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158 to a loss of $65,500 for each 100 million dollars of the State shortfall . Mr. Ference listed the various State revenues which would be affected by the deflator. Discussion followed regarding the effect on special districts, such as fire districts, that such districts produce little or no revenue on 'mew their own and the impact may well be greater on special districts than on general government, although there is legislation that could make awl provision for them. It was also noted that counties have the right to make their own allocations. Mr. Ference prefaced his presentation regarding Proposition 4 with the comment that there has been no legislative act nor court decision for implementing Proposition 4. The Act provides a limit on appropriations made from "proceeds of taxes" to those made in 1978-79, plus adjustments for cost of living (overall U.S. CPI) and population growth. Each area of government will be affected differently so there will be no uniform effect on any one government agency; also, what population figures will be used is unknown. He named the kinds of revenue which come under the heading of "proceeds of taxes." He also listed the types of funds that are exempted from the appropriations limit. Mr. Ference continued the report with an analysis of the effect on Redwood City, and examples of kinds of appropriations used in deter- mining the 1978-79 appropriation limit. Appropriations according to the Act are defined as any authorization to expend proceeds of taxes and State subventions during a fiscal year. It was indicated that the 1978-79 figures are used because they are known, that it has been determined that the 1978-79 base year appro- priation limit subject to taxes is $16,625,164, and if the CPI for the United States is applied for the period June 1, 1978 to June 1, 1979, then the estimated appropriation limit for 1979-80 is $18,437,307. However, Mr. Fales advised that the figure of $16,625,164 is real and will serve as the base figure forever; that if in the future it is decided to change the categorization, it would be necessary to go back to the base year and recalculate to arrive at a new appropriations limit. Mr. Ference noted that a population decrease could have a very detrimental effect on the City's revenues. Mr. Ference referred to Exhibit II attached to the report, titled Proposition 4, Allocation of Subject Revenues 1979-80 Adopted Budget, which listed sources of income and the amounts within the categories of either Proceeds of Taxes or Non-Proceeds of Taxes, or both. Mr. Fales advised that in the next year's budget, there will be different calculations because services supported by Non-Proceeds of Taxes, such as water, sewer and other services all must be calculated by cost and balanced against revenue assignable to those items, and that in the past the General Fund has been partially supporting those services. In response to question by Council , Mr. Ference advised that "Charges for Current Services" were composed of items such as zoning fees, sales of publications, library fees, weedabatement, garbage collection fees, subdivision services, recreation services, etc. Exhibit III, Proposition 4, Appropriations Subject to Limit, 1979-80 •w/ Adopted Budget, was reviewed and Mr. Fales and Mr. Ference commented regarding the fact that the appropriations limit is so high that no mot Adj .Mtg. Budget Review 2/23/80 Page 2