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Constitutional concerns eyed in state-local mix

Gov. Brown’s ambitious plan to shift billions of dollars in state programs to the locals, eliminate redevelopment agencies, cut enterprise zones and raise taxes may face its most profound opposition not in the Capitol or at the ballot box but in the courts.

“It (eliminating redevelopment agencies) is another gimmick that will likely result in extensive litigation,” John Shirey, executive director of the California Redevelopment Association, said in a written statement.

California cities and redevelopment agencies denounced the proposal, while the counties remain wary. No decisions have been reached by anyone on whether to go to state or federal court – or both – to try and block the plan, which would shift $5.9 billion in state programs to the counties and raise $5.9 billion in taxes to finance it. As the proposal unfolds, it would shift $7.3 billion by 2015 and ultimately $10 billion, the administration said.

But those discussions are under way, and in the end they likely will depend on the outcome of negotiations in the coming weeks with the Brown administration. Barring a breakthrough, a court fight is likely. Brown, the former mayor of Oakland, is considered well versed in redevelopment issues.

A key issue is Proposition 22, a voter-approved ballot measure that bars the state from tapping local money to balance the state budget. The initiative, approved in November, specifically included the funds of some 400 redevelopment agencies under its protection.

Brown’s budget doesn’t take their funds – it first eliminates them, then makes use of the money. To Shirey’s group, it looked like “budget smoke and mirrors … representing a series of contradictions and inconsistencies.”

The cities, too, had similar concerns.

Under Proposition 22, “the state can’t directly or indirectly do this,” said Dwight Stenbakken, the deputy executive director of the League of California Cities.

He noted three constitutional issues that may be related to the realignment and the elimination of the redevelopment agencies in Brown’s budget. First is Proposition 22, second is Proposition 13 of 1978 and third is Article 16 of the state constitution, under which the redevelopment agencies were established.

“They are sitting down and trying to sort this out,” he added.

In a written statement issued Tuesday, the League said the Brown plan should be “further vetted on constitutional grounds” and said Brown and lawmakers should “reflect on what the voters have repeatedly communicated at the ballot box on the importance of protecting local government funding.”

The Legislative Analyst, the Legislature’s nonpartisan fiscal analyst, noted that issue and others as well, such as ballot measures that tie lawmakers’ fiscal hands.

“The administration’s plan will require considerable work by the Legislature to sort through many legal, financial and policy issues,” the LAO said. “Certain voter-approved measures will also constrain the Legislature’s authority to shift program responsibilities to counties….

“For example, Proposition 63 may not permit the proposed shift in mental health funds. In addition to requesting voter approval for any proposed tax increase, the Legislature may also wish to request voter approval of these elements of the realignment plan.” Proposition 63 imposed a new tax on the state’s wealthiest people to raise money for mental health care.

The LAO also noted that some programs use federal money, and others have restrictions related to the federal health care reform law.

The governor’s initial $5.9 billion realignment package includes 13 programs, in addition to the redevelopment elimination, which is separate and would bring the state about $1.7 billion. The programs include fire and emergency response services, foster care and welfare services, courthouse security, mental health programs, correctional programs for lower-level offenders and parole violators, juvenile justice services, drug programs and community health services.

That Brown has placed realignment at the top of his budget plans is clear: One lobbyist said it was the first time in nearly four decades that an incoming governor had hastened to the counties’ headquarters to confer on budget issues. And the counties weren’t alone: Brown made a similar visit last week to the League of California Cities. Brown and his top staff have been quietly meeting for days with legislative leaders to sell the program, signal the coming budget pain.

Thus far, the most consistent response is the Republicans oppose new taxes, but don’t want to roll out their own budget proposals.

While there is a general feeling that realignment is valuable, the sticking point is on the financing.

“There is no question that everybody agrees with it (the concept of realignment). The question is, how do you do it while still having enough revenue for the state and sufficient revenue at the local level to meet the responsibilities you’re giving them?,” Lenny Goldberg of the California Tax Reform Association said earlier.

The point of realignment is to clean the state’s plate and have the programs administered by officials closest to those using the services. Ideally, it saves the state money, boosts local control and weans the locals from state subsidies.

It’s been tried before, most notably in 1991 during Gov. Pete Wilson’s first term.

Wilson, tapping an idea that emerged during George Deukmejian’s administration, and the Legislature shifted nearly $2 billion in health and social service programs to the counties, then gave them pieces of a statewide sales tax hike and vehicle license fees to pay the tab. Over two years, 1991-93, California faced a staggering $24 billion shortfall – the equivalent of about $38 billion in 2010 dollars, and fully $10 billion larger than the current shortage facing the state over the next 18 months.

By most accounts, the 1991 shift worked. “They planned it right, they got the money, they covered the locals,” said a lobbyist who worked the issue.  Others didn’t end so well, and over the years, the cost of running the program has outstripped the money to finance it. “There has been a gradual deterioration, and now look where we are.”

 Four years later, Wilson tried another realignment plan, this time to boost the locals’ share of welfare costs. It was rejected. Years later, other programs were realigned, including courts and some corrections programs.

Brown sees the realignment as a way of loosening the centralized system that emerged after two-thirds of the voters approved Proposition 13 in 1978, during his first term.

Proposition 13 cut property taxes 57 percent, rolled back assessments to 1975 levels and limited new increases. The initiative choked off local revenue, and cities and counties went to Sacramento for help. The state, with a $6 billion surplus, provided a continuing bailout, but the result was that the locals became increasingly more addicted to the flow of state money.

Assemblyman Jim Beall Jr., a San Jose Democrat, spent 26 years in local politics, including 14 years on the San Jose City Council.

“All are wary of the paternalistic nature of the state, which is why realignment did not work in the past,” he said. “We have to overcome that addiction.”

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