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FI M 10 HEARING page lease ........... ............................... The March 5 hearing was conducted by the Assembly Local Government Committee and the Assembly Budget Subcommittee on State Administra- tion. Local government finance consultant Michael Coleman, who also serves as a fiscal consultant to the League, was called upon by the joint panel to provide background and context for the hearing. He described the decline of local governments' fiscal independence since 1978, and the impact that the state's growing authority over all revenue sources has had on communities' growing inability to provide services or plan for future growth. The League's Fiscal Reform Committee, chaired by San Diego Council Member and League Board Member Jim Madaffer, has been working for several months with its local government partners to develop specific recommendations for reform of the state -local fiscal relationship. Protection of revenues to ad- equately fund local resources is the League's top organizational priority. ..................... STATE BUDGET UPDATE McKenzie expanded upon the theme: "The phenomenon of rising service costs and restricted revenues imperils city services and deters essential planning ", McKenzie said. "As city councils are left with few revenue options, they defer maintenance and cut back on city services." McKenzie described how the state's increasing control over local revenues causes instability in cities' planning and budgeting. "Cities worried about losing their vehicle license fee funds have already started to cut their budgets, freeze hiring or eliminate positions," said McKenzie. "They are more hesitant about committing to long -term projects or engage in long- term planning. "This is an unhealthy situation for communities. Citizens not well served by government that cannot plan for future needs." "Our polling tells us that this is a significant factor in the voters' dissatisfaction with government, and a major cause of voters' lack of trust," he said. The joint panel heard also from a number of other witnesses, including representatives from the Califor- nia State Association of Counties, the California Taxpayers Association, the California Tax Reform Association, and State Finance Director Steve Peace. McKenzie concluded his testimony by pressing for reforms that provide cities with both fiscal predictabil- ity and independence. "Local government can live with the risks of economic uncertainty. But we can't properly plan for and manage the local service needs of 35 million people if the state can always step in and raid local funds." • The Assembly budget committee passed legislation on Monday containing $3.3 billion in current fiscal year program cuts. Governor Davis and the State Controller Steve Westly are reported to be arguing over which of them has the authority to pull the trigger — with neither eager to assume the political "heat associated with doing so. • Senator Burton held a press conference early In the week in which he expressed appreciation to Senate Republicans for having introduced their budget propos- als last week. He identified what he believed were a number of problems with the proposal, but emphasized the importance of the Republicans' efforts to put forward their ideas about a budget solution. By the end of the week, Senate Democrats had agreed to delay taking formal votes on FY 2003 -04 year cuts, at least until the end of the month, to give staff more time to review the impacts of the Governor's proposed plan. • The Assembly Local Government Committee and Assembly Budget Subcommittee on State Organi- zation (with authority over local assistance funding) held a joint informational hearing on March 5 to gather ideas about how to reform the state -local fiscal relationship. League Executive Director Chris McKenzie testified, calling for balanced mix of adequate revenues tied to public needs and services, and constitutional changes to protect those revenues from state raids. (See article, "McKenzie Calls For Fiscal Reform" on page 1.) Other witnesses: League economic consultant Michael Coleman; State Finance Director Steve Peace; and representatives from the California State Association of Counties, the California Tax Reform Association and the California Taxpayers Association (among others). Continued on Page 7 PAGE 6 /PRIORITY FOCUS Visit the League's Official Web Site -- www.cacities.org