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The Bucks Stop Way Before Here

August 04, 2003|Zev Yaroslavsky

California now has a budget. We're still not sure of exactly what's in it, nor is anyone else -- least of all, the lawmakers who voted it through. The devil is in the details, and it's only a matter of time before he makes his appearance.

What we do know is that the state again has largely balanced its budget on the backs of local governments. Our finance experts tell us that Los Angeles County will forfeit as much as three months' revenue, between $116 million and $189 million, because of a delay in implementing the hike in vehicle license fees. Counties will be sharing the state's burden of federal child-support penalties, costing Los Angeles County alone more than $10 million for the state's administrative inefficiency. We're also told that the state, again, will renege on its obligation to pay for local programs mandated by the state, costing Los Angeles about $40 million.

The state is rolling over an $8-billion deficit into 2004, a major election year in which it will be nearly impossible to implement significant service cuts or tax increases -- virtually ensuring that the state will make another grab at local government coffers next year.

The budget includes a structural imbalance that requires the state to borrow $10.7 billion by issuing new "deficit bonds," which it plans to pay off using part of the sales tax revenue it had been sharing with local governments; local governments would instead receive additional property tax money. The pitfall in this "tax swap" is that having earlier taken our vehicle license fee money and property taxes, the state is now going after our last revenue source, the sales tax increment, while asking us to trust that it will be repaid.

There are many reasons for the state's fiscal predicament, from a dot-com boom that went bust to a manufactured energy crisis to counterterrorism efforts. Overshadowing all is the anarchy of a chronically dysfunctional state government. And now, haunting the entire scene is the specter of a costly gubernatorial recall campaign.

Amid all the chaos, however, one instigating factor stands out. California is one of only three states -- along with Arkansas and Rhode Island -- that require a two-thirds vote to enact a state budget. This mechanism, adopted in the name of fiscal accountability, actually encourages a lack of responsibility by holding the budget process hostage to the tyranny of the minority and the clout of opportunistic special interests.

For local governments like the County of Los Angeles, the problem is even more acute: $3.2 billion, or nearly 20% of our $16.5-billion budget, comes from state assistance. We cannot complete our budget work until the governor and state lawmakers complete theirs. No longer masters of our own fiscal destiny, the people of Los Angeles County are prisoners of Sacramento politics.

Fortunately, we have an opportunity to cure this intolerable situation. A proposed budget accountability act in the form of an initiative is now circulating. It calls for a constitutional amendment that would enact reforms in state budgeting. The measure's key elements include reducing the vote required to pass the budget from two-thirds to 55% and setting aside a "rainy day" fund of at least 5% in good times so that budget cuts and tax increases will be less likely in challenging economic times.

Although we should make it easier for the Legislature to adopt a budget, we must also make it harder for Sacramento to overspend on one.

Toward that end, lawmakers should consider adopting statutory spending limits, which might take one of two forms: a spending cap that would link expenditures to revenues, ratcheting down spending when available funding declines; or a requirement that one-time revenues be spent only for one-time purposes, such as capital projects or debt reduction. Either mechanism would have helped avert the catastrophic situation in which the state finds itself.

At our county level, in particular, it's long been a truism that the budget drives everything. The health of our residents, their physical safety, their ability to find work and support their families, their collective credit-worthiness all depend on the timely adoption of a sound state spending plan.

There is no higher public policy priority in California than solving the state budget crisis -- not just for this year but also for every year from now on.

Zev Yaroslavsky represents the 3rd District on the Los Angeles County Board of Supervisors, which includes most of the San Fernando Valley, mid-Wilshire and the Westside.

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