GILROY
– Officials around Gilroy, from the city to the schools, were
digesting Wednesday the state’s latest version of the 2003-04
budget, and it has been leaving a poor taste in the mouths of
many.
GILROY – Officials around Gilroy, from the city to the schools, were digesting Wednesday the state’s latest version of the 2003-04 budget, and it has been leaving a poor taste in the mouths of many.
For the City of Gilroy, the new budget plan means a $525,000 revenue loss in vehicle licensing fees for next year and a potentially permanent loss of half its share of sales tax revenue.
And for Gilroy Unified School District, cuts in per-student funding and reductions in the amount of money the state gives schools for cost of living increases are as bad as had been expected since May.
“For us the cuts are a little worse than expected,” Gilroy City Administrator Jay Baksa said. “I don’t think any one change in the final budget is going to trigger more cuts, but they’re starting to add up.”
In order to not raise 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.
According to City of Gilroy estimates, Garlic Town will lose:
• $1 million in 2008-09.
• $718,000 in 2007-08.
• $632,000 in 2006-07.
• $302,000 in 2005-06.
• $139,000 in 2004-05.
• No loss in 2003-04.
The loss of sales tax revenue for Gilroy is especially frustrating. In recent years, Gilroy has wined and dined large retail outfits to set up shop on the east side of town. The purpose – use the boost in sales tax revenues to boost city coffers.
Mayor Tom Springer, who has decided not to run for re-election, says the state tactic of grabbing more sales tax revenue contributed to his lack of desire to lead Gilroy another four years.
“Once the idea of shifting property taxes with sales taxes got kicked around in Sacramento, there was a gleam in the eyes of every legislator. They knew they were picking up a new revenue source that increases in economic boom times,” Springer said. “You could see the drool forming on the sides of their mouths.”
Springer predicted cities will have larger deficits next year, thanks to the state’s way of managing its fiscal doldrums. The state has nearly $8 billion of debt left over from the current fiscal year.
Although the state is promising to backfill the sales tax revenue loss with property tax revenue, city leaders are not holding their breath. In the middle of a major recession in 1992, the legislature balanced California’s books by transferring property tax revenue from cities and counties to schools. Baksa says cities never got repaid in full.
“We never have luck with the state when it comes to the state fulfilling its promises to backfill,” Baksa said. “Their history has been nothing but shoddy. They’ve been liars ever since the early ’90s.”
Baksa is also reeling over the more than half a million dollars in vehicle licensing fees the state will take from Gilroy, despite raising those fees in this budget plan. Again, the state says that will get repaid at a later date.
“We’re out $525,000 in revenue for this (fiscal) year,” Baksa said. “That is not a small amount of money for us.”
The half-million-dollar loss is being called a borrowing plan by the state.
California was supposed to repay Gilroy and other cities with general fund money after the state reduced vehicle license fees in the early 90s. It hasn’t paid off the “loan” yet and with no general fund money available, no one knows when the repayment will happen.
In other words, Gilroy has to make spending plans without the $525,000.
Local agency leaders already made tough budget choices weeks and months ago in preparation for the final state budget. State law requires cities and school districts to have balanced budgets by the beginning of each fiscal year on July 1.
Because the final budget mirrors closely what Gov. Gray Davis outlined in his budget proposal in May, local agencies are not planning any further layoffs or job freezes.
“The only difference I can see from what we projected is a small increase in funding,” GUSD Superintendent Edwin Diaz said.
GUSD will receive roughly $90,000 more from the state in 2003-04 as part of a so-called equalization program. The $90,000 is meant to help GUSD receive as much per-student funding as the average California school district. In 2002-03, equalization was not funded by the state.
Per-student funding is different between schools because the amount of property tax each district generates varies based on the value of homes.
“Frankly, $90,000 is not a lot of money, and it doesn’t get us to the state average,” Diaz said. “But in times like these, every little bit helps.”
