CITY REVENUE FUNDS SAFE GOVERNOR'S BUDGET IS DEEMED 'GOOD NEWS'.

Byline: Heather MacDonald Staff Writer

SANTA CLARITA - Though city officials are still bracing for deep cutbacks in state and federal funding, the budget proposed by Gov. Gray Davis does not attempt to wipe out the state's $12.5 billion shortfall by reducing key sources of revenue for local cities and counties.

Santa Clarita leaders were most concerned that Davis' budget would propose that the state stop reimbursing cities for deep cuts in annual vehicle licensing fees. The city could lose about $7 million if that were to happen, according to Steve Stark, the city's Director of Administrative Services.

``We're still worried and keeping a concerned watch,'' Stark said. ``But so far the governor's budget is good news.''

The state's $12.5 billion deficit was brought on by last year's energy crisis, the slowing economy and the technology bust. At the same time, state officials have spent millions of dollars on security measures designed to prevent terrorist attacks.

``The real test will come in May, when the numbers are revised and the year-end budget is released,'' Stark said.

In the last recession, state officials diverted billions of dollars from local coffers during the 1992-93 fiscal year, throwing many cities and counties into turmoil with no way to balance their books.

While some state legislators have suggested revoking some or all of the tax cut to balance the budget, or ending the state's obligation to make up the difference between today's fee and the 1997 assessment to local governments, such action seems unlikely, said Assemblyman Keith Richman, R-Granada Hills.

``I would hope that there will be broad bipartisan support in the Legislature to keep local government whole,'' Richman said.

Davis' $100 billion budget, which some analysts have said is overly optimistic, would allow California to borrow money and defer payments to future years instead of cutting programs or raising taxes, both of which are politically unpopular in this election year.

The state's budget woes come at an especially bad time for Santa Clarita. The city's reserves have been depleted by the city's ambitious capital improvement programs and the city's $129 million budget has been pinched by rising energy costs and the slowdown.

In addition, the Santa Clarita City Council's contingency fund has been wiped out by the discovery of mold in City Hall that has sickened a handful of employees, and a 3 percent cost of living salary increase for city employees.