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qA3 LEAGUE PRESIDENT TESTIFIES ON STRUCTURAL REFORM FOR ASSEMBLY COMMISSION League President John Russo, City Attorney of Oakland, presented the League's recommendations for structural reforms of the state budget at an April 23 hearing in the State Capitol. The hearing was sponsored by the Assembly Commission on Structural Challenges to Budgeting in California, organized by Assembly Speaker Herb Wesson. Assembly Member Dave Cox serves as Vice Chair. The commission was also addressed by a bipartisan group of Assembly Members who have been working on structural reform issues, including Simon Salinas, Keith Richman, Sharon Runner, John Campbell, and Joe Canciamilla. Other testifiers were: Jean Ross of the California Budget Project, Fred Main of the California Chamber of Commerce, and Ted Smith of the California State Association of Counties. Mr. Russo emphasized the importance of basing any reform of the state budget structure on some principles and values of sound budget management, including the following: Transparency and Competency. Assure Californians their state budget is being well managed in. an open and professional manner. Fiscal Discipline. Achieve improved fiscal predictability and control. • Invest and Stabilize. Make long -term capital investments; avoid dramatic swings in spending or taxation; and only carryover operating deficits from year to year on a short-term, emer- gency basis. Intergovemmental Accountability. Re- sponsibility for financing state government services should not be directly or indirectly shifted to local governments. Give local governments broad rev- enues options. He followed with these specific recommenda- tions: 1. Build A Firewall Between State and Local Budgets. Whether it is deferring mandate reim- bursements, raising local cost -share percentages or directly appropriating funds historically dedicated to local services, the state needs to quit looking at local treasuries as the way to balance the state budget. This practice undermines basic concepts of ac- countability and fairness, but more importantly, it weakens our most important democratic institutions by limiting their ability to respond to citizen needs and set community priorities. If something is good enough for the state to order a local government to do it the state should pay for it entirely and promptly, or the law should be repealed or never enacted in the first place. This is best done Constitutionally. 2. Two -Year Budget; Prudent Reserve. Most fiscal experts advise that governments have mull-year revenue and expenditure forecasts to better predict the long -term consequences of today s budget and tax cut decisions. California desperately needs to take a long -tens view of this type, perhaps through the type of process provided for in AB 499 (Canciamilla) or some other multi-year process. In fact, state legislators should be demanding long- term analyses and forecasts of their decisions and the revenue and expenditure trends facing the state. Moreover, a requirement for a prudent reserve (see AB 498 (Canciamilla) is absolutely necessary in order to help meet short term cash needs (in lieu of short-tern borrowing) and to deal with the inevitable downturn in economic cycles. 3. A Balanced Budget Based on Consensus Estimates. We either need to be honest with the California public that we don't necessarily adopt a balanced budget (the constitution only requires that the Governor propose one) or we need to set the requirement into law and live with them. A separately elected official, such as the State Controller, should be delegated responsibility to independently verify that the budget is based on a reasonable balance of estimated revenues and expenditures. Moreover, the Department of Finance and LAO should be required to reach consensus on the final estimates on which the adopted budget is based. 4. Use Incentives and Enforce Balance. In most private and public corporations the CEO is ultimately responsible for compliance with the budget Continued on Pape 10 Visit the League's Official Web Site••www.cacities.org PRIORITY FOCUS /PAGE 3