News & Views from 465 California Street

Power to the (Local) People!

Clint Reilly
Jan
5
2010

Imagine for a moment that you’re a kid again. Maybe you have a lemonade stand or your parents give you a small allowance each week. It’s not much, but it’s enough to cover the general operating expenses incurred by a seven-year-old.

Enter “Cal,” the school bully who lives down the street.

Cal is the most feared eighth grader in your school. He’s twice your size and his egotism is matched only by his avarice. He’s always broke, so his favorite pastime involves punching you in the stomach and taking your money.

If this scenario sounds familiar to you, there’s a decent chance you’re a local government official or service provider in the state of California.

Thomas Jefferson would be appalled by the past 40 years of California’s political history. A firm believer that government is most responsive when it is closest to the people, Jefferson would undoubtedly recoil at Sacramento’s relentless assault on local governments.

Indeed, the only thing more predictable than serial budget crises in Sacramento is the subsequent attempt to close the gap with local revenues.

If you think the state’s multi-billion dollar budget shortfalls are some abstract, far-off problem, think again. Local governments – cities, counties and special districts – have become the piggy banks of last resort for a state government that has come unhinged.

Since 1991, California cities have lost more than $10 billion in property tax revenues to the black hole in Sacramento. Even though nearly 84 percent of California voters approved Proposition 1A in 2004 – which protected local funding for public safety, health, libraries, parks and other locally delivered services – the state continues to tap into local funds to balance its budgets.

What does this mean to you?

It means you’ll have to wait an extra 30 minutes for the bus you take to work each day, if your line hasn’t been cut entirely.

It means you’ll be doing less pleasure reading, because your local library branch has been closed. And the kids who attended after-school programs there will have to find somewhere else to spend their free time.

It means dirtier parks, filthy train stations and grimy streets.

It means less money for mental health and rehab programs, which in turn means more homelessness and crime.

Finally, it means that even though your city might be dealing with a crime problem, the money might not be there to put more cops on the street. And if your house catches fire, it means you don’t want to live in an area hit by rolling fire station closures.

From Alturas to Chula Vista, no local government or agency has been immune. In the most recent budget debacle, the state borrowed nearly $10 million from the city of Oakland alone, the equivalent of $25 per resident.

Even sparsely populated Modoc County was forced to chip in about $289,000 to the state bailout fund, a whopping $30 per resident.

Around the Bay Area it was more of the same: Marin was taken for nearly $10 million. Santa Clara County shoveled $42.5 million into the abyss. The most astonishing grab involved Solano County. The state clawed back $8.8 million even as Solano’s largest city, Vallejo, contemplated bankruptcy.

These are only the most egregious examples of the state’s encroachment on local authority. There are many more.

In 1992, the state government responded to a budgetary shortfall by establishing the “Education Revenue Augmentation Fund,” which annually shifts about one-sixth of all property taxes from cities, counties, and special districts to schools. ERAF simultaneously reduced the state’s education funding obligation by an equal amount. Apparently “augmentation” means something different in the state Capitol.

ERAF is typical of the fiscal shell game Sacramento plays with its smaller counterparts. The schemes always end the same way: with local governments forking over cash.

But a storm is gathering in 2010. Another budget crisis looms and local governments are already stretched to the breaking point. At the same time, a movement to call a constitutional convention that would restore the balance of power is gathering steam. I’ve signed on to help lead the charge.

I hope you will consider joining up as well.

Comments (14)

  • I’m in Clint!

    Posted by: melinda maginn | January 5th, 2010 at 10:23 am

  • Good points. Last year’s (09) budget was basically a sham, with money taken from Peter to Paul and so on. Sacramento loafs along, not eliminating entire agencies, as they should. Go to the state’s website, and the list of agencies is astounding. The “A” page has over 30 different entries. A serious culling is in order. I’m predicting a sort of critical mass may occur in 2010, and sales tax and property tax revenues continue to decline. We simply can not keep this government afloat at it’s current size.

    Posted by: Clarke Johnston | January 5th, 2010 at 5:04 pm

  • Mr Reilly,

    I am thankful that people want to change the way California works. i guess I have been waiting for someone to “lead the charge” for a long time.

    But how do you weed out the “every man for himself” (aesop’s fables) people? Who can we, the followers, really trust to work for the community?

    sadly, we cannot even trust the community to vote for people who would work for the community. Too often people are lazy and just vote for their party.

    As much as I want to see a Consitutional convention, I wonder if the solution the leaders end up with will really be the medicine we need.

