Gov. Arnold Schwarzenegger’s May budget revision is expected to include a proposal to shift $2 billion from local governments to the state government, according to the California State Association of Counties, which decried the idea in a news release Tuesday.
The budget maneuver would call for a suspension of 2004’s Proposition 1A, a constitutional amendment designed to discourage such fund shifts from local governments to the state.
The state would be obligated to repay the local governments within three years, with interest. But it would be devastating to local governments now, according to the CSAC statement. And though they have the legal authority to borrow against the state’s promise to repay, as a practical matter it would be very hard, the organization said.
“The three-year deadline would hit at the same time taxes and fees approved under the state budget in February may expire — making it incredibly difficult for the state to meet its obligation to repay local governments,” said the CSAC statement. “Local governments will have difficulty borrowing against the state’s constitutional obligation to repay due to the poor condition of the credit markets.”
