Help save Oakland from a State raid on our money!

Yesterday was the second of the Oakland City Council’s special meetings to discuss the Mayor’s proposed budget, and they will meet again to discuss it further on on Monday at 4 (PDF).

Councilmembers expressed a great deal of frustration at yesterday’s meeting over the Governor’s proposal to borrow $2 billion from local governments to balance the State budget, talking mostly about how unfair it all is and how nobody knows about it. Okay. So I haven’t really written about this at all, mostly because I assume that my readers also read the newspaper, and therefore would all already be aware. But in case some of you somehow missed it, here’s the deal.

In November 2004, 83.7% of California voters said yes to Proposition 1A, which basically said that the State is no longer allowed to take local tax money away from local governments as a way of solving their own mess when they have budget problems. Under Proposition 1A, cities get to keep all their local property and sales tax money for themselves.

But, under Proposition 1A, if the Governor proclaims and two-thirds of the Legislature agrees, that the State is in a position of “several fiscal harship”, the State can borrow money from local governments, and they’re currently planning to do just that (PDF). They want to take 8% of the property tax revenue received by local governments, with a promise they’ll pay it back in a few years. Of course, given the impact of today’s economy on local government finances, it’s not like any city is really in a position to just give up millions of dollars, whether or not they’ll be getting it back a couple years from now.

As you might expect, the League of California Cities opposes the proposal, and is asking its members to pass a resolution (PDF) declaring a their own state of several fiscal hardship and opposing the State’s proposed seizing of local funds. 96 cities have done so already (Oakland is not yet among them. The Council’s Finance and Management Committee was scheduled to consider such a resolution (PDF) earlier this week, but continued the item until their June 9th meeting.).

So…this is completely unacceptable. Oakland, already facing a staggering budget deficit, simply cannot afford to send millions of dollars to Sacramento. And you can help stop it. First, everyone should write their State representatives immediately and say NO. If you live in Oakland, your Assemblymember is either Nancy Skinner or Sandre Swanson or Mary Hayashi. If you don’t know what district you’re in, you can find out here. Your State Senator is Loni Hancock. All three have e-mail forms you can use to contact them about this issue on the sidebar on the left side of their websites. You can also call their offices at the numbers below:

You can also voice your opposition to the proposal at the excellent website Save Your City. Save Your City is a coalition of citizens, businesses, and local organizations opposing the proposed State raid on local revenues. You can add your name to the list here, and if you are involved with any local community organizations, you should pass the site on to other members and ask them to join as well. It’s very easy to remember: saveyourcity.net. The site allows you to upload a video explaining your opposition to the proposal, and every uploaded video will be available on YouTube, and will also be sent to your legislators. Here are some sample videos:



The website already features videos from Alameda City Councilmember Lena Tam, San Leandro City Councilmember Michael Gregory, Emeryville City Councilmember Ken Bukowski, Orinda City Councilmember Tom McCormick, Orinda Mayor Sue Severson, El Cerrito City Councilmember Bill Jones, Walnut Creek City Councilmember Cindy Silvia, Los Angeles County Supervisor Zev Yaroslavsky, Chowchilla Police Chief Jay Varney, Tustin Mayor Pro Tem Jerry Amante, Fontana City Councilmember Janice Rutherford, Pittsburg Mayor Nancy Parent, and over 200 other local officials throughout the State. There are no videos from anyone in Oakland. Let’s change that.

And if you’re interested in learning more about the State’s budget issues, here are my favorite sites for following what goes on in Sacramento:

  • Rough &Tumble: Your one stop shop for California politics headlines. Aggregates headlines from papers around the state. A necessary bookmark for anyone interested in following California politics.

  • The Sacramento Bee: The Bee has an excellent Capitol and California section, where you’ll find many of the best articles out there about the goings on in Sacramento. The Bee offers California Politics and State Budget RSS feeds.

  • Assemblymember Noreen Evans’s budget blog: I discovered this site from Becks’s post yesterday, and if you’re concerned about the Statebudget (which you should be), it’s another must-read. Evans chairs the Legislature’s Budget Conference Committee, and is posting daily updates on the State budget.

