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I BUDGETfrom page 4 ............... .....................6669600466 cuts than already experienced during the gap the base VLF amount collected due to planned period. If this "new" and larger "gap" figure proves refunds of overpayments. We are in discussions to be accurate, it simply means that there was an with the Administration now about their plans and unexpectetl revenue increase due to factors that how they could affect these payments. may include early payment of V'.F fees or in- creased car sales. The increased revenue will be The bottom line is that by November 17, the allocated to help close the budget deficit. date the VLF trigger was "unpulled" by the Gover- r ' To put it in another perspective, it is revenue that cities never would have received under the 2003 -04 budget. The DOF plan for the "new" VLF "gap" figure is to roll the additional $475 million into the loan repayment to be made by the state to local governments starting in July of 2006. Can cities and counties take this loan repay- ment promise of $1.3 billion to the bank in three years? This "promise" is only as good as any of the many made by the state to local government in recent years. A lot is going to happen before July 1, 2004 that makes much of this recent budget maneuvering very tenuous. SB 5X 1 Update We understand that Senator Brulte plans to proceed with his SB 5X 1. This bill would appropri- ate money to backfill local governments' VLF losses resulting from the Governor's recent action to rescind the VLF tax increase authorized by the Davis Administration. Most recent announcements peg the appropriation amount in the bill at approxi- mately $3.2 billion -- consistent with the DOF estimates. The bill is expected to be heard by both the Senate Local Government Committee and the Senate Revenue and Taxation Committee, but no hearings have been set by the Senate leadership. What About the December and January VLF Payments? As stated above, the revised VLF "gap" esti- mate is not accurately characterized as a direct cut of VLF revenues, since cities did not expect to receive VLF backfill payments in the first three months of the current fiscal year. But there are indications that in the absence of immediate passage of SB 5X 1 ( Brulte) that the December 10 and January 10 VLF payments may be lower than nor, the state had collected at least one and one- half months of overpayments that the Administra- tion intends to refund in January. If the refunds to vehicle owners are drawn from the VLF fund, it will have a direct financial impact on pay- ments to cities and counties. What does all this mean for cities? The good news for cities is that the Administration's proposal continues to reflect an understanding of the state's obligation to keep its promise to keep city and county services funded by backfilling the VLF. But the budget committee members in both houses had many questions about how the administration proposal would worts from a technical perspective, and whether it would succeed in putting the state's fiscal house in order. It is also troubling that SB 5X 1 has not yet been set for hearing. The new questiors about December and January VLF payments underscore the impor- tance of city officials contacting their legislators and the Governor about the importance of backfill- ing local governments for lost VLF revenues. Tell them: " The refunds to vehicle owners are a state responsibility – not the responsibility of local governments. " The state must not delay in keeping its promise to provide a VLF backfill to fund local services. Effective November 17, cities and counties are losing more than $300 million each month — $105 million for cities alone. We need a solution to this funding loss NOW. For a sample letter, please visit the League's website at www .cacities.oro /advocacvicenter. Visit the League's Official Web Site -- www.cacities.org PRIORITY FOCUS /PAGE 5