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Sacramento's kick-the-can budget

The pact doesn't deal with California's fiscal problems; it just shifts them to local governments.

July 22, 2009

If a can is kicked down the road but no one admits doing the kicking, does it make any sound?

Sure it does, and California will be hearing the racket for years, courtesy of the budget agreement announced in Sacramento on Monday evening. The deal -- to close the $26-billion gap between a budget adopted in February and the drastically lower revenue receipts that came later in the year -- cuts deeply into safety-net programs, leaving many seniors and children without medical care, and leaving cities and counties to deal with the fallout.

But here's the can-kicker: The agreement also relies on swiping billions of dollars from those same cities and counties, sticking them with the hard choices -- whether to seek tax increases to prop up public safety, mental health, addiction, housing and job placement services, or to put up with more people in the jails, on the streets or lined up for scarcer assistance. Now, on top of the already deep and painful cuts in state programs such as Healthy Families, CalWorks and In-Home Supportive Services, county and city governments will have to identify millions of dollars more in cuts.

That sort of delayed reckoning and outsourced accountability should not be portrayed as forward momentum. The state should not try to take credit for solving the budget problems when in fact it has merely foisted its problems onto local governments. There is no separation, in the minds of voters or in the pangs of those most in need, between state and local government. We'd prefer a little more honesty from both the Capitol and the many city and county halls, all of which should acknowledge that their budget woes are but two sides of the same worn coin.

But even after abrogating responsibility to cities and counties, Sacramento has merely delayed its own budget reckoning. Because of Proposition 1A, a measure adopted by voters in 2004 as a reaction to the last wholesale state confiscation of local money, funds taken from cities and counties will have to be paid back within three years, with interest. The same is true of gasoline sales tax money, which can be used only for transportation but which this budget diverts to other purposes. We can almost hear the governor in 2013, whoever that person may be, railing against his or her predecessor for shifting the burden of reckless budgeting to the future. Or, in the words of current Gov. Arnold Schwarzenegger, kicking the can down the road.

The sharp downturn in the economy and the volatile nature of California's tax system made the reliance on local money predictable and inevitable, so there's no point in spending too much effort lamenting it. The state's only other choice was to accept deeper cuts to programs for those in need or further accounting gimmicks that move money from one budget to another.

Yet the state in this budget exceeds even itself in confiscatory gimmickry by taking billions of dollars from local redevelopment agencies, then attempting to pay those agencies back by giving them license to rob cities and counties of billions of property tax dollars in the future.

The gimmick is in the nature of redevelopment agencies. They invest in eradicating blight, then get continued funding from the higher property taxes that result from their efforts. This "tax increment funding" already diverts money that would otherwise go to counties or schools, but the bargain, although controversial, is usually deemed acceptable to society because of the investment in and eventual rehabilitation of neighborhoods that have run aground.

The state budget deal gives new power to redevelopment agencies to continue diverting tax increment money even after blight is eliminated. That may be unconstitutional, and it helped move the Los Angeles County Board of Supervisors to vote Tuesday to block the budget in court. A lawsuit is unfortunate because it injects further delay and further uncertainty into the budget process, and in so doing keeps California from finally dropping its flirtation with insolvency. It would be understandable, but unproductive, if the county were suing simply to block the taking of local and transportation funds, but given the attempt at a legally suspect redefinition of redevelopment agencies' powers, what choice does the county have other than to turn to the courts?

In dragging out the dickering and pushing California dangerously close to insolvency, Democratic legislative leaders insisted that they were protecting the safety net, knowing all the while that they were fraying it at the local end. They had few options, and it would be foolish for rank-and-file legislative Democrats to reject this budget based on the depth of the cuts. It's just that a little more candor about the limited nature of Californians' choices is in order.

That goes tenfold for Schwarzenegger, who insisted that the additional three weeks of parrying was an attempt to fix the state's structural problems once and for all. Nonsense. No once-and-for-all resolution was available. Despite the fantasies of would-be reformers, government cannot be remade in a few weeks during the middle of an economic disaster, a fact proved by the kick-the-can budget just announced. The real work comes over a period of months and perhaps years, as Californians turn their attention -- as they must -- to remaking our tax structure and reinventing our government.

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