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State should keep hands off county, city tax revenues

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“We are not Washington. We cannot print money. We cannot run up trillion-dollar deficits. We can only spend what we have.” With that statement Tuesday, Gov. Arnold Schwarzenegger summarized the state of the state, its $24.3 billion budget shortfall, and the dire condition California finds itself in as the deepest recession in nearly 80 years drags on. Spend only what it has. If that is true, the governor should publicly announce that he has pulled nearly $3 billion in tax borrowing off the table – local property and gas taxes that counties and cities collect for the state but rely on getting back to fund basic services at the community level. In Placer County, that amount could exceed $8 million or more. In Auburn, it could reach $350,000 or so. And that’s on top of already reduced property tax collections from the housing downturn, and a double-digit decrease in sales tax from reduced consumer spending. County and city leaders appear stoic at this point on what might happen. In part because every day is another day of announcements from Sacramento on what must be done – and done now – to offset the rising tide of red ink. The declarations routinely call for a new set of impacts on local governments. Schwarzenegger gave a clarion call for reform Tuesday, saying a number of state boards and departments must be eliminated, textbooks digitized, prison expense slashed and surplus state property sold. But nowhere in his 1,700-word speech did the governor mention that counties and cities were off the hook. He’s keeping his options open, which bodes poorly for the foothills. As big and bureaucratic as they can be, Placer County and the City of Auburn still deliver programs and services more cost-effectively than the state. Analysts seem to have sharper pencils. Budget cuts have been more strategic. Basic service levels are being met. While questionable expenses still occur, such as the county’s decision to purchase a $4 million helicopter for the Sheriff’s Department, local government is still better positioned to spend taxpayers’ money locally. There’s also the issue of the payback. A 2004 ballot measure passed by voters gave the state the authority to borrow up to 8 percent of local property tax revenues, on the condition that repayment be made in three years. What’s the likelihood the state will be in the position to repay the debt? If it can’t, in what condition will that leave local government? How much will it cost in legal fees to litigate what amounts to a family feud between state and local governments? Schwarzenegger ended Tuesday’s speech in what he hoped would be a no-nonsense call to action. “Let’s meet these challenges head-on without gimmicks,” he said. “I don’t want to hand these problems to the next governor and I know you don’t want to hand them to the next Legislature.” The governor terms out in 2010, and heaven knows what the makeup of the state Assembly and Senate will be. But one thing is clear: Borrowing local property-tax revenues from counties and cities is a gimmick, and doing so now will be a problem for the next governor and Legislature to solve. Don’t do it.