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Brown marks up budget

Government: Governor’s financial plan for the next year looks to repair the state’s massive deficit

Posted: January 10, 2011 11:08 p.m.
Updated: January 11, 2011 4:55 a.m.

Gov. Jerry Brown gestures as he discusses his approach to dealing with an estimated $25.4 billion state budget deficit during news conference where he released his $84.6 billion general fund state spending plan at the Capitol in Sacramento on Monday.

Governor Jerry Brown’s budget proposal raised the ire of Santa Clarita Valley government officials after its release Monday, saying the plan could cripple local governments and stymie the city’s economy by eliminating a program that has saved area businesses millions of dollars in taxes.

Brown’s financial plan for the next year looks to fix the state’s massive structural deficit by making sizeable cuts to social-welfare programs.

The newly elected governor is also requesting a five-year extension on tax hikes implemented in 2009.

“These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice,” Brown said during a press conference in Sacramento.

“It’s better to take our medicine now and get the state on a balanced footing.”

In the next 18 months, the state is facing a $25.4 billion budget shortfall.

To bridge the gap, the governor is looking to cut $12.5 billion from California’s welfare programs and $500 million from both the University of California and California State University systems.

Under the proposal, the only area of state spending safe from possible cuts is California’s K-12 education system.

Assemblyman Cameron Smyth, R-Santa Clarita, said though he supports the governor’s decision to make deep cuts in state spending while maintaining funding for K-12 education, he would not support extending tax increases for the next five years.

The Legislature would need to approve the proposed tax extensions with a two-thirds majority vote, Smyth said.
Then, voters would decide during a special June election.

“I can assure you I have received no calls in my office asking for more taxes or extending any taxes,” Smyth said. “I don’t see any way the voters would support a tax increase for five years.”

Officials wary
Brown is also seeking to restructure state government by shifting some responsibilities from the state to local municipalities, a process that is being met with scorn from Santa Clarita Valley government officials.

It was unclear Monday how the proposed budget would affect Los Angeles County and the city of Santa Clarita. But officials said they were concerned that possible restructuring could burden the municipalities with a host of new responsibilities without any way to pay for them.

“I’m chewing on (the budget proposal), but I haven’t digested it yet,” City Manager Ken Pulskamp said.

Pulskamp, who has worked in local government for 33 years, said he was concerned the governor’s proposal would ask cities to foot the bill for years of wasteful spending in Sacramento.

“(State officials) regularly try to balance their budget on the back of local government,” Pulskamp said.

“The state has a miserable track record. It’s to the point where local government officials don’t trust the state. The idea that the state would do anything to help cities is a foreign concept during my career.”

County officials voiced similar concerns.
Ryan Alsop, assistant chief executive officer for the county, said it appeared there was not enough long-term funding from the state under the proposed budget to make sure the county could pay for the increase in government services.

“Without the revenue from the state, it’s a hell of a burden for us to carry and it will bankrupt local government quickly,” Alsop said.

A detailed analysis on the budget’s impact on the county would be ready for Tuesday’s Board of Supervisors meeting, he said.

Supervisor Michael D. Antonovich, who represents the Santa Clarita Valley, said in a statement that the governor’s realignment plan could be a trick.

“Shifting state and federal mandates to local government and calling it ‘realignment’ is a Trojan horse,” Antonovich said in a statement. “All non-property related services should be funded by the state. Any other scheme is a recipe for fiscal chaos.”

Enterprise zone on chopping block
Brown also wants to eliminate the state’s enterprise zone program, which gives business-tax breaks for hiring disadvantaged workers.

City officials said enterprise zones have provided local businesses with millions of dollars in tax savings since 2007.

But Brown said enterprise zones have not proven effective in spurring economic growth.

The Public Policy Institute of California released a report last year that said it’s difficult to determine if enterprise zones help the economy. The program cost the state about $533 million in lost tax revenue in 2005.

Pulskamp called the governor’s plan to eliminate the program ill-conceived and shortsighted.

“Enterprise zones have been very successful, and we’ve had a number of businesses relocate to Santa Clarita specifically because of them,” Pulskamp said. “Enterprise zones create more jobs and revenue. Eliminating them will end up hurting the Santa Clarita Valley from an economic perspective.”

According to past reports, city officials estimate that more than 200 local businesses have saved a combined $72 million through hiring tax credits since 2007.

The governor’s plan to eliminate the program comes less than a month after state officials announced the Santa Clarita Valley was awarded a new, larger enterprise zone that would give tax breaks to businesses in unincorporated areas of the valley including the Valencia Commerce Center.

Redevelopment agencies also targeted
Also on the chopping block are redevelopment agencies.

Redevelopment agencies are common in cities throughout the state and allow municipalities to use property tax revenue to revitalize blighted areas.

Santa Clarita has had a redevelopment agency to fund construction work in Newhall since 1989.

Santa Clarita’s redevelopment agency received $4 million in property-tax revenue this year, Pulskamp said. 

“When you get rid of redevelopment agencies, in the long-term, it will end up having economic consequences for the state,” Pulskamp said.

Smyth, who chairs the Assembly’s Local Government Committee, said other cities have wasted redevelopment monies.

“Redevelopment is kind of a mixed bag,” Smyth said. “It’s been a useful tool and I think Santa Clarita is a good example of that. But there are other communities that loosely define blight in order to get redevelopment zones and agencies.”

Brown gives deadline
Brown said he wants a preliminary budget prepared within 60 days.

“These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice,” Brown said.
“We’ve made some drastic cuts and to do more would impair our ability to provide public service.”


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