Local government lobbies took some comfort, however, in the preservation by the Assembly of $1 billion in gas taxes taken by the Senate some 10 hours earlier.
The governor could sign the budget as early as today after attempting to wring another $1.1 billion in line item vetoes to restore a reserve.
“We have steered the California ship away from the iceberg,” Governor Arnold Schwarzenegger said in a statement Friday afternoon. “We are battered and bruised, but intact.”
Schwarzenegger pointed to changes in CalWORKS requirements as structural changes that would save the state millions of dollars each year going forward.
The governor added a warning, “We are still in troubled waters and may be back in six months.”
Judy Mitchell, Rolling Hills Estates mayor and League of California Cities president, said she had mixed feelings about the budget revise, which borrowed Proposition 1A funds with language that authorized “securitization” of the loan so local governments could try to borrow against the state’s repayment commitment.
A League press release called the budget “a devastating loss of local revenues to finance state expenses” and “less harmful than when the voting began.”
“We were pleased that the Legislature finally heard arguments from economists and legal experts that stealing local gas taxes not only violated the state constitution, but it would have devastated the maintenance of local streets and created true local public safety problems,” Mitchell said.
League Executive Director Chris McKenzie credited local government with informing legislators of the violation they were about to commit.
“The HUTA [Highway Users Tax Account] raid was clearly unconstitutional, and the united force of city and county officials drove that home individually and collectively. We had hundreds of cities ready to join a lawsuit to make that point,” McKenzie said.
The down side of the budget had many ringing their hands.
“We continue, however, to be concerned that the budget contains a clearly unconstitutional diversion of local redevelopment funds, and we believe the state should not count on that revenue materializing,” Mitchell said.
A plan to divert $1.7 billion or 8 percent of redevelopment funds was met with threats of lawsuits.
“Any use of redevelopment funds for non-redevelopment purposes is unconstitutional,” read a California Redevelopment Association alert.
A plan to extend redevelopment area lifetimes by up to 40 years in exchange for a state loan against future revenue was stripped in the Senate.
Los Angeles Mayor Antonio Villaraigosa said his city will lose $261 million this year after already closing a $540 million deficit.
“We will have to go back to the drawing board and make more drastic cuts,” Villaraigosa said. He called the taking “highway robbery”.
“This cuts at the kneecaps federal efforts to invest in cities and metropolitan areas,” Villaraigosa said.
Placer County Supervisor Kirk Uhler was frustrated on Friday afternoon as well.
Largely rural Placer County closed an $8.5 million budget gap earlier this year by renegotiating public employee contracts to avoid layoffs.
The budget passed on Friday would require finding another $20 million in savings.
“It is unlikely we could do that without layoffs,” Uhler said.
Uhler, son of Lew Uhler, founder and president of the National Tax Limitation Committee, who authored the Revenue Control and Limitation Act, supported the idea of cutting the budget rather than increasing taxes, but said local government needed more flexibility to successfully implement mandates.
Uhler, a former Assembly candidate himself, called the legislature “completely dysfunctional” due to the polarizing effect of legislatively-drawn safe districts.
Even Jon Coupal, president of the Howard Jarvis Taxpayers Association, called the deal a mixed bag at the local level.
“While local governments should use the loss of revenue as motivation to pursue their own reforms, we also are concerned that the loss of revenue will only increase the pressure to raise taxes at the local level,” Coupal said.
Although city officials still faced a difficult challenge in coming to terms with painful losses of revenue, some also basked in the glow of a renewed sense of power after coming together to fend off a blow that could have capsized some municipalities.
Iris Herrera, legislative analyst for the California Special Districts Association, credited member letters, resolutions and phone calls with making Prop 1A suspension one of the hardest votes in this budget package.
“The pressure put on by a united local government front resulted in a very difficult decision for lawmakers,” Herrera said.
“This power and sense of the possibilities underscores even more what we can do, collectively, to reform the governance of California,” said the League’s McKenzie. “I expect more in that regard in the future.”
JT Long can be reached at firstname.lastname@example.org