Cities, counties and special districts continue to squeeze from already tight budgets.

The Legislative Analyst’s Office outlined a budget gap of $40 billion during 2008-09 and 2009-10 in January. Since then, the economy has continued to spiral and the budget hole has only grown wider.

As part of a series of question and answer pieces on how local government officials plan to handle tightening budgets, interviewed Neil McCormick, Executive Director of the California Special Districts Association to learn more about how an increasingly stretched budget will affect Special Districts.

From the Special Districts perspective, what is your posture?

Special districts statewide, like other local governments, are feeling the effects of the economic downturn. With a shrinking pool of money and continued demands for more services, it has become increasingly difficult for districts of all types to continue business as usual.

Many districts rely heavily on property taxes to support critical services, including public safety. The effects of the housing market and, consequently, the reductions in assessed home values have resulted in a significant decrease to the property tax revenue base received by districts.

Further, districts that rely more on fees, charges and assessments for revenue are in a difficult position as many need to raise additional revenue through responsible increases to support demands for service and increased costs.

However, in the current environment, many are hesitant and being very cautious while others, in some cases, are restricted by a number of requirements and high voter thresholds to approve increases. Clearly, special districts are very concerned about what lies ahead in terms of the ongoing state budget deficits and the economy in general.

What is your biggest fear with an even more shrinking budget?

A big part of it is the uncertainty of what lies ahead. We acknowledge that the governor and Legislature had to make some very tough decisions during the state budget negotiations. Moving forward, we are very concerned with the potential of additional revenue shifts and “borrowing” of revenues from special districts and local governments in general.

The fact is that most districts are already stretched and struggling to maintain service levels with a shrinking revenue base. Further shifts of local government funds, beyond what’s already shifted annually through the Education Revenue Augmentation Fund (ERAF), would continue to erode their ability to effectively provide services and force severe cuts and closures to critical services that constituents rely on every day.

Those items on the table that were already close to being cut, will likely come back on the table and be given an even keener look. What programs for local, independent special districts will be most affected by further budget cuts?

Special districts working on infrastructure projects funded through state bonds have gone without payment for months worth of invoices from 2008. This unplanned delay in payments puts some districts in a very difficult situation in terms of cash flow. Further budget cuts could worsen this and leave many needed special district infrastructure projects either significantly delayed or completely halted for the long-term.

CSDA recently gathered feedback from all types of districts to get an even better handle on what kind of cuts districts are already making as well as how further revenue reductions would impact them. Many districts have put into place mid-year cuts that range from 5 percent up to 20 percent of their total budgets for the current fiscal year and plan similar cuts moving into the next fiscal year.

Additionally, a number of districts reported that they expect budget deficits with some ranging from $20,000 up to $2 million. Still, others are raising the costs of programs and rates in order to just maintain critical services like safe water supplies, wastewater/sanitation, and mosquito and vector control.

Another already hard-hit area that could see impacts magnified significantly by further budget cuts and shifts are special districts that provide fire and other public safety services. Layoffs, furlough days and the need to raise service and program fees will be compounded by any additional cuts to revenue streams of special districts.

What do you expect to happen, in the near future, and down the road? How long can special districts continue to shoulder more and more cuts?

CSDA and our members are being very cautious in regard to the future. I expect that districts will remain very conservative in its approach when it comes to fiscal issues.

With the state’s ongoing budget deficit, comes a lot of uncertainty. Special districts and CSDA will remain vigilant in working to protect the special district revenues that they currently receive so that further cuts to the wide variety of services and impacts to the public can be minimized.