AgdaPkt 2003-12-01 - Laserfiche WebLink

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VLFfrom page 1- as . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . During his campaign the Governor -elect fre- (est. at $1.3 to $2.0 billion) and program savings. quently promised not to make city and county FY 2004 - thereafter governments shoulder the financial burden of reducing the VLF to its previous levels. While • Retain VLF at effective 0.65% rate. making the promise, Schwarzenagger never pro- vided any details of how he woula keep that com- • Allocate $4.2 billion in property taxes to cities/ mitment, causing understandable concern among counties from ERAF and backfill schools from SGF local officials who over the years have routinely from higher revenues than anticipated and savings seen the state take local taxes to fund state ser- from other actions. vices. One example of this has been the twelve - year old practice of shifting local property taxes to a special Educational Revenue Augmentation Fund The Hertzberg Plan (ERAF) in each county to be distributed to schools, allowing the state general fund's responsibility for school funding to be reduced and the monies spent elsewhere in the state budget. The VLF backfill plan would apparently involve the replacement of the lost VLF revenue with a comparable amount of property tax revenues — presumably from the ERAF fund in each county. The plan also would reportedly depend not only on legislative support but also on the abandonment of the plan approved in the 2003 legislative session for financing $11.7 billion of the state operating deficit known as the "Triple Flip ". That plan also relied on the ERAF fund to compensate cities and counties for the loss of 0.5% of the local sales tax. The Governor -elect also has indicated that he plans to seek legislative approval to place a major deficit reduction plan on the ballot for voter consid- eration in March of next year. The plan would reportedly be in the $20 billion range. If approved by the voters, the "Triple Flip" would no longer be needed. Information available to the League indicates the property tax backfill plan would not take effect until 2004 -05, leaving nine months of backfill in the current fiscal year that would be financed through a combination of unanticipated state general fund revenues and program reductions and savings. The following table summarizes the possible fea- tures of the plan. FY 2003 -04 (currentt Lower the VLF to U.65% effective rate from 2.0% rate. • Provide backfill payments to cities and coun- ties for 9 months ($3 billion) from State General Fund (SGF) resulting from higher SGF revenues Some news reports have confused the pro- posed VLF Reduction - Property Tax Backfill Plan with an initiative reportedly being developed by Bob Hertzberg, former Assembly Speaker. This plan would substitute increased property tax shares to cities and counties for the local sales tax ($4.8 billion statewide) and the total VLF to local govern- ments ($5.8 billion). Less is known about this proposal, but it would appear to be inconsistent with the other plan because there are not enough property tax funds in each county going to schools to fund both plans. EDITORIAL from page 4 • • • The Legislature also took $135 million in local rede- velopment property taxes to fund the state budget. Cities could have used that money to create jobs and build housing. So, whether times are good or bad, the state keeps taking money from precious local ser- vices and job creation projects. You're right if all of these budget shenanigans sound like some kind of Rube Goldberg contraption that's designed to hide from taxpayers where their money is going. We believe that this kind of action has to stop. That is why we support the simple idea contained in the proposed initiative by the League of California Cities: Let voters decide if they want their local tax dollars to continue being siphoned away to support state government....... Some, of course, want the status quo. Others don't want to change the system because they trust the Legislature or believe things will get better. But cities have been down this road too many times before. We don't have faith in the status quo. We are willing to trust the voters. Let the voters decide. After all, it's their tax money. Visit the League's Official Web Site -- www.cacities.org PRIORITY FOCUS /PAGE 7