July 7, 2004
| TO: | CLA Members/ Systems/ Network Contacts |
| FROM: | Mike Dillon, Lobbyist Christina Dillon, Lobbyist |
| RE: | NEWS FROM THE CAPITOL |
I. LITTLE MOVEMENT ON BUDGET - - COULD BE A WHILE
Yesterday, all was quiet at the Capitol. Today isn"t much different as we chatted with one Assembly Member, wearing Bermuda shorts and sandals. While there appears to be little activity in the Assembly, the Senate Republicans and Democrats were at least caucusing, although there was no session scheduled for today. Meanwhile, representatives of cities, counties, and special districts, who met with the Governor and his staff and several legislative leaders yesterday, were meeting again today. There have also been discussions between local government leaders and Assembly Speaker Fabian Nunez.
At this time, there appears to be substantial division, and what happens next is unclear. One key Assembly Republican Leader informed us, earlier today, that he felt his caucus would hold firm on the Governor's original deal, as they shared many of the concerns of the cities they represent, including concerns regarding future raids on their local revenues. Republican legislators are frustrated that they were left out of the earlier discussions between the Governor and Democratic members working on the "compromise deal." At this time, it appears that Senator Burton is willing to let Assembly Speaker Nunez take the lead on working out an agreement on the local government piece of the Budget, as that is where most of the discussions have occurred. If some sort of an agreement is not reached soon, the Governor's patience may run out. If this were to occur and no deal is finalized, the Governor and the Legislature could just take the $1.3 billion from local government this year and let the chips fall where they may in November. Given the current atmosphere around the Capitol, it is likely that any final action on the Budget would not occur until early next week, perhaps even later.
II. WHERE's THE HANG UP?
As our readers know, the so-called "LOCAL initiative," sponsored by CSAC, the League of Cities, and CSDA, is scheduled for the November ballot. In order to help balance the State Budget this year, Governor Schwarzenegger asked local government to be part of the solution by shifting $1.3 billion of property taxes from cities, counties, and special districts to schools this year, and $1.3 billion again next year. Realizing that the "LOCAL initiative" is retroactive and would preclude the shift of funds without voter approval, the Governor worked out an agreement with local officials wherein a substitute ballot proposition would be placed on the ballot by the Legislature that would, in effect, override the local government initiative, in exchange for stable local government funding in future years. Without a pledged agreement, the Governor very clearly stated he would publicly oppose the "LOCAL initiative." But under the agreement reached more than a month ago with local officials, Governor Schwarzenegger promised to publicly support the compromise local government "deal."
Unfortunately, full agreement on the Governor's deal was never embraced by the Legislature, particularly the Democratic Leadership. As we mentioned in last Friday's memo, there had been eight days of silence before the cities, counties and special district representatives met with representatives from the Governor's Cabinet and Department of Finance. Due to some miscommunications, some Democrat legislators were led to believe that local government would sign off on a "new deal," that had been quickly developed by representatives of the Department of Finance, Democratic legislative staff, and a number of Democratic lawmakers as an alternative plan.
However, when the details of the substitute proposal leaked last Thursday, city, county and special districts began expressing their strong opposition to their legislators, and by Friday afternoon, there was a standoff between Republicans and Democrats on the local government issue. While most Republicans are willing to go along with the Governor's original deal reached with the cities, counties, and special districts, many Democrats and their leadership will not. The major reason for objecting is that they do not want to completely protect local government funding at the expense of education funding, health and welfare, and other programs vulnerable in future years. This year, for example, the Governor and Legislature are effectively "suspending" Proposition 98, as school funding is being reduced by $2 billion. Thus, the Democrats want similar flexibility for funding all local governments, which the "LOCAL initiative" and the Governor's "deal" would restrict.
There is also a certain Democratic anger at the Governor for repealing the VLF, thus creating an additional $4 billion budget problem because of the loss of revenue. Additionally, a number of Democrats and a few Republicans feel that by locking into the Constitution the current funding sources for all local governments, that larger issues, such as the "fiscalization of land use," can never be addressed without first going to the voters. Most troubling are comments we had heard in recent days that the California Teachers Association (CTA) and the Service Employees International Union (SEIU) will launch a major effort to oppose the LOCAL initiative in either form on the November ballot. Senate President pro Tem John Burton was quoted on the radio this morning, stating: "The cities have an initiative on the November ballot, let them take their shot...and I"ll be happy to lead the campaign against it." In the end, this may be what occurs.