Republicans will strip local government limits out of budget proposal

Republican legislators are planning on bringing back a controversial spending limit proposal that failed late last week. But the new version of ACA 19 will be missing most of the language that would have imposed tough budgeting rules not just on the state but on local governments as well.

While the measure has little chance of passing, it is instructive as a map of what Republicans want from budget negotiations.
The measure, ACA 19 is authored by Republican Assembly Leader Mike Villines, R-Clovis, and Budget Committee vice chair Roger Niello, R-Fair Oaks. It would impose several budget mechanisms long-sought by Republicans, such as a spending cap and a greatly-expanded rainy day fund. It would also broaden the definition of what would be consider a tax under state law.

Currently, the state levies a number of fees that only require a simple majority vote in the Legislature. Taxes require a two-thirds vote. A fee is earmarked for a specific purpose once it is collected by the state. A tax can be used for general operations.

But under the original plan, cities and counties within California would also have been hit with a spending limit which may "not exceed the total amount of revenues received by that entity for that fiscal year from its authorized taxes."

Organizations representing California cities and counties quickly jumped on ACA 19, as well as a very similar measure from Senate Republicans. SCA 26 was introduced on August 11 by Senate GOP leader Dave Cogdill, R-Fresno, and Senator Bob Dutton, R-Rancho Cucamonga. Cogdill's office described SCA 26 as "basically the same" as ACA 19, and said there has not yet been a decision made to try to advance the Senate measure.

On August 15, Daniel Carigg, legislative director for the League of California Cities, sent a letter to Villines and Niello opposing ACA 19. Carrigg said that cities have generally stayed out of the state budget fight, and he asked the GOP leaders to return the favor.

"It was a bit surprising," Carrigg said of the content of ACA 19. "At least about a quarter of the bill seemed to be focused on local government issues.

Niello confirmed that his office had submitted amendments to ACA 19.

"It's been changed to an extent that I don't think any local government will have a problem with it," Niello said.

Niello also said there were other amendments coming. These will include eliminating some of the new definitions of taxes, the requirement for multi-year revenue and expenditure forecasts, and other provisions. The idea, he said, was to strip the bill down to it's core focus on a spending limit and an expanded rainy day fund. 

Paul McIntosh, executive director of the California State Association of Counties (CSAC) has editorialized against the bill as "heavy-handed." Were ACA 19 to become law, he said, local governments would lose many of the hard-fought rights they won with Proposition 1A in 2004. The initiative protects local funding for resources ranging from police to libraries, and also prevents the state government from reducing local governments' property tax proceeds.

After "ongoing talks" with both Villines and Niello, McIntosh said, the Republican leaders agreed to strip out local government provisions from the measure. Local governments are already under a cash crunch from multiple directions, McIntosh added. A doubling in the cost of gasoline has made things difficult for social workers who do home visits on children who have been referred to Child Protective Services, for instance.

Meanwhile, the state hasn't given a cost of living increase on many of the social programs administered through the counties since 2001. With $38 billion a year in state programs administered through the counties, McIntosh said, county and state government really need to look at each as partners.

"We're like Matt Damon and Greg Kinnear in ‘Stuck on You,'" McIntosh said. "We're joined at the hip on these programs."
Jean Ross, executive director of the left-leaning California Budget Project, said conservative tax revolts are a big part of the reason local governments have looked towards expanded fees in recent years. The most important of those, of course, was Proposition 13, the 1978 initiative that places significant limits on local property taxes.

Ross pointed towards the 1997 Sinclair decision, in which the California Supreme Court ruled unanimously against Sinclair Paint. The company had claimed the certain fees they had to pay under the Childhood Lead Poisoning Prevention Act of 1991 were really unconstitutionally-passed fees.

"It's an interesting decision to read," Ross said. "It talks about fees as a logical outgrowth of Proposition 13. By restricting the powers of government to tax, it in essence directs the Legislature to look for ways to finance government through the imposition of fees."

Jon Coupal, president of the Howard Jarvis Taxpayers' Association, had a different take. State and local government has been flouting the voters' intentions when they passed Proposition 13, he said, by "obfuscating" the difference between fees and taxes.
"Certainly at the state level, there have been lots of new revenues that in the old days would be called ‘taxes,'" Coupal said. He added: "At the end of the day, we need some sort of budget reform. That's got to be the start of the discussion."

ACA 19 itself is unlikely to become law. It was rejected by the Assembly Budget Committee on August 15 by a 13-10 party-line vote. SCA 26 has yet to get a committee hearing.

However, both ACA 19 and SCA 26 provide a window into GOP thinking on the budget, and what Republican leaders are pushing for as negotiations pass their 52nd day past the deadline. Talks between the four Legislative leaders and Governor Arnold Schwarzenegger broke down when Villines walked out of the "Big 5" negotiations on Tuesday. With Villines taking a hard line and apparently in control of his caucus, he is likely to continue pushing for some of the provisions in ACA 19.

It also appears that this approach may be paying dividends. Governor Arnold Schwarzenegger held a press conference on Wednesday, calling for a "compromise budget" with an additional $2 billion in cuts and an increased rainy day fund. 

If ACA 19 had been in effect since 1991-92, Ross said, the state would have had to spend $39 billion less in the 2007-08 fiscal year than it actually did.

Ross added: "That's math, not ideology."

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