
In Vacaville, leaders expressed disappointment with the court ruling.
"Last year, in the previous budget, the state had determined to take $2 million of our redevelopment funds. We took them on and we won," said City Manager Laura Kuhn on Tuesday.
But when the state decided to appropriate $9.5 million this year, similar recourse
"We sued again and lost," Kuhn said. "So what happens next? Will the state take more and more money, or is this it?"
Despite the ruling, it seems Vacaville will pull through. For now, at least. In the event that the latest lawsuit failed, city officials made a variety of cuts and put aside $9.5 million. All that's left to do is to write the check to the state. The deadline, apparently, is Monday.
The worry, though, is the $3.5 million set to be taken in 2011. There's little doubt that future programs and projects will be affected, or that already-approved projects may be reevaluated in light of the new situation.
The city's Department of Housing and Redevelopment is responsible for implementing housing, revitalization and neighborhood services. The department operates the Section 8 rent subsidy programs for both the city and Solano County, and administers federal Community Development Block Grant funds to benefit lower income households and neighborhoods.
Also, the DHR functions as a community revitalization lender for low-income housing, operates the code compliance program, serves as staff for the Vacaville Redevelopment Agency and more.
Meanwhile, there are more signs of economic distress in California.
State income and corporate tax collections took an unexpected drop last month after four months of steady improvement. The controller's office reported personal income taxes in April were down about $3 billion, or 30 percent, from administration projections. April is a critical month because it's when most Californians pay their taxes.
Taxpayers could have sought more refunds and 2009 could have been economically weaker than expected, said Michael Cohen, deputy legislative analyst of the nonpartisan Legislative Analyst's Office.
"For those people who thought revenues were going to contribute a major piece of the $20 billion problem, that doesn't seem very likely at this point," Cohen said. "All the same bad options we had in January are still there, except in some cases, now we've lost the lead time to get things up and running."
Anticipating the difficult budget season ahead, Democratic Assembly Speaker John Perez and Senate leader Darrell Steinberg traveled to Washington, D.C., this week seeking federal aid. They were scheduled to meet with House Speaker Nancy Pelosi and Health and Human Services Secretary Kathleen Sebelius to discuss the effect of federal health care reform on California.
In January, Schwarzenegger proposed $82.9 billion in general fund spending for the upcoming fiscal year, which would take the state back to its spending level six years ago.
The governor said he would not agree to any tax increases, unlike last year when the state imposed temporary sales and income tax hikes. That extra revenue will begin to expire at the end of this year, just as federal stimulus funding begins to run out.
Schwarzenegger on Monday also ruled out a plan to expand oil drilling off the California coast after the explosion on a Gulf of Mexico drilling platform that caused a massive oil spill. The plan would have provided some $100 million to keep state parks open next year.
Unless the federal government provides a $6.9 billion increase, the administration has said it will seek to eliminate many social service programs, including in-home care for frail seniors and the disabled, and the Healthy Families program, which provides health care for millions of children from poor families. CalWORKS, the state's main welfare program, also could be wiped out.
Students have already rallied statewide to protest college fee increases, and union groups last month organized a 365-mile march through California's Central Valley calling for greater investment in education and home health care under the state's In-Home Social Services program, known as IHSS.
"Our members live this economic crisis every day and it's always real that California is in a cash crisis," said Laphonza Butler, president of SEIU United Long Term Care Workers, which represents 179,000 in-home care workers. "But what's also real is, having IHSS brings federal money."
Tuesday's court decision settled just one piece of the budget puzzle, although The California Redevelopment Association, the leading plaintiff in the case, said it will appeal.
Schwarzenegger and lawmakers had agreed to use more than $2 billion from redevelopment funds for schools in those districts as a way to make up for declining general fund revenue.
The redevelopment association and local governments argued that shifting that money was unconstitutional and would halt projects that create jobs at time when California's unemployment rate is at 12.6 percent.
Judge Connelly sided with the state, saying California could use that money to help support schools located within redevelopment agency boundaries because it served a public purpose.