Frugality Makes a Comeback

FRUGAL COUNCILMEMBERS

Saturday's Daily Bulletin had an editorial titled "Frugality Welcomed" that talked about what the Bulletin's editorial board felt were some good examples of local government officials demonstrating real willingness to take their cities financial situations seriously.

The editorial gave some partial praise to Claremont's City Manager, and to the two councilmembers who were on the losing end of a 3-2 vote to approve a 4% bonus for the City's chief executive. Councilmembers Linda Elderkin and Sam Pedroza voted along with Mayor Ellen Taylor to grant the raise and bonus.

We welcome Claremont City Manager Jeff Parker's decision to freeze his own 3 percent cost-of-living salary increase for 90 days.

Parker said he would "figure out what comes next" in three months, but he accepted a separate 4 percent performance increase.

Actually, we like the approach of Councilmen Corey Calaycay and Peter Yao, who voted in the minority against the performance increase even as they praised Parker's work - "because the future is uncertain," Calaycay said.

We hate to keep harping on this, but there have been plenty of warnings over the past 18 months that a mighty big financial storm was coming. Now it's here to stay a while, and, whatever happens, it's a different budgetary world for local and state governments everywhere. One gets the sense that this message has finally begun to sink in with Claremont's City Council. They're holding a special budget meeting on Saturday, January 31st, and every one of the three candidates for City Council - Calaycay, Bridget Healy, and Larry Schroeder - have named the fiscal crisis as the most important issue we face.


CHANGING THOSE SPENDTHRIFT WAYS

It's not going to do to continue to depend on money trickling down from Sacramento and Washington anymore. We've got to come up with real budgetary solutions that will keep our books balanced. That way, if and when some grant money does get freed up, we've positioned ourselves to take advantage of that largesse without having bankrupted ourselves in the process. This means prioritizing which services are vital and which are secondary. It also means cutting back until the storm passes.

It is also important that any fiscal solutions for Claremont not rely too heavily on the sorts of grants we have counted on in the past. California, you may have noticed, is going to run out of money in a few weeks if Sacramento doesn't get it's act together. In the meantime, our dependence on municipal bonds on the local and state level has become a major issue as the state has had to place a freeze on the sale of bonds because of its poor credit rating.

The bond freeze is the reason why Padua Ave. Park is getting built without much of the landscaping the city had planned on. In that instance, $850,000 in pledged, bonded grant money suddenly became unavailable due to the state's moratorium on bond sales.

And, even if the legislature and the Governor's office come up with a last-minute budget deal, if they don't address the structure problems with California's budget process, the bond markets will take notice. The Sacramento Bee reports that California's credit rating may take hit from the credit rating agency Moody's Investors Service if state leaders don't come up with a real budget solution soon. This means no more temporary fixes. The Bee's Kevin Yamamura writes:

The credit ratings service said it will be "acutely focused on liquidity" in the next few weeks as the Legislature attempts to find a solution before the state runs out of cash. Moody's said in a release that it anticipates its review of California's bond rating to finish by the middle of April.

Democratic leaders plan to resume daily talks with Republicans and Gov. Arnold Schwarzenegger starting Thursday in an attempt to pass a budget by February. But Moody's expressed doubts about whether they will strike a compromise that legitimately solves the budget problem.

"Although the legislative and executive branch continue to debate fiscal and cash measures, and the Legislature is required to come up with solutions by February 3, we do not yet know whether solutions will actually be passed, or whether they will be workable, reasonable, and of a sufficient magnitude to achieve a degree of credit stabilization consistent with the current rating level," Moody's said in its release.

As it stands now, California will begin to run out of money on February 1st. The Los Angeles Times reports that the State Comptroller John Chiang has given the order to suspend $3.7 billion in various payments, including tax refund checks and student grants:

The controller said the suspended payments could be rolled into IOUs if California still lacks sufficient cash to pay its bills come March or April.

"It pains me to pull this trigger," Chiang said at a news conference in his office. "But it is an action that is critically necessary."

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.

Even if a budget agreement is reached by the end of this month, tax refunds and other payments could remain temporarily frozen. Chiang said a budget deal may not generate cash quickly enough to resume them immediately.

Not all payments will stop Feb. 1. Most school and healthcare programs will be paid, as required by state and federal law. The state will continue to pay more than $6.6 billion in such bills.

And Los Angeles County officials said they would cover welfare payments to more than 500,000 local recipients -- for now.

But California is projected to be $346 million short of the funds it needs to pay all its bills in February. By March, the state would be so far in the red that even continuing to suspend payments would not cover the shortfall. California would be insolvent, making the issuance of IOUs likely.

The lesson we ought to be taking from all of this is that however things end up when this is all over, we cannot go back to business as usual, not on the state level, and certainly not on the local level. All of our elected officials, from the lowliest councilmember to the most tenured state legislator, need to come away from this with an appreciation for that frugality the Bulletin editors praised. If they do not, it is up to each of us to remind them.