Loss of funds from repealed vehicle license tax threatens local
jobs
GILROY
– Gov. Arnold Schwarzenegger’s promised
”
car tax
”
reduction left the driveway and pulled into traffic Wednesday as
the state’s monthly payments to counties and cities came in at
levels many municipal leaders say they can’t live with.
Gilroy got $58,000 in vehicle license fee money for this month, $150,000 less than its previous monthly payment – a 72 percent cut. City officials expect to get $700,000 this fiscal year, $1.8 million less than they budgeted.
The city can weather the storm for now but will have to begin laying off staff in spring if things don’t change, City Administrator Jay Baksa said. At worst, the city might have to close its youth and senior centers, the city museum and a new, third fire station.
Santa Clara County lost $11.6 million in vehicle fees for December an 85 percent decrease. It got $2 million this month and found out it won’t get a vehicle license payment at all in January and may not in February either, according to county spokeswoman Gwendolyn Mitchell. The county is expected to lose between $60 million and $70 million this fiscal year and could lose more than $85 million next year if the state doesn’t step up for a payback.
County executives will bring both short-term and long-term cutback plans to the Board of Supervisors Tuesday. The short-term plan would save about $70 million by freezing technology investments and capital improvement projects, including a disaster recovery plan and a plan to automate construction-project management, Mitchell said. Long-term reductions may include cuts from the Sheriff’s Department, fire and emergency medical services and the county-owned Santa Clara Valley Medical Center.
“The nurses at the hospital are critical, the firefighters are critical, and we need to get them (paid for),” county Supervisor Don Gage said Wednesday. “Otherwise, we don’t have any choice but to cut from those.”
Supervisors lobby for payback
County supervisors Jim Beall and Liz Kniss and executive Pete Kutras were among about 100 local politicians and police and fire chiefs in Sacramento Wednesday, urging state legislators to “backfill,” or repay, municipalities for vehicle-fee losses. Two bills are in the Legislature to do that, but the state budget deficit of roughly $14 billion may prove too big an obstacle.
“Every day of delay further jeopardizes the county’s ability to continue to provide services that are essential to public safety,” Beall said. “Every day of talk is one less cop, one less nurse, one less firefighter (who is) needed to protect our communities.”
“One of the governor’s promises was to protect local services,” Kniss said. “This is a promise that needs to be kept.”
The state’s leading plan to pay locl governments hinges on voters passing a $15 billion bond in the March 2004 general election. Thus far, the Legislature has made a token payment only – $1,000 for California’s counties and cities to share.
The state constitution requires backfill, but there’s some disagreement over how much. Mitchell said the constitution doesn’t require the state to repay the full amount. Gage said the constitution guarantees 100 percent backfill.
“They should reimburse us totally for that,” Gage said of legislators and the vehicle-fee loss.
Although Gage didn’t go to Sacramento, he said he spoke to at least one state legislator over the phone about the issue.
Vehicle license fees had made up 27.5 percent of the county’s discretionary funding and 8 to 10 percent of its general fund.
In California as a whole, the vehicle license fee cuts mean a monthly loss of about $300 million to cities and counties, or more than $4 billion a year.
Schwarzenegger and legislators rolled back the state’s vehicle license fee, or “car tax”, from 2 percent to 0.65 percent of a vehicle’s value, fulfilling a campaign promise by the new governor. The state did the same in 1998, backfilling local governments for the difference, but former Gov. Gray Davis, facing heavy budgetary pressure, raised it back to 2 percent earlier this year.
Gilroy’s plan
Deflated vehicle license fee payments cause a critical cash flow problem for many local governments.
In Gilroy’s case, 9 percent of the general fund is made up of vehicle license money from the state.
“We aren’t as dependent on it as some cities, and we have the cash reserves to get us through the next few months,” Baksa said. “We don’t need to take immediate action.”
Baksa said Gilroy will be OK until March or April. By that time, cities hope, the governor and the Legislature will have a plan to backfill the $1.8 million annual payment to the city of Gilroy.
If voters reject the bond or if the Legislature fails to pass a bill that reimburses cities, Gilroy will go into extreme cost-cutting mode, Baksa said. City officials plan to make budget cuts using a three-tier system of spending priorities.
If revenue losses trigger the first tier of cuts, nine full-time positions would be terminated at the city. If losses are so severe that the third tier is triggered, then 43 full-time positions could be cut and Gilroy’s third fire station on Sunrise Drive would be closed, among other reductions.
In order to make it easier to handle potential revenue changes in fiscal year 2004-05, Baksa said he is asking city staff administrators to develop a baseline budget earlier than normal. Staffers likely will develop budgets for their departments by the end of January.
By April, City Council likely will be making revisions to a draft 2004-05 budget. The final budget must be adopted before July 2004, the start of the new fiscal year.
Cities may sue over tax swap
Another of the state’s budget-fixing plans is likely to draw lawsuits from municipalities it affects, perhaps including Gilroy.
To avoid raising income taxes and to keep education cuts at bay, state lawmakers are swapping property tax and sales tax revenues with cities. It sounds like a wash on paper, but over time sales tax revenue will outgrow property tax revenue.
On Tuesday, the city of Cerritos in Southern California announced it would sue the state over the matter. Baksa said Gilroy needs to consider joining that lawsuit or being a part of another one.
Baksa said he will discuss taking legal action against the state with the City Council at a meeting Monday.