    Posted by: m campos | January 6th, 2010 at 9:30 am

  • Thanks so much for your frank and honest article in the CCTimes. I find myself in full accord with you. I would also like to add a few points that would be nice to share with the people of California.

    FIRST of all, the ROOT problem can be found in the name of our state’s tax system, “The State Board of Equalization”, our state’s misguided beliefs that they can legislate economic equality among the people.

    California’s “BIG” problem, is that they are beyond the tipping point. Meaning that more than 50% of the taxes each year go to California’s entitlements like public employee retirements, public assistance etc., not to mention the payments on a ever growing mountain of bonds. The state’s employee compensation used to be under the private sector, but the benefits were the carrot. Now the state employee compensation is at or in many cases MORE than that of the private sector, and they still enjoy a very generous benefit package.

    You are right about the shell game, They’ve been doing it for 30+ years. The state lottery is another prime example where the state “augmented” the school budget by actually REMOVING specific tax monies for schools and spent it elsewhere. I for one wouldn’t mind so much *IF* we got something in return. However, what we get is the poorest roads in the nation, the 49th position in ranking of all states in regards to our school’s performance.

    I for one wonder where in the hell all this money is going to ?

    The state keeps telling people that they have no choice but to raise taxes. Why is that ? California taxes at a whole rank in either 1st, 2nd, or 3rd highest depending on the category (income, property, fees, sales taxes etc.) of any state in the union… yet they (our legislature) feel that they simply aren’t taxing enough. They seem to feel that the state’s higher income populace is held “captive”, and their monies are to be taken (plundered) with full prejudice.

    This “Tax happy” sentiment of our state doesn’t go unnoticed by our federal government. Because we apparently love high taxation here, our state receives less than 70% of our federal tax monies taken out of the state (by direct federal income taxes). That means that other states receive MORE federal monies than what is taken from their respective states.

    California keeps on bemoaning Prop 13 as it’s financial ruin. Popular myth #2 is that the state can’t raise property taxes. Truth is, that the state can as does raise property tax EVERY year by the limit (2%). This tax hike, albeit seems very small, is 2% of the house value. Whereas our salaries are (if lucky) raised 3% a year. This 3% is impacted by state and federal taxes, which leaves a true income raise of 1.5 to 2.0%. So, your intire raise (and then some) is consumed by taxation of some sort.

    The real tax burden is appalling, in that 8% of the state’s population pays 50% of the state’s tax. That’s right, that the other 92% pay the other half. This other “half” really is the people in the 85 to 92 percentile. Less than 1% of California’s tax income comes from 50% of the population.

    So, I guess we simply aren’t taxing the rich enough… at least that is the popular politically correct myth #1. These numbers came from Tom Campbell, in a speech given during a luncheon. So I believe that they are in fact true and correct.

    With respect and regards,
    Rick Bartlett

    “Let me tell you how it will be, here’s one for you, 19 for me. Should 5% appear too small, be thankfull I don’t take it all”
    Beatles

    Posted by: Rick Bartlett | January 6th, 2010 at 10:37 am

  • thanks for just putting this out there. the bully metaphor is appropriate–the state can’t get its act together so it just rolls over onto the cities and local agencies who actually know how to manage themselves. you know there’s a problem when modoc county is having to pitch in to keep the state solvent.

    Posted by: Moonman | January 6th, 2010 at 1:36 pm

  • You fail to mention that not all agencies (city, county, schools, etc) use their tax-income wisely. If they did, they would have enough money to conduct their essential services. When the state takes money from them, they don’t usually decrease salaries and benefits of administrative personnel or other overhead.

    Before the state gives any program money, it should put “strings” on how that agency may spends its money. I know this is against your “local” control; but I don’t see any financial discipline in any of these local agencies. E.g., in my city of Hayward the number of city employees who have salaries above $100,000 is astounding. I have seen data for San Francisco and other more prosperous cities and counties, and it’s even worse. They keep on whining that they have “cut to the bone.”

    In education only about 60% of its budget goes to the classroom (per data on the CDE web site). Over $4 billion is spent on the archaic 58 county offices of education. The Little Hoover Commission and other bodies have recommended their abolishment.
    There is a national group calling for at least 65%. of a school budget should go the classroom. Some years ago the education establishment persuaded the voters to reject the 95/5 initiative which would have mandated that school districts could not spend
    more than 5% of its budget on administration. It’s interesting that state-wide associations of school administrators and school, boards used lobbyists to defeat the initiative. The salaries of these lobbyists are paid for from public funds– via the dues to the associations that come from tax money. Hello, isn’t that illegal?