  • The California Report: Statewide radio news program from KQED radio. 9 minutes a day of what’s going on with the State, and a weekly half-hour in-depth program.

  • Capitol Weekly: Weekly newspaper about State politics.

  • CalBuzz: Insightful commentary (and some gossip) about California politics from former San Francisco Chronicle managing editor Jerry Roberts and former San Jose Mercury News political editor Phil Trounstine.

  • Calitics: Multiple daily posts about California politics, mostly commentary, some breaking news, and some news you won’t find elsewhere. The site is focused on “progressive” issues, which is a word I absolutely hate, but overall, it’s another must-read.

  • California Progress Report: Founded by Oakland attorney, current Chief of Staff to Assembly member Nancy Skinner and former Chair of the Alameda County Democratic Party, Frank Russo, this site offers commentary on State policy from a “progressive” (ugh, that word again) perspective.

  • Capital Notes: KQED Sacramento Bureau Chief John Myers offers breaking news and frequent podcasts about State news. Really, really good site.

30 thoughts on “Help save Oakland from a State raid on our money!

  1. livegreen

    I’m curious about why local taxes go through the State, and how this came about in the first place (for sales or income). I believe New York City receives both taxes directly.

    This would result in more local control, and might also eliminate at least some of the State’s bureaucratic costs of shuttling the money back and forth…

  2. Naomi Schiff

    Thank you for posting this excellent contact info. I hope everyone will make a lot of noise. Prop 13 should be repealed and/or reconfigured. My younger neighbors pay around 7 or 8 times the property tax I do, for the nearly identical house! How is that fair? And the state has already raided Redevelopment funds too. We’re likely to have to cover the state shortfall in other ways as well: they are trying to make the county government deliver services they can’t afford to provide. It’s not just the governor. Our former state sen. Don Perata can take some credit as well.

  3. Robert

    And when you advocated voting no on all the propositions, did you take this outcome into account?

  4. V Smoothe Post author

    One has nothing to do with the other. The State’s raid on local funds was already planned and announced before the special election. Contrary to what certain lawmakers are trying to make people believe, the propositions on the May ballot would not have raised very much revenue, and certainly were not anticipated to raise anything close to the amount needed to close the State’s deficit.

  5. Justin

    The propositions were not going to cover the whole mess, for sure, but there is, at least, a $6 billion difference that can be attributed to the failure of the propositions.

    Whether that means local governments weren’t going to be on the block if they all passed is a different question. But things are more dire because the propositions failed; that is a fact.

    In any case, raiding local governments is bad bad bad, justifiable really only because its something the state is empowered to do (if Oakland could raid the state, I’d be all for it).

  6. Robert

    As Justin said, there is a connection. The failure of the propositions puts more pressure on the state to try and rob local governments.

  7. V Smoothe Post author

    Well, like I said before, they were planning on robbing local governments either way. And the bulk of the money that would have been raised, $5 billion, was going to be raised by borrowing from future revenues. (Which is the same thing the State is talking about doing here.) That is hardly fiscally responsible. And remember, the State’s budget deficit is $24 billion.

  8. Patrick

    The reasoning behind voting NO to all of the propositions WAS to put pressure on the State; not to rob local government, but to fix the underlying problems that exist in our tax structure. Every budget cycle is the same and getting worse. Oakland is really no different than our state as a whole. And Prop. 13 is at the heart of it.

    The only real way for Oakland to substantively raise tax revenues currently is via the parcel tax; a regressive and completely unfair method of taxation. I refuse to support most parcel taxes because the benefit is not shared equally as is cost.

    It’s a shame we couldn’t tax commuters for the pollution they leave behind when driving through our town to get to their homes in the suburbs – we’d be freaking rich.

  9. len raphael

    LG, NYC has it’s own hefty income tax that’s imposed on both corporations, and individs residents and commuters. The state collects it and gives it to NYC.

    On single individuals, the rate is an amazingly high 3.5% on taxable income over 12,000.

    NYS rate is about 6.9 unless your income is >1Mill. This compares to highest CA state rate on individs (<1Mill of taxable income) of 9.3%.

