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9..4- 9 Multi -Year Plan to Partially Finance Larger Budget Gap The Governor's proposal assumes an adjusted budget gap of $38.2 billion, $3.6 billion more than the January estimate of a $34.6 billion deficit. It proposes to finance a portion of the deficit over multiple years, paid for with a temporary one -half cent sales tax, estimated to generate $2.3 billion/year. The budget includes a greatly scaled -down version of the January proposal to "realign" $8.2 billion in health and social services programs, transferring those from the state to counties. The new proposal is to realign $1.7 billion in programs financed by pas- sage of $1.8 billion in new cigarette taxes and in- creased income taxes on top wage -earners. Impacts Affecting City Services Largely Reduced The budget assumes that the vehicle license fee "trigger" will be pulled by June 30 and counts on saving the VLF backfill costs for the full -year as a result. It continues to fully fund a number of important public safety programs for local governments, including $232.6 million for the COPS /Juvenile Justice programs: $18.5 million for grants to small and rural county sheriffs, and $18.5 million in law enforcement technology grants. Booking fees, however, remain eliminated in the proposal. It restores the Williamson Act subvention to $40.15 million — an important fiscal incentive to maintain agricultural production land. It proposes to suspend 34 state - mandated programs, repeal one mandate relating to the Open Meetings Act and defer all other annual and accumu- lated mandate claim costs. This reduces the annual obligation for these mandates by approximately $32.9 million. This is a change from the January budget, which proposed to continue the current budget year deferral of mandate reimbursement payments to local governments for all of the funded mandates. The deferral would have resulted in a cost to the state of an estimated $900 million by the end of FY 2003 -04. The proposal states that it is the Administration's intent to draft statutory language necessary to repeat 27 of the 34 mandates proposed for suspension in this proposal during the development of the 2004 -05 Governor's budget. Cities Concerned About Redevelopment, VLF "Funding Gap ", Other Cuts There are, however, still a number of areas of concern to cities and local government. Some of these are the following: Redevelopment Agencies. The May Revise proposal continues to call for a $250 million ERAF shift of property taxes from redevelopment agencies to the state. We understand that this shift is intended to be ongoing, and grow by $50 million a year over a period of about 15 years until it totals about $1 billion/year. This proposal further requires local government general fund revenues to back up the costs, if the RDA cannot produce the neces- sary revenue to pay for it. To view the results of research on the impact of the proposed RDA cut on cities, go to www.cacites.org/budget. Commenting on the potential impact that the redevelopment fund shift could have on local ser- vices, Russo said, "We continue to strongly oppose the governor's proposal to raid local redevelopment funds. Redevelopment is an essential tool to rebuild our economy. We believe that a raid on these funds is short- sighted and contrary to the governor's stated goal of stimulating our economy and promoting jobs and affordable housing." Vehicle License Fees — Funding Gap? There could be a 60 -90 day start up period after the VLF trigger is pulled, and before collections are fully realized. This could leave a 2 -3 month gap when no VLF payments are made to local govem- ment, costing cities and counties about $250 million a month — or a total of $500 million to $750 million if the gap extends to two or three months. The Depart- ment of Finance reports that it was their intent to make the transition from VLF backfill to VLF tax without loss of revenue to local government, but the exact mechanics of this transaction are not clear and require further confirmation. "We want to thank those members of the legisla- ture who ultimately rejected the notion of raiding critical vehicle license fee (VLF) revenues and fought Continued on Page 10 Visit the League Official web Site-- uiw.carities.eag PRIORITY FOCUS /PALE 9