Now that California’s legislative leaders and Gov. Arnold Schwarzenegger have agreed on a proposal to “balance” the state budget, not everyone is positively giddy with relief.

Expected to be voted on this week, the proposal, says the League of California Cities, includes “illegal raids” of local government gas tax, public transit and redevelopment funds, as well as a “loan” of local government property taxes that is “unlikely to be repaid.”

The league adds that by relying on “illegal mechanisms and fund shifts, this budget resembles a Ponzi scheme that the League of California Cities condemns in the strongest possible terms.” 

“Meeting in secret, the Big Five have put together a state budget that relies on unconstitutional seizures of local taxpayers’ funds or ‘loans’ from local taxpayers to finance today’s state operating expenses,” says the league in a statement. “This recipe for disaster passes off responsibility for repayment or complying with future court orders to reimburse local governments to future governors, legislatures and taxpayers.

“As they have in the past, courts are expected to enjoin the state from implementing its unconstitutional raids of local gas tax, public transit and redevelopment funds. Further, given California’s negative fiscal outlook, the league believes it is illusory to maintain that the state will be in a position to repay the ‘borrowed’ property tax funds in a few years.”

“Cities across the state have suffered deep revenue losses and acted responsibly to cut spending by laying off staff, shutting public facilities, and eliminating programs,” says league president and Rolling Hills Estates mayor Judith Mitchell. “While some at the state level will try to pass this proposed state budget off as a major breakthrough, city leaders know it only passes the buck and the problem to the future. As an elected official who took an oath to protect and defend the state constitution, I am embarrassed that any state officials would propose a blatantly unconstitutional budget that promises to fail within weeks of its adoption.” 

“This budget proposal is a reckless Ponzi scheme because it depends on unconstitutional seizure of billions in local revenues that the voters dedicated to specific purposes and questionable borrowing provisions,” says Chris McKenzie, league executive director. “It also puts government’s most important responsibility—protecting public safety—at risk because it takes local property tax revenues that should be used to patrol the neighborhoods of the cities of California and to respond to the many fire, police and emergency medical calls that cities in California receive. We have assured state officials we will see them in court the day after a budget is signed if it contains illegal provisions.”

Also jumping on the condemnation bandwagon is the California State Association of Counties, whose executive director Paul McIntosh says the budget deal is definitely not good news for counties.

The CSAC lists the “atrocities” of the agreement:

·         Proposition 1A borrowing – “Until we see the final budget language, it is not clear how iron clad the securitization provisions will be. Talks of ‘guarantees’ may fall on deaf ears on Wall Street.”

·         Highway Users Tax Account (gas tax) raid – “Two years of raiding these funds means the loss of more than 4,000 county public works jobs and the effective decimation of local public works departments statewide. After two years of layoffs, how do we ever re-build these departments.”

·         RDA (redevelopment funds) take – “The final contours of the RDA proposal are not presently known, and further details are unlikely until shortly before the vote is taken. No matter what form it takes, all RDA proposals that we are aware of are legally questionable.”

·         Health and human services reductions – “On top of a series of devastating cuts, the Legislature appears to be going along with an ill-advised and unachievable proposal to privatize eligibility functions for a range of social service programs.”

·         And Corrections reforms – "How the Legislature plans to achieve over $1 billion in cuts to the state corrections agency has been kept under wraps, but impacts to local governments and public safety agencies are sure to be significant."

“And frankly, this is just the short list,” says McIntosh. “We will not know the full scope of the hits to counties and the communities we serve until legislators are ready to put up their votes on perhaps the most disastrous spending plan in history.”