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j?~/ BUDGET PROPOSALS from page 1..................................... (To view the complete proposal, visit the Department of Finance website at www.ebudgetca.gov. To view Gov. Schwarzenegger's "Strategic Growth Plan Briefing Packet" go to www.aovernor.ca.aov.) Fiscal Issues (Prop. 1A ERAF Contributions, Mandate Repayment, Board of Equalization) . ERAF III Concludes. The governor's budget acknowledges that the $1.3 billion in annual contri- butions from local governments to the state agreed to as part of the Proposition 1A budget package has come to an end. These shifts will not occur in the FY 2006/07 budget In essence, they will free up these funds for local programs ($350 million for CDunties, $350 million for special dis- tricts, $350 million for cities and $250 million for redevelopment agencies). . Mandate Reimbursements Resume for Local Governments. The budget includes $98.1 million for repayment of deferred payments owed to local government for mandate claims prior to the FY 2004/05 budget year. The state is required to pay back approximately $1.1 billion over a period of 15 years, pursuant to the FY 2005/06 Budget agreement. . New Mandates Unit. The proposal appro- priates $537,000 financed from proposed mandate cost savings for a unit within the Department of Finance devoted to addressing issues related to reimbursable state-mandated local programs, including the development of policies and pro- cesses to improve the mandates system, and ensure fair and equitable payment of costs. . Funding for Improved Tax Collection. The proposal includes $1.1 million for the Board of Equalization to undertake additional enforcement of sales and use tax collections. The budget estimates that this could result in an additional collection of $13 million in local sales tax revenues for cities and $5 million for counties. . Mid-Year Budget Authority for Gover- nor. The proposal includes language giving the governor mid-year budget reduction authority. This would allow the Director of Finance to reduce General Fund appropriations if necessary to protect the financial interests of the state. . PTAP Grants Suspended. Continued suspension of the Property Tax Administration Program (PTAP) grants through FY 2006-07. The PTAP grants are used by county assessors to enhance their property tax collection efforts. Transportation . Proposition 42. Fully funded in the FY 2006-07 budget at $1.4 billion. The budget also includes an additional $920 million as a repay- ment of Prop. 42 (sales tax on gas) funds that were borrowed in prior years. Although there is a two-year "gap" in the existing statutory funding formula for local streets and roads, cities and counties will still receive $255 million for local streets and roads from the repayment funds. The governor has also proposed a constitutional amendment that will permanently protect Prop 42 funds in the future. . SAFTEA-LU. The budget recognizes that California will receive annually approximately 28 percent more in federal transportation funding due to the passage of the Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2005. Over recent months, the League and CSAC have worked together to request "an equitable share" (approximately 60 percent) of the $208 million increase in funds under the Equity Bonus pro- gram to be allocated directly to local governments for local streets and roads. . Tribal Bonds. The budget notes that $1 billion in outstanding transportation loans, includ- ing Prop. 42 monies due from the suspension back in 2003-04, remains dependent upon the sale of tribal gaming bonds. Several lawsuits have impeded the sale of the bonds. The budget assumes the bond sale will now occur in the spring of 2006. Should this become a reality, the monies would be allocated as follows: $465 Continued on Page 5 PAGE 4 - PRIORITY FOCUS January 13, 2006 - Issue #2 Visit the League's Official Website-www.cacities.org