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ORANGE COUNTY PERSPECTIVE

Bracing for a Big Budget Hit

January 19, 2003

Each day's headlines show the state budget storm in Sacramento moving closer and closer to Orange County. Debate continues over the size of the budget deficit, but it's clear the pain will be broad-based because 71% of the state budget goes for health, education and social welfare programs delivered at the local level.

What's equally clear is that a long-standing problem with the distribution of property taxes magnifies the effect on Orange County. That's because Gov. Gray Davis' controversial balancing act would keep some motor vehicle license fees now being sent to counties. If Davis' $34.6-billion budget shortfall estimate holds, the county's general fund would take a minimum hit of $30 million.

Any loss of license fees would be painful because Orange County receives just $42 per person in property taxes from the state, woefully below the $120 average across California. The county's heavy dependence upon the fees is driven by an archaic property-tax funding formula that was a byproduct of Proposition 13. The formula was based upon county government spending at the time, and because Orange County wasn't a big spender back then, it since has been harshly penalized by an abysmally low property-tax return.

Counties and cities will bear the brunt of the budget crisis because schools get most of their funding guaranteed by Proposition 98. But elected officials and other representatives can't sit idly by as Sacramento hashes out a budget solution. That's why the Orange County District Superintendents Assn., whose school districts educate more than 500,000 children, should be applauded for its plan to travel to Sacramento on Feb. 4 to lobby the county's legislative delegation for support.

Some of the proposals being advanced -- say, cutting the number of school days and reducing payrolls -- clearly are responding to the immediate crisis. Others, however, probably deserve study even without a budget crisis. Schools are right to demand that state-mandated programs be fully funded or suspended -- a message that Uncle Sam also should heed.

Speaking of unfunded mandates, Davis' plan would provide $8.2 billion in funding to cover costs of health care, court security and other programs that would be shifted to counties. Davis proposes to pay counties back through a combination of taxes, a worrisome development because funding sources invariably fluctuate while demand for these basic services almost always increases.

That brings the discussion back to the glaring shortfall of property-tax receipts that are returned to the county. The local legislative delegation must work together to protect the most necessary health and education programs. But when the budget crisis eventually subsides, the delegation again must tackle the decades-old property-tax disparity that results in Orange County sending more money to Sacramento than is returned. Those getting more than their fair share -- including San Francisco -- must be constantly reminded that their good fortune comes at the expense of Orange County and other donor counties.

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