California Proposition 1A on the May 19 ballot would make
significant changes to the way the state currently manages its
revenues. And officials from local jurisdictions who depend to
varying degrees on state funds, have mixed feelings about whether
or not the changes would achieve their intended purposes of filling
the current and projected state budget hole.
California Proposition 1A on the May 19 ballot would make significant changes to the way the state currently manages its revenues. And officials from local jurisdictions who depend to varying degrees on state funds, have mixed feelings about whether or not the changes would achieve their intended purposes of filling the current and projected state budget hole.
The proposition would allow legislators and the governor to increase the amount of annual revenue it can set aside in its budget stabilization fund, or “rainy day fund.” It would also restrict the purposes for which those funds can be withdrawn.
Currently, the state puts up to 3 percent of its annual revenues into the reserve fund, which caps out at $8 billion or 5 percent of revenues, whichever is higher.
If Proposition 1A passes, the targeted cap for the reserve fund would be 12.5 percent of total revenues, which is currently about $12 billion, and the state could add extra money to the fund when it collects more revenue than expected.
Plus, the withdrawal of funds from the reserve would be further restricted, and other restrictions are made to limit the purposes for which the money can be used.
Another contentious provision of 1A is the extension of taxes that were included in the current fiscal year’s state budget, but are set to expire. A 1 percent sales tax, a vehicle license fee increase, and an across-the-board personal income tax increase of .25 percent are currently set to expire in 2011 or earlier.
Proposition 1A would extend these taxes for at least another year, bringing $16 billion into state coffers.
State assemblymember Bill Monning, who represents the 27th district which includes Morgan Hill, supports all six propositions on the May 19 ballot, including 1A.
“My support for 1A is rooted in the balanced objective of trying to set spending caps and create the rainy day fund in better times,” Monning said. “The most immediate benefit is the revenue streams” from the extended taxes.
He said he doesn’t “take joy” in raising taxes for people suffering the effects of a recession, but the state is currently having such trouble it couldn’t balance the budget without “paralyzing” service cuts.
The state’s $40 billion deficit resolved this year, at least on paper, was caused by the loss of expected revenue, Monning added, and legislators predict another $8 billion gap next year.
Santa Clara County relies on state funds for about 32 percent of its annual revenue. As a result it faces a $230 million deficit going into next year.
County Budget Director Leslie Crowell said the idea of having a stable reserve fund to protect the state is a good idea. But the terms of Prop 1A would also limit the reserve fund’s flexibility, possibly limiting the state’s ability to send money to the county in the future.
“It’s almost as if you’re paying in the future for a fix now,” Crowell said.
Morgan Hill Unified School District Deputy Superintendent of Business Services Bonnie Tognazzini said what local school districts need is more flexibility with state money, and Prop 1A doesn’t address that.
“So much of the money that comes from the state has strings attached. We are in survival mode, and they need to give us the flexibility we need in order to survive,” Tognazzini said.
MHUSD has been forced to cut about $9 million from its budgets the last two years.
And Morgan Hill City Manager Ed Tewes said while the city does not rely directly on state funds, if the six propositions don’t pass the state might take money from the city.
“The state will have a bigger budget hole, and look for other ways to get money out of our pocket and look for Redevelopment Agency funds,” Tewes said.
