Claremont Insider: Another Year Older and Deeper in Debt

Monday, May 10, 2010

Another Year Older and Deeper in Debt

Local governments around California let out a collective groan last week when Sacramento Superior Court Judge Lloyd Connelly issued a ruling that supported the state's right to take $2 billion in redevelopment funds from redevelopment agencies across the state over the next two fiscal years.

The state, as you know, needs the money to help balance its $18 billion budget deficit. It seems to us that we were in just about the same place this time last year. The plan is for the state to take $1.7 billion for 2009-10 and $350 million for 2010-11. The money, legislators say, is supposed to go to local schools, which have their own problem with the state withholding money.

The first $1.7 billion payment was due yesterday. Monday's Daily Bulletin had an article about the state's latest money shift. The article described the impact of the redevelopment money grab on Inland Empire cities. Claremont City Manager Jeff Parker told the Bulletin that at least one Claremont Redevelopment Agency job will be eliminated because of the money transfer:

The Claremont redevelopment agency takes in about $3.8 million in property taxes, but has to pass along $1.3 million to other local agencies or into its low-income housing fund. Of the remaining $2.5 million, half goes to pay for debt incurred for past projects.

That leaves $1.25 million, with the state next week taking $1.19 million.

"It basically takes everything from that one year," Claremont City Manger Jeff Parker said.

That means Claremont will lay off its only full-time employee focused solely on economic development.

Claremont's City Hall has resigned itself to coughing up that $1.19 million Parker alluded to. The City's website has this news blurb:

Claremont Will Pay State Redevelopment Funds (May 6, 2010)

On Tuesday, May 4, 2010, the City was notified of the decision in the CRA lawsuit against the State of California. Sacramento Superior Court Judge Lloyd Connelly upheld AB X4 26, the state budget bill passed in July 2009 as part of the 2009-10 state budget that requires redevelopment agencies statewide to transfer $2.05 billion in local redevelopment funds over the next two years.Anticipating this decision, the City of Claremont put aside $1.2 million and is prepared to make the payment by the May 10 deadline.

Advocates of smaller government should be happy. Because of Sacramento's financial ineptitude, along with the refusal of state legislators to come up with reality-based methods for balancing the state's budget, every level of California government will have to enact even more austerity measures in the coming year. Those cuts will likely include such things as releasing older prisoners to reduce the state's prison costs and even taking a look at reforming public pensions.

Anti-tax groups won't be pleased, though, with the revenue side of the budget equation. Along with more cuts in services, the state will have to find replacement income to help reduce its deficit. Californians will soon have a clear picture of the exact size of that deficit when Governor Schwarzenegger's May budget revision (the "budget revise") is released.

The state's deficit is almost certainly to increase when the May revise comes out. Last week, the LA Times reported that the state's tax revenues were down 30% year-over-year. That translates to $3 billion, so the hard times are likely to continue a while more.