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LAO REPORT from page 1 ........... ............................... "The state made a policy decision to give tax relief, and we think that the same entity of govern- ment that makes the decision about tax relief should bear that burden," Hill said. Hill indicated that the Governor's mid -year and budget year proposals would, if completely en- acted in a timely manner, resolve the fiscal crisis facing the state. She called the plan credible and ambitious, and stressed that there is no "silver bullet" out there to solve the state's fiscal prob- lems. She further cautioned that the budget would be out of balance if any of the expected benefits of the revenue proposals fall through, citing specifi- cally the $1.5 billion expected from Indian gaming operations, and over $300 million projected from the Federal Government to pay for incarceration of undocumented felons. 2003 -04 budget year, the deferral of payments on all general and local government mandates. By the end of the budget year, the state would owe an estimated $1.2 billion to local governments for mandate costs. The LAO recommends a policy that would either fund the mandates, or eliminate the state's liability for the mandate. They also recommend that some of the mandates be con- solidated within the state - county realignment proposal. 3. Sales Tax Simplification –The LAO suggests that the Legislature direct the BOE to examine the advantages and disadvantages of participating in the interstate Sales Tax Simplifica- tion Project due to the potential revenue gains of collecting Internet and other remote sales and use taxes. Hill also said that the Governor's proposal to use about $1.7 billion in transportation funds to aid the General Fund would delay projects in the Traffic Congestion Relief Program (TCRP) and makes the program's future funding uncertain. This uncertainty impacts the current 141 projects, and the 200 contracts that are ready to go in the near future. "It's important that the Legislature and Administration act soon to determine the long- term funding commitment ", Hill said. She sug- gested some alternatives such as "bridge financ- ing" might be considered if the long -term intent was known. Some additional highlights of the overall analysis document include: 1. Redevelopment Agency Low and Mod- erate Income Housing Funds – although the Governor's current budget year proposal to shift "unencumbered" funds from has not vet aarnered any support, the LAO suggests that s -c ,+d there be an attempt to take any of these funas, that the Legislature could specify in law that any redevel- opment agency that transfers housing funds to ERAF is guaranteed replacement funding under Proposition 46. 2. Local Government Funded Mandates — The Governor has proposed continuing, for the 4. Williamson Act –The LAO recommends that the Legislature plan for a phasing out of this program, rather than the immediate elimination of it as proposed by the Governor. 5. Additional Options to Consider for Reducing State Spending a. High -Tech Law Enforcement Grants – eliminate. $18.5 million benefit b. Citizen's Options for Public Safety – eliminate. $116.3 million benefit c. Juvenile Justice Grants –suspend for one year pending evaluation results. $116.3 million benefit For a link to the full LAO analysis report, go to www.cacities.org /budget. Visit the League's Official Web Site -- www.cacities.org PRIORITY FOCUS /PAGE 5