In the weeks leading up to the May 19 special election, it became clear that several propositions aimed at closing the state’s $23 billion dollar budget gap were doomed—the lone exception being Proposition 1F, the measure pushed by Sen. Abel Maldonado limiting pay increases for legislators in deficit years.
Now local governments may have to deal with the fallout from the decision. In addition to making broad cuts to state-run programs, the state will likely have to borrow money to get through the next two years. Local governments, including cities, counties, and special districts, could become the unwilling lenders.
On May 5 the State Department of Finance announced a plan to borrow $2 billion from cities, counties, and special districts—the maximum allowed by state law—to help close the gap. For the city of San Luis Obispo, that could mean more than $1.2 million in state takeaways on top of the city’s existing $10 million budget gap this year. For the county, it could mean the loss of $10 million, coming on top of their $30 million budget shortfall, according to staff reports.
The San Luis Obispo City Council adopted a resolution May 19, that members planned to send to Sacramento in an effort to defend against the proposed takeaways. The resolution declares that a state of severe fiscal hardship will be created by the losses proposed. The resolution does not, however, prevent the state from borrowing the money, SLO city Finance Director Bill Statler said.
“I think it’s sending a message to Sacramento,” Statler said, “that they need to solve their own problems with their own resources.
“All of the things that the state is struggling with,” Statler went on, “the cities and counties are struggling with too—decreased property tax revenues, declining [Transient Occupancy Tax]. It’s like a double whammy.”
It’s not the first time the state has attempted to fix the budget on the backs of cities and counties. According to staff reports, the state has seized $8.6 billion from municipalities statewide from the early ’90s until 2004 when voters passed a proposition requiring that the state pay back loans with interest.
Statler said the state is still in the early stages of the budget process, so anything could happen.