    (Don’t know how the NY sales tax revenue split is done.)

    Don’t know if it’s Prop 13 that forbids CA cities from levying income taxes, but thought that prohibition predated Prop 13. Without the high income commuter base of NYC, i can’t see how Oakland with it’s high percentage of poor people would come out ahead if the State of CA lowered it’s rates and Oakland imposed an income tax.

    -len raphael
    temescal

  10. len raphael

    P, it was odd seeing political liberals and conservatives agreeing on opposing the props. each side wanted another shot or two or three at winning it all their way. either side winning looked to me like net increase in human suffering for the near and mid term compared to muddling shell gaming it thru the way the compromise was pointed.

    the idea being that over the next several years, a combo of cuts and revenue increases will happen unless the fiscal crash is more permanent than expected by most.

    -len

  11. Robert

    P, the logic of liberals in opposing the propositions is clear, and the comparable logic of conservatives in also opposing the props. But the greater pressure for robbing local govs was a readily forseeable, albeit unintended, consequense of the defeat. As V points out, it wasn’t a big secret that borrowing money from cities was an option on the table. And given the abject failure of the state government to deal with budget problems over the last few years, do you really think that increased pressure due to the defeat of the props is going to give any better result?

  12. V Smoothe Post author

    Perhaps I could better answer the questions of those who think the propositions should have passed if they could explain their rationale for supporting them. There appears to be an idea here that the State would not have a budget deficit now if they had passed. That is patently false. We would still have an over $18 billion deficit. The State would still be trying to borrow local property tax money from cities.

    The only one of the propositions that would have generated significant revenue to close this year’s gap, $5 billion, would have done so by borrowing against future revenues. That’s the same thing the State is trying to do here. I oppose taking local money away from local government because of the adverse local impacts, but I also oppose the proposal because it will hurt the State budget in the future, because that money will have to be paid back from future revenues, with the added cost of interest.

    The voters of California said very clearly through their overwhelming rejection of 1C that they do not want the State to deal with today’s problems by causing more problems tomorrow. Some of those voters would like to see the budget balanced only through cuts. Other of those voters, like myself, would like to see the budget balanced through real, long-term increases in revenue. I believe that most voters, on either side of the political spectrum, would like to see our representative in Sacramento do their damn job and create a workable budget. I don’t imagine that anyone was trying to send a message that the State should find a different way to borrow against future revenues and rob local governments of their own revenue at the same time.

  13. Robert

    Well, my original question was whether you considered the increased pressure on the state to steal local governments funding when you opposed the propositions. I can only speculate on your reasoning from the fact that your initial contention was that the two issues were unconnected.

    It is not so clear to me why voters opposed the propositions, I only know why I voted the way I did, which did include voting against 1C, for much the same reasons you did. But I did it knowing that it would create additional problems for the state and local governments. I would disagree about whether the state representatives did their job. They did pass a budget that appeared at the time to solve the immediate problem, maybe giving them time to find a long term solution. It seems to me that what the voters really did was tell the state that they did not like the particular solution, but without providing guidance on what an acceptable solution would be.

    While revenue increases could be a solution, I don’t see them happening in the next 2 to 4 years. Since the Republicans who compromised on the tax increase this time around were all punished by their party, I don’t think you will see them do it again. And other solutions will require going back to the voters once again. In addition to the time delay, you will get people voting no just because they are p**sed at the continued rounds of propositions to fix the budget. So any short term fix for the state budget right now is going to be spending cuts and borrowing of money.

    While you are correct that the state borrowing is not a good solution, your initial post focusing on the unacceptability to Oakland, not on the unacceptability of borrowing in general.

  14. V Smoothe Post author

    The issues are not connected in the sense that the State was intending to take local property tax revenue from local governments whether or not the propositions on the special election ballot passed. So we would be in this exact same situation either way.

    Not sure how the voters of California could have provided any guidance on what an acceptable solution would be through their votes in the special election, since they were only given a single option (borrowing from future revenues) to raise significant amounts of revenue today. There is, of course, ample polling available that offers legislators an idea of what voters do and do not see as acceptable solutions.

