The budget proposal does not include a suspension of Proposition 1A (2004), confirming the action taken last week by the legislative budget conference committee wherein all 10-members of the committee voted to reject the administration’s proposal to borrow from special districts, cities and counties.
However, the package does include revenue raising provisions, which both Republicans and the governor have publicly said they oppose.
Specifically, the revenue provisions include an oil severance tax, a $1.50 excise tax increase on a pack of cigarettes, effective October 1 of this year and an elimination of most of the corporate tax reductions that were included in the February budget.
It is important to reiterate that even though a suspension of Prop 1A is not included in the Democratic budget package, Prop 1A is not off the table completely.
Opportunities will emerge over the next few weeks of budget negotiations where Prop 1A will come up as a viable solution to help fill in the state’s $24 billion budget gap.
Finally, even if Prop 1A is not suspended with this budget fix, most likely legislators will have to revisit the state’s budget at some point during the 2009-10 fiscal year if revenues continue to decline as they have over the past few months. Be prepared that Prop 1A will be back as a topic of discussion for additional budget patches over this coming fiscal year.
Special districts, cities and counties have maintained a unified front against a Prop 1A suspension. It was this unity and outpouring of opposition from local government and the public that contributed to the budget conference committee’s unanimous decision to reject the governor’s proposal to suspend Prop 1A.
CSDA is committed to continuing our strong partnership with cities and counties against a Prop 1A suspension.
Visit the California Special Districts Association at www.csda.net