SAN JOSE
– Santa Clara County, along with 17 other California counties,
announced plans Wednesday to sue the state over the recent loss of
vehicle license fees – potentially an $85 million annual hit to the
county’s health and public safety services.
County officials say the state constitution requires Gov. Arnold
Schwarzenegger and the Legislature to backfill, or repay, an amount
equal to what the controversial
”
car tax
”
once generated for local governments.
SAN JOSE – Santa Clara County, along with 17 other California counties, announced plans Wednesday to sue the state over the recent loss of vehicle license fees – potentially an $85 million annual hit to the county’s health and public safety services.
County officials say the state constitution requires Gov. Arnold Schwarzenegger and the Legislature to backfill, or repay, an amount equal to what the controversial “car tax” once generated for local governments.
“It is a fiduciary obligation and, for sure, a moral obligation,” said Blanca Alvarado, chairwoman of the Santa Clara County Board of Supervisors, Wednesday at a press conference in San Jose.
In reaction, the governor plans to use new extraordinary powers to make a $40 million payment to local governments by Dec. 26. Schwarzenegger aides, speaking on condition of anonymity Wednesday, said he would declare a financial emergency today and bypass the Legislature to keep cities and counties from closing facilities and laying off police officers and firefighters. Under these new powers, the governor would authorize a total of $150 million in budget cuts – mostly from welfare and public health programs, sources said – to pay local governments in lieu of vehicle fees.
In addition, Schwarzenegger’s emergency proclamation would call on lawmakers to make cuts of $2.6 billion to fully reimburse local government for all the money lost since the higher car taxes were repealed, aides said. The Legislature will have until March 1 to make the cuts, according to the governor’s office. County officials were unavailable to comment on Schwarzenegger’s possible declaration.
Sacramento is under pressure on this issue from around the state. Other counties suing over vehicle fees include San Benito, Contra Costa, San Francisco, Los Angeles and San Diego, according to Santa Clara County officials. The California State Association of Counties, the League of California Cities and the city of Los Angeles also have authorized legal action. The counties plan to wait until early January to file the lawsuit to give other local government boards time to consider joining.
Gilroy City Administrator Jay Baksa said he’s amazed by the upheaval in California since Monday.
“This series of developments is unprecedented,” Baksa said. “I’ve never seen anything like this.”
Vehicle license revenue makes up 4.7 percent of Santa Clara County’s $1.8 billion general fund and 27.5 percent of the discretionary fund supervisors have control over, which goes mostly for public safety.
In the current fiscal year, Santa Clara County stands to lose $70 million in vehicle fees. It received $2 million this month instead of its standard $13.6 million, and it won’t receive any vehicle fees at all in January and possibly February as the state reimburses vehicle owners who already paid the high fees.
Kutras noted that the state already borrowed $24 million from the county earlier this year to help balance the state budget. Because of that, the county had to lay off Sheriff’s Department personnel.
In large part because of these losses, county officials say they’re looking at a “best-case scenario” of $90 million in cuts next fiscal year. Without the backfill, the county will have to cut an additional $85 million – a total $175 million loss for public safety here.
First on the chopping block, according to Alvarado, may be mental health services, services for mentally and physically disabled children and up to $30 million from Santa Clara Valley Medical Center, the county’s hospital. The county Department of Corrections may have to absorb a $7 million cut, the Sheriff’s Department $3 million, and the Public Health Department may see severe cuts in the wake of the biggest flu scare in recent memory.
The county’s fire department, district attorney’s office and public defense office could feel the blow as well, Supervisor Don Gage, of Gilroy, said later.
“I just don’t think we have any choice (but to sue),” Gage said.
The result of these cuts would be noticeable, officials said. With a smaller mental health service, “Police departments are going to see mental health problems on the street,” Alvarado said. “They’re going to end up in the criminal justice system.”
“Layoffs and service reductions again will be required under (both best- and worst-case) plans,” county Executive Peter Kutras Jr. said. “We have made budget reductions totaling $281 million during the last three years, and as a service organization there is nowhere to go.”
For now, the county has frozen capital and technology projects.
As Schwarzenegger promised in his campaign, his first act as governor in November was to roll back the car tax from 2 percent of vehicle value to .675 percent. Gov. Gray Davis made the same reduction during rosier economic times, in 1998 – but then with a guaranteed backfill plan in place.
The test for Schwarzenegger will come when he releases his proposed state budget in January, but the counties engaging in the suit decided they couldn’t wait that long.
“We’re not waiting for a promise,” Gage said. “We’re suing, because promises are cheap.
“And it’s not really Schwarzenegger we’re suing; it’s the Legislature,” Gage added. “We were going to wait until after the governor’s proposed budget, … but other counties jumped into this thing and started the process. Well, we can’t back out now.”
Gage said he personally supports Schwarzenegger’s reduction of the vehicle fee but not the way Davis did it in 1998. For Davis, Gage said, “It was a political game. … He wanted people to know that he was the one who was giving them that. … If he wanted to give a rebate, he should have given it as a one-time thing out of the $4 billion surplus they had (at the time).
“That’s why he isn’t around anymore, because of shenanigans like that.”
With a lower vehicle license fee in place, however, Gage said Californians rightfully expected it to last. But Davis and the Legislature raised it to 2 percent again earlier this year in light of a massive budget deficit.
“My (vehicle license) bill went from $264 to $721 for one vehicle,” Gage said. “I’m supposed to get that back, and I haven’t seen it.”
Even if the lawsuit is successful, it is unknown how long it would take a court to force the state to pay the vehicle license fees, potentially making the legal action more of a statement about the budget mess rather than a solution for it. But Assemblyman Simon Salinas, D-Salinas, says the lawsuit is a valid solution nonetheless.
“I was a (county) supervisor before, and if I were still in that position, I’d be looking at a lawsuit as an option to be explored,” Salinas said. “I think (the counties and cities suing) are right. If you look at how VLF reductions were made, I think it’s pretty clear the cities were supposed to get their money back.”
In Sacramento, most Republicans want to restore the backfill immediately and make the then-necessary cuts later. Most Democrats, including Salinas, want to backfill from a definite funding source, which hasn’t yet been established.
The Associated Press and Dispatch Staff Writer Eric Leins contributed to this report.
