Last Monday, the legislative budget conference committee voted to
reject the proposal to suspend Proposition 1A, a measure that allows
the state to borrow property tax revenues from local government during
a severe fiscal hardship.

CSDA, along with the League of California Cities and the California
State Association of Counties, have spearheaded the opposition to a
Prop 1A suspension. In early May, the governor proposed to suspend
Prop 1A and borrow approximately $2 billion from local government to
help bridge the state’s massive budget deficit. The non-partisan
Legislative Analyst’s Office offered an alternative solution that
would borrow a larger percentage of property tax revenues from those
local agencies that could replace property taxes with fees or other
revenues, like water and wastewater enterprise districts.

Over these past couple of months, special districts, cities and
counties maintained a unified front against a Prop 1A suspension. It
was this unity and outpouring of opposition that contributed to the
budget conference committee’s rejection today. While the rejection of
Prop 1A by the committee is a positive sign, this is by no means the
final budget package. Even if Prop 1A is not included in this budget
package, with the volatility of the economy and recent decreases in
state revenues there is a high probability that the legislature may
have to revisit budget issues again this fiscal year (2009-10). It is
important that local governments maintain our strong partnership
against a Prop 1A suspension.

Budget deal aimed for June 30

The legislature continues to shoot for a June 30 deadline to approve a
budget package that will supplement the 2009-10 budget that was
adopted earlier this year in February and that is now estimated to be
bleeding $24 billion in the red. In addition to the shortfall numbers,
State Controller John Chiang has continued to remind legislators that
a severe cash flow crisis will occur by the end of July if the
legislature does not adopt a balanced budget in time. If no budget
patch is adopted, California will not be able to pay all of its bills
by July 28 and will be $2.78 billion short by July 31. Last Wednesday,
Controller Chiang released new projections on the state’s cash outlook
based on actual revenues received in the month of May and finalized
May Revision data provided by the Department of Finance. See the full
forecast here