CITY CHEERS BUDGET DEAL NO MAJOR LOCAL CUTS TO BALANCE STATE DEFICIT.

Byline: Heather MacDonald Staff Writer

SANTA CLARITA - City officials and nonprofit leaders breathed a sigh of relief Tuesday, their first day back to work since Gov. Gray Davis said he would sign the $98 billion state budget without cutting local funding.

Ending California's longest budget impasse, state legislators agreed Sunday to plug the $23.6 billion deficit without raising taxes on cigarettes or drivers, or cutting aid to cities and counties.

``It's great news for the city,'' said Steve Stark, Santa Clarita's director of administrative services. ``We feel we're in a good position for this next year.''

Santa Clarita's finances had been in limbo since July 1, the start of the fiscal year. Officials were concerned that state lawmakers would fill the state deficit by ending reimbursement to cities for the cuts the state made last year in the vehicle license fee.

Such a move would have slashed $5.5 million in expected revenue from Santa Clarita's $117 million budget, and forced city officials to overhaul their plans for next year, Stark said.

As a result of the gaping budget deficit, the City Council adopted a hold-the-line budget that maintains the current level and mix of municipal services, but adds only a few new programs and projects.

Officials also began to rebuild Santa Clarita's reserve accounts that were depleted by the city's ambitious capital improvement plan over the past two years to absorb some cutbacks in state funding.

The budget also is dependent on strong sales tax revenues, which could decline if the economy does not continue to improve or even worsens, Stark said.

``We're still watching the state and federal budgets, along with the economy,'' Stark said. ``It's still an uncertain.''

Negotiations over the budget stalled when Republicans refused to raise vehicle fees or taxes on cigarettes, and Democrats refused to cut spending in a variety of programs.

The package, which passed 54-26 with the minimum number of votes needed, includes a total of about $9 billion in spending cuts and about $2.4 billion in revenue increases. Davis is expected to sign the budget into law on Thursday.

Assemblyman Keith Richman, who is vying to become mayor of a possible San Fernando Valley city, was one of four Republicans to cross party lines and vote to approve the spending plan. Richman is also seeking re-election to the Assembly. In November, the 38th District he now represents will expand to include Santa Clarita at the start of the next term.

Perhaps hardest hit by the budget impasse were social service organizations that depend on the state for funding. Several local groups were forced to scramble to pay their bills and keep their doors open after state funds dried up two months ago.

``It is a great relief that this is over,'' said Kathie Mathis, executive director of the Domestic Violence Center of the Santa Clarita Valley. ``But now it's just a matter of waiting it out until the checks actually get here.''

The center relied on donations from individuals and businesses, Mathis said.

``We were very fortunate that the community rallied behind us,'' she said.

Other groups were forced to apply for short-term loans, or to dip into emergency reserves to pay their employees.

``The impasse caused huge problems,'' said Gerry Howard, executive director of Pleasantview Industries, which helps place mentally disabled adults in jobs.

Many of the groups that were hurt by the impasse also saw their funding cut back because of the massive budget deficit created by the state's energy crisis, the Sept. 11 terrorist attacks and the economic recession.

Pleasantview Industries is facing a third consecutive year in which state officials have failed to raise the daily rate paid for job training - although the organization's costs, like power and insurance, continue to increase, Howard said.

``The stalemate was like rubbing salt in the wound,'' Howard said. ``We feel like, what next are they going to do to us?''