SAN FRANCISCO - California counties, which depend heavily on state funding for social services, lost about $3 billion in the budget deal that Gov. Arnold Schwarzenegger signed earlier this week, according to the California State Association of Counties.
The hit will require the counties to reopen budgets that were agreed to with difficulty earlier in the year. The budget package relied on a variety of local revenues and cuts in state funding for local governments as part of a plan that closed a state budget deficit of about $24 billion. Schwarzenegger used his line-item veto power to cut another $500 million from the budget this week.
"A significant portion of the state's budget solution simply pushes the state's problem onto county governments," Paul McIntosh, executive director of CSAC, said in a statement.The $3 billion of lost revenue is a preliminary estimate, according CSAC. The reductions include state borrowing of $900 million in county property tax revenue, which must be repaid over three years, and $2.1 billion of outright spending cuts.
The problem for counties is that many of those spending cuts can't easily be passed through to the recipients of social programs, Kelly Brooks, CSAC's legislative representative for health and human services, said in an interview.
For instance, some of the funding pays for county administration of the state programs, such as child welfare. The budget deal cuts $124 million from programs for abused and neglected children, but it didn't reduce the required supervision of children in foster care or extend the amount of time that counties have to respond to abuse complaints.
Counties will similarly have to absorb cuts of $375 million for employment, childcare, and transportation for participants in the state's welfare-to-work program and $120 million in funding for county workers who determine eligibility for California's Medicaid program.
Tracy Sandoval, assistant chief financial officer for San Diego County, said the state plans to borrow $70 million of property tax revenues from her county. She said finance staffers at the state's third-most populous county are working to figure out if it makes financial sense to join in efforts to borrow to cover the loss of revenue.
"The cuts to programs, especially in the social services area, are going to have more impact," she said in an interview. "We will have to take additional budget action on our part to deal with these cuts."
Sandoval said the county hasn't yet figured out the precise cost, but she said the San Diego County Board of Supervisors has traditionally refused to back-fill programs cut by the state.
The social service cuts mean that county budgets are likely to feel more pain than city or school district budgets, especially in counties where boards can't or won't pass the pain on to recipients of social services.
"Counties will be under immense pressure in the coming weeks to deal with the consequences of the governor's decisions to dramatically reduce funding to health and human services programs," Gary Wyatt, an Imperial County supervisor and president of CSAC, said in a statement.
School districts will lose about $6.1 billion over two years, but the state expects federal stimulus dollars to offset much of that cut. Schools also extracted a legislative commitment to repay them $11.2 billion when the economy improves.
Cities and counties are both subject to California's plan to borrow $2 billion of their property tax revenues, but most hope to offset that loss by taking part in a state plan to securitize the repayment.
Redevelopment agencies lost about $2.05 billion in state raids on their revenues this year and next. As a percentage of income, they're taking the biggest hit at about 30% of tax increment revenues, which are their main funding stream.