Good news, bad news

Santa Barbara county and city waiting for budget lowdown.

By NATHAN S. WELTON
South Coast Beacon

Declaring a state of fiscal emergency last week, and using the ensuing opportunity to bypass the State Legislature, Govenor Schwarzenegger diverted $150 million from California’s budget to fix an economic dent left in local governments from the car tax repeal.

While welcomed by local finance officers, the money is still just a small percentage of the $2.6 billion necessary to completely re-fund reeling local economies for the rest of the fiscal year. The governor promises to fill that gap through $1.9 billion in budget cuts and $1.8 billion in increased revenue projections recently discovered by state analysts.

“We were anticipating we could have lost up to $20 million for the rest of the year if the governor had not taken this action, which would have meant draconian cuts across the county, primarily in public safety areas,” said Lori Norton, an analyst in the county’s budget office. “So, we’re thrilled with the news.”

In the meantime, local officials have considered a temporary freeze on hiring and job reclassifications until the flow of money resumes. Other counties and cities across the state are reported to have cut health and public safety programs and even laid off police officers.

Due to decreased car tax income, the county now loses some $1.53 million per month from its general fund, and an additional $586,000 per month for various health and human services programs. The city, on the other hand, loses $325,000 per month, or about five percent of its budget.

“Relatively speaking, we’re not that bad off,” said Bob Samario, the city’s assistant finance director. He noted that Santa Barbara, due to its tourist base, relies heavily on sales tax revenue instead of car tax revenue.

“But still, $325,000 a month is no chump change. It’s a major hit, particularly since we’re at the heels of a down economy,” he said.

By flexing his executive branch brawn, the bodybuilder-turned-governor invoked a law authorizing him to make up to $2.7 billion in mid-year budget alterations without consulting other lawmakers in Sacramento.

“I was elected by the people of this state to lead; since the Legislative leadership refuses to act, I will act without them,” said Govenor Schwarzenegger in a statement. “We must protect the people in this state and give the cities and counties the money we owe them.”

The actions guarantee a portion of retroactive car tax payments on Dec. 26, with regular funding resuming in early January, said Samario. That means the local governments are looking at losing up to two months of car tax revenue, since the governor repealed former-Gov. Davis’ vehicle tariff increase in November.

Still, local finance officers remain wary and cautious.

“We’re not sure of the details yet, and as is often said, the devil’s in the details,” said Norton. “We are very hopeful that the details actually enact what has been promised.”

What’s more, county staff members worry that the monetary shuffling will negatively affect funding for local health and human services programs. The state typically sponsors such programs, which have been targeted by Schwarzenegger in his proposed, mid-year $1.9 billion budget cut.

Cities generally don’t receive nearly as much as counties for humanitarian programs, said Samario. Counties are generally the local arm of the state, so when state programs get cut they reverberate to the local level.

“Although it’s positive news, we remain concerned that although he’s given us one source of revenue back he may indeed end up making an equivalent cut somewhere else that will impact us,” Norton said.

Coinciding with the governor’s actions last week, Wall Street financial firm Fitch Ratings knocked the state’s credit rating to one grade above junk-bond status. Two other firms took similar actions earlier this year.

California already has the county’s lowest credit rating, and will have to pay higher interest rates when it borrows money.