AgdaPkt 2008-07-28 Clsd and Reg - Laserfiche WebLink

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REPORT 6.38 Page 1 To the Honorable Mayor and City Council From the Ci ,Mana er July 28, 2008 SUBJECT Resolution opposing any state budget proposals that "borrow" or take funds from local government, redevelopment, or transportation, toward balancing the state's budget. RECOMMENDATION Adopt the resolution opposing any state "borrowing" or taking of local funds to offset the state budget deficit. BACKGROUND California is once again in the midst of a state budget stalemate, facing a deficit estimated at between $15 billion and $18 billion, and weeks beyond the deadline for an approved budget. In recent weeks, a number of rumors have been circulating that state officials are considering borrowing local government (including redevelopment) and transportation revenues to help close the deficit. This potential taking of local funds is not at all without precedent. For the past decade- and-a-half, the State legislature and previous governors have approved laws that divert local tax revenues away from local governments. As recently as 2005/06, the State diverted significant local revenues in order to help offset that year's State's budget deficit. Redwood City's "hit" for that fiscal year alone amounted to about $6.3 million in combined ERAF diversions. In response to those repeated funding raids, in 2004 a resounding majority (84%) of California voters supported a measure protecting local property tax, and 77% passed a transportation funding protection measure in 2006. It is useful to remember too that in 1952, voters approved a constitutional amendment providing for tax increment financing for redevelopment - not for balancing the State budget. It's abundantly clear that the Statellocal fiscal system is broken, and there has been a lack of sufficient effort by the legislature to address this worsening problem. The State needs to close the budget defICit with State revenues, using a variety of viable tools such as increasing efficiencies, cutting spending, and increasing revenues - not by borrowing toeal and transportation revenues. Two balanced budgets (the Governor's and the Budget Conference Committee) have already been proposed without raiding local government funds and transportation funds, so there is no doubt that a compromise is within reach. This resolution will put Redwood City on record as strongly opposing any attempt by the State to divert local funds to offset its own fiscal mismanagement. ALTERNATIVES The Council could choose not to adopt this resolution and therefore not go on record in opposition to the State borrowing or taking local funds to address the State's own budget deficit.