    Local city councils, boards of supervisors, governing bodies of higher ed and boards of education do not have the will or expertise to make cuts where it counts. The UC board of regents didn’t even know that some of its administrators were getting such high salaries and perks until they read it in the newspapers!!.The power to grant huge salaries and other benefits should be restricted by law. This
    would necessitate some changes in the law. A performance audit should be made of each and every program receiving state/federal monies. Until that can be done, I like Willie Brown’s suggestion: keep the present year budget–imperfect as it is– and pass that as the new 2010-11 budget. Then, during the fiscal year, after income
    is known, each program can come forth and plead its case for additional money.That would avoid the annual June/July “budget dance of death.”
    As for the state legislature, it has not made enough cuts. And many that they have made are declared illegal or the cuts are never actually made; e.g., the parks. (Cry wolf!!) Though I’m a Democrat, I’m happy that the Republicans have prevented taxes going up more than they have. I like the 2/3 rule. I’m all for term limitations,
    but maybe if we had the old pols–like Willie Brown–in office they would do a better job.

    Ernest A

    Posted by: Ernest A. | January 6th, 2010 at 1:38 pm

  • What is the legal basis for the State’s appropriation of local funds? Did Prop. 13 give this power to the State, or did it previously exist? Has this power ever been challenged by any local jurisdiction, organization or individual? If not, why not?

    Thanks.

    Ken S

    Posted by: Ken S. | January 6th, 2010 at 1:52 pm

  • Boy, am I ever for a constitutional convention!

    I went to http://www.repaircalifornia.org, to see if I could help somehow. They said the most important thing they need is to collect signatures to put the issue on the ballot, but there was no way to sign up to do that. I could give a tiny gift, but I was hoping to help with the signatures. Does the idea have to go through some other hurdle before it’s OK to get sigs?

    I live in Palo Alto, and I’m 74 years old, so I’m not up for a lot of trips in the City, but I do want to help.

    Posted by: Sue K. | January 6th, 2010 at 2:07 pm

  • Welcome to conservatism!

    Posted by: Don F. | January 6th, 2010 at 2:07 pm

  • The constitutional convention!! I am all for it. How can I join?

    Your material by far is always the best in the Mercury News, and I always exclaim, “Why doesn’t he run for governor.” Yours are always the best ideas, and Jerry Brown’s already been governor.

    A big fan in San Jose,

    Karita H

    Posted by: Karita H. | January 6th, 2010 at 2:08 pm

  • We all are aware that there is a problem. You call Sacramento a black hole. In my opinion that is not a public service message. Changing the constitution to “restore the balance of power” will make you feel better I’m sure, but will that make the streets perceptibly less grimy? No. A better change to the constitution would be the one that lowers the 2/3 majority threshold needed to pass a tax bill.

    The Republicans in Sacramento have been DEAD SET against raising taxes, but they are just pandering to the uneducated types who apparently don’t care if our institutes of high learning get another dime. The Republicans HOLD FAST on taxes so they can get re-elected meanwhile knowing that taxes is the only method left to raise available funds. There is rarely a peep from them on ideas for cutting waste — which is what Republicans used to talk about.

    Please start coming up with some better ideas on how to solve this Golden Bear of a problem other then some vague balance of power proposal.

    Phillip B

    Posted by: Phillip B. | January 6th, 2010 at 2:10 pm

  • In 38 years this is only the 2nd time I wrote in regards to a column by anyone. As a
    green card holder only (they didn’t have the right
    size of rose colored glasses) I can only be amazed how Americans can keep
    complaining about the idiocy they call their government
    and then vote 98 % of the same idiots back into office. But of course why bother to
    vote. Only as you know 56 or so percent . In the recent
    German elections it was 76 % and people there were aghast at that low turnout. As
    for Califor nia the sophistication of its people totally
    prevent them from voting in their local elections. Of course you know all these
    things but you might try to e xplain to the People that if
    they are to stupid to vote they get what is the only constant of a computer: garbage
    in ……

    Posted by: Willie G. | January 6th, 2010 at 2:13 pm

  • I’m interested in a Calif. Constitutional Convention. Is there a
    petition form?

    Posted by: Romano | January 6th, 2010 at 2:13 pm

  • > taxes is the only method left to raise available funds.

    Given that we are over taxed to begin with, why is increasing the taxes the only solution? Why can’t they cut spending? Could it be that it is too easy to pass bonds and increase expenditures, without needing to worry about how to pay? Bond initiatives are great big credit cards… Change them to two thirds, cancel many of the existing ones, and then see if you can balance the budget.

    Posted by: Bob Van Cleef | January 7th, 2010 at 7:31 pm

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