Wilson Plan Would Give $225 Million to Cities, Counties

SACRAMENTO —  Gov. Pete Wilson will propose $225 million more for California’s financially ailing cities and counties this week as a way to share some benefits from a booming state economy.

The funds are aimed at offsetting some of the revenue that the state took from local governments in 1993 and 1994, during the downturn. The money was welcomed Sunday by struggling local administrators--particularly in Los Angeles, where county officials expect to receive from a third to half of the windfall.

But local authorities around the state also consider the funds to be a small oasis in a big desert. They complain that the undoubted financial crisis in their future demands a major correction--not just a short-term fix.

“Anything is helpful,” said Los Angeles County’s assistant chief administrative officer, Sandra Davis. “But we have a structural imbalance which means we have been budgeting year to year. . . . There are things we are not dealing with.”

Wilson’s proposal would distribute the $225 million statewide through three separate programs, but not on a spend-it-as-you-like basis. It would replace some local money that is now required to go to schools; it would help pay some hospital administrative costs, and--for the first time--it would finance a plan to help pay for local government construction projects.

Ventura County officials welcomed the governor’s proposal, which could bring an additional $1.1 million to help cover the county hospital’s overhead costs.

“This is great news,” said county Supervisor Frank Schillo. “I’m very happy to see the governor taking the initiative and doing this. It’s only fair. We helped [state officials] out at a time when they needed it, and now that there’s a surplus, they ought to be giving some of the money back to us.”

Democratic lawmakers--who are also considering various other ways for the state to increase local funding--were cautiously supportive of the governor’s proposal Sunday.

“These are reasonably desirable things to do,” said Senate President Pro Tem Bill Lockyer (D-Hayward). “We will have to compare these ideas with our other budget priorities.”

Lobbyists for the counties responded to the governor’s idea with tepid praise.

“We are very pleased with this recognition by the governor that cities and counties need discretionary revenue,” said Steve Szalay, executive director of the California State Assn. of Counties. “We have really been searching to find common ground with the governor and we hope this is a start.”

In Los Angeles, the budget that the Board of Supervisors is considering for the upcoming year was balanced without the expectation of this extra revenue. But Davis said the county budget still has some uncertainties in it, and neglects to fund some needed improvements, so the additional money would give administrators more confidence about avoiding a shortfall.

It is probably not enough to finance a major new project, she said.

“Our holes are so large that it does take a lot of money,” she said. “So I can’t tell you this is going to solve a specific problem.”

The money Wilson proposes to allocate locally comes from a budget windfall whose precise size the state is expected to disclose officially on Wednesday.

Last week, the independent legislative analyst’s office predicted the announcement will show the state has about $2.7 billion more in income than officials expected in January, when Wilson proposed his $66-billion budget.

This week, Wilson is also expected to direct some of that windfall to pump up child care funding to help welfare reform succeed, and to further his plan to reduce class sizes in kindergarten through third grade.

Regarding cities and counties, nearly half of Wilson’s $225-million allocation plan--$100 million--is intended to be temporary relief from a costly school funding mandate that state lawmakers passed in 1993 and made even costlier in 1994.

(At that time, lawmakers grappling with a major deficit in the state budget adopted a plan to shift about $3.6 billion in property tax revenue from local governments to schools over three years.)

Officials said this is a one-time offer, subject to renewal if the economy keeps improving.

Some Democratic lawmakers want to provide more than $100 million, and to get it, might consider repealing the 1993-94 mandate. They contend that it is a major reason for the local financial crises that have threatened some counties--including Los Angeles--with bankruptcy.

In a report on the Los Angeles County budget problems last year, the state legislative analyst concluded that “the current shortfall is reflective of a major structural imbalance between program costs and revenues primarily caused by the combination of property tax shifts, sluggish revenue growth and declining federal funds.”

That means the analyst’s office believes the gap between the cost of services the county has to provide and the availability of money to pay for them is caused by three things: slow increases in tax money, the decline in federal dollars that once helped to make up the difference, and the state’s ordering the counties to pick up more of the tab for schools.

Wilson, however, has blamed much of the problem on local politicians, accusing them of being reluctant to make the difficult cuts that would match the cost of their programs to the size of their budgets.

“We believe the counties still have a great deal that they can do to restructure,” a Wilson aide said Sunday. “Is there a long-term structural impediment? These are issues that are being discussed in Sacramento. . . . But it is difficult to give an assessment until we see what additional progress these counties can make.”

Another official predicted that welfare reform will require a new and close examination of the financial relationship between the state and local governments. State lawmakers are now preparing to turn over much of the responsibility and authority for welfare to county governments.

Wilson’s local $225-million funding increase would include $75 million statewide for an existing program that gives more money to hospitals that serve many low-income patients.

Los Angeles County is already a prime beneficiary of the $2.1-billion Disproportionate Share Hospital program. State authorities said it would receive about $36 million from the governor’s proposal. The remaining $39 million would be shared by 22 other counties.

The governor is also expected to propose this week that the state put $50 million into the California Infrastructure Bank. The institution was authorized in 1994 but has not been able to operate because no money was authorized.

The bank would allow local governments to create pools of bonds whose sale could take advantage of the state’s often-superior credit. The bonds would pay for local construction projects like roads, sewers and water mains.

Wilson’s budget plan in January would have added the first $200 million to the bank from a state bond proposal next year. Instead, he said the $50 million would allow the bank to be operational sooner. The additional $200 million would still be added when the state bond money is available.