California Counties Praise Governor, Legislators for '04-05 Budget Plan; Deal Includes Historic Fiscal Reform for Local Governments.

SACRAMENTO, Calif. -- California county leaders praised Governor Arnold Schwarzenegger and State Legislators today for passing a spending plan that supports the fiscal stability of local governments and ensures a bright future for all Californians.

"Governor Schwarzenegger gave counties his promise that state raids on local governments would cease during his administration, and he has kept that promise. Counties understand that we are entwined with the state and that as the state goes, so go counties. That's why local governments are willing to help California through these tough economic times with a $2.6 billion contribution over the next two years," said Paul Stein, California State Association of Counties President and Calaveras County Supervisor. "We want to thank the Governor and the Legislature for their commitment to seeing this deal through."

In return for contributing $2.6 billion over the next two years to help the state through its budget crisis, local governments will receive long-term fiscal protection and stability through a Constitutional Amendment to be placed on the November ballot as Proposition 1A.

A significant component of the local government agreement is Senate Constitutional Amendment (SCA) 4, which includes provisions for the protection of certain local revenues. If passed, Proposition 1A will prevent the state from turning to local government coffers to balance future state deficits.

Under the package, the state will only be allowed to borrow revenues from local governments during fiscal emergencies, and can only do so with a two-thirds vote of the Legislature and the Governor's signature. Borrowing can only take place twice during a 10-year period, and only after the first loan has been repaid with interest.

Other key elements of the local government package include the swapping of vehicle license fee backfill funds for constitutionally protected property tax revenues; the prohibition of property tax transfers from local governments to schools -- a practice commonly known as ERAF -- and creation of a new paradigm in which the Legislature may approve voluntary exchanges of property tax for existing sales taxes. SCA 4 also preserves the local Bradley-Burns sales tax rate of 1% from being lowered or reallocated; will prohibit the state from transferring program costs to local government without complete reimbursement; and requires the state, with limited exceptions, to either fund or suspend mandated programs.

Fiscal reform for California counties has long been one of CSAC's top priorities, and Association leaders are ecstatic that the first steps toward true reform have become reality. CSAC remains committed to continuing to work with the Legislature and Governor on additional fiscal reform measures.

"For the first time in 30 years, local governments will have stable and predictable revenues that they can count on when building their budgets each year," said Greg Cox, CSAC First Vice President and San Diego County Supervisor. "Governor Schwarzenegger and the Legislature must be strongly congratulated on a job well done. Their tireless efforts on a very complex issue have paid off to protect local services."

CSAC Treasurer and Sonoma County Supervisor Valerie Brown, who represented counties during the sensitive budget negotiations, echoed her colleagues' comments.

"Proposition 1A provides strong protections for local revenues, while providing essential flexibility for the state during times of economic crisis. By working together, local governments, the Governor and legislative leaders have created true fiscal reform," said Brown, a former Assembly Member herself. "Today is a memorable day for counties, and we're looking forward to focusing our efforts on additional fiscal reform to provide the public health and safety services, housing and community programs that will continue to improve the quality of life for all Californians."