San Diego leaders irate over possible state-mandated loans

This story was reported for the San Diego News Network on June 3, 2009.

California’s possibly taking $2 billion from local municipalities led San Diego County leaders to convene an emergency budget meeting Wednesday.

Elected officials from 15 of the 18 county’s cities, as well as two members of the board of supervisors, were in attendance.

Distressed over Gov. Schwarzenegger’s proposal to borrow up to $2 billion of property tax revenue from local municipalities cities across the Golden State have launched a campaign to detract state legislators from doing so to save their $24 billion shortfall.

“We’re all in this together whether we like it or not,” said county supervisor Dianne Jacob (District 2). “We’re taking the gloves off and we’re fighting the state.”

Schwarzenegger’s Plan B to borrow local revenue was unveiled days before the May 19 special election and after poll results indicated the ballot measures would fail. His proposal, though, would require a two-thirds majority vote by the state legislature and would temporarily suspend Proposition 1A from 2004, which blocks the state from taking such measures. Should the proposal pass, the state would have to pay back local governments by fiscal year 2012-13 with interest.

In addition, legislators are exploring other revenues to take from local governments including gas taxes that would normally be used to fix roads. State leaders who have adamantly stated they would pass a new budget by the fiscal year’s end are causing local officials to lobby them from making those moves.

The meeting, organized by San Diego Mayor Jerry Sanders, served as an opportunity for local leaders to vent about their frustrations before moving into a closed-door session where they were set to discuss the legal ramifications of the state’s potential actions.

“It’s criminal,” said Supervisor Greg Cox (District 1). “I have never felt more demoralizing, more depressed, than I am now.”

If state legislators choose this route, over $100 million would come from San Diego County through the suspension from Proposition 1A alone, according to SDNN’s calculations.

Imperial Beach’s finance director Mike McGrane, whose city will have to loan about $300,000, said his city has already cut back its own budget.

“We’ve been ultra-conservative,” McGrane said. “We’re not as bad in the hole as other cities because we don’t rely on certain revenues that others do. Street maintenance would be affected.”

Tourism hotbed Coronado may have to loan $1.65 million. Its leaders estimated that the state could borrow another $200,000 from gas tax subventions, councilmember Mike Woiwode said.

Jim Madaffer of the League of California Cities was also present during the meeting. The former San Diego councilmember asked leaders to be careful of the word “restructure” and said the state was not restructuring its budget if it plans on “dumping responsibilities [on local governments].”

In a budget committee meeting, San Diego councilmember Tony Young said he was upset over having to repeatedly revise down the city’s spending plan as the dire financial picture becomes clearer.

“It’s almost like we’re running a marathon and we are about a mile away from finishing the marathon and somebody yells and says, `Hey, when you finish, we got to climb some mountains,”’ he said. “We have done a lot of work, but it never ends. It seems like it never ends.”

San Diego councilmember Kevin Faulconer said he is 99 percent sure $36 million is going to be taken away from the city.

“The cuts that we have made are important, difficult, but I think all of us on this council realize that there’s more action that will likely need to be taken,” he said.”We’re going to make some mid-year adjustments, I would say sooner rather than later, once we know what’s going on with the state.”

Despite the pressure from San Diego leaders and others, Gov. Schwarzenegger is not shying away from the option. In a special joint legislative session Tuesday, the governor said he realizes the impact of his proposal but sees it as California’s only route to take.

“Our wallet is empty, our bank is closed and our credit is dried up,” Schwarzenegger said. “I know for many of you, these will be the hardest votes you will ever make. But the people sent us here to lead not only in times of prosperity but also in times of crisis.”

In an earlier interview with SDNN, State Sen. Christine Kehoe (D-San Diego) said cuts and loans from local municipalities were necessary. “Every source of revenue will need to be scoured to keep all levels of government functioning,” she said. “I don’t think it’s going to be pleasant.”

Schwarzenegger’s Plan B also includes at least $1 billion in Medi-Cal cuts and imposing stricter eligibility requirements to the Healthy Families program, which may affect up to 942,000 low-income children. He’s also made statements about ending cash grants for college students, shortening the school year by seven days and laying-off thousands of state employees. In addition, the state is considering the closure of up to 220 parks (including the governor’s mansion) and the sale of the Del Mar Fairgrounds.

The consolidation or elimination of several state boards has also been considered, as announced by Senate President Pro-Tem Darrell Steinberg (D-Sacramento). Steinberg said over 30 California boards, commissions and departments will be examined throughout the month to determine whether each is necessary in consideration of the recession.

The Department of Mental Health, Department of Public Health, Department of Water Resources, Department of Conservation, California Air Resources Board and the Department of Conservation could all be affected.

“There is no doubt that much can be done to make government work better for the people that it serves,” Steinberg said. “The question is whether we do it in a smart way that maximizes taxpayer dollars while providing the level of oversight the public demands.”

Aside from looking at budget cuts, legislators are pressuring the federal government for a bailout. However, state treasurer Bill Lockyer said a bailout is highly unlikely.

Whatever the cuts may be state controller John Chiang said that if a budget isn’t passed by the end of the month, California will officially run out of cash.

“I have no confidence in the state government,” Cox said. “We need a game plan.”

Joe Britton from City News Service contributed to this report. Hoa Quach is the political editor for the San Diego News Network.