  15. len raphael

    V, curious about the polling. i assumed that a majority of the electorate oppose service cuts and oppose tax increases on themselves, but are willing to increase taxes on the other guy.

    yes borrowing is sub optimal, but to some unknown extent this is a temporary revenue trough. if they cut expenditures enough and freeze them at that lower level till revenue growth resumes…

    would hope they’ve run those projections more carefully and realistically than Oakland would.

    but if it turns out there are many years of say a jobless recovery plus higher interest rates for govt borrowing etc. super drastic cuts would needed at that time, plus a tax surcharge on the upper middle class.

    -len raphael
    temescal

  16. Patrick

    The overall consensus seems to be that we (the voters) shouldn’t have to give “guidance” to legislators. However, if we’re eternally going to have to have special elections to solve budget crises, how about giving us alternatives?

    VOTE FOR ONE ONLY (TO CLOSE $5 BILLION DOLLAR BUDGET GAP):
    (Figures completely pulled out of thin air)

    Proposition1A: raise $5 billion by borrowing (will cost the State $22 billion in principal and interest payments over 20 years);
    or
    Proposition1B: raise $5 billion by raising the sales tax .5% (which may lead to a decline in economic activity necessitating another tax increase)
    or
    Proposition 1C: cut $5 billion out of the school budget (class sizes will double, 10,000 teachers out of work)
    or
    Proposition 1D: Modify Prop 13 to apply only to primary residences, leading to a revenue increase of $5 billion (actual modification will increase revenues by $7 billion; $2 billion needed in one time charges related to assesment and updating tax rolls).

    As they will cumulatively get 100% of the vote, the choice with the highest percentage of votes passes. We could even do ranked choice voting. The state is guaranteed that the problem will be “solved” after the vote and Californians get to vote on specific issues with specific outcomes , rather than voting on some nebulous “solution” with only a vague idea about what not voting for them will mean.

  17. Robert

    P, the special election was required because some of the solutions in the legislative compromise required going to the voters for approval, mostly because of various other things that the voters have approved over the years. They didn’t put it to a vote becuase they thought it would be a cool thing to do.

    I didn’t mean to suggest that the election was configured, or could be configured, to give guidance.

    The problem appears to be that the voters are convinced that this mess at the state level can somehow be solved with the only expense or inconvenience being to the ‘other guy’. And that is just not going to work any more. And that is true for Oakland also.

  18. Patrick

    Compromise? What compromise? The special election was the result of political blackmail by a minority party.

    The “other guy” has always been people like those of us who live in Oakland. Who cares about Oakland’s schools, streets, parks – all I care about is my rent control/Prop. 13 benefit/crime-free suburb. As long as the myth that the wealthy only subsidize the poor persists, we’ll never be able to move forward. Oakland subsidizes the rest of the Bay Area – just not monetarily. We subsidize them by enduring the pollution of the port and the trucks which transport products to SF, SJ, Walnut Creek, etc. We subsidize them by hosting the most poorly maintained freeways in the Bay Area, which are largely traveled by people outside of Oakland. If 101 was in the condition that 880 is, there would be riots. And, we subsidize them by housing, schooling and caring for the illegals/underemployeds/worker bees that make the wealth of the citizens of other cities possible.

    And THAT is what is not going to work anymore. I venture to say that the average Oaklander is used to taking care of themselves with very little – and is probably more willing to assist their City in time of need, When little Johnny Lamorinda has to write his compostion on the back of a piece of scrap paper, perhaps they’ll finally see the light.

  19. SW

    Regardless of what you think about the failed propositions or the state’s latest money grab from local government, it’s worth setting the record straight, and contrary to V’s statements above, the State did not propose a local property tax borrowing until it was clear the propositions were in trouble. The Department of Finance released the May Revision just a few days before the election, when the handwriting was on the wall. Even then, they only threatened to take the property tax if the propositions failed. The revision included $15B in reductions to deal with further downturns since the adoption of the budget, and another $5.8B in cuts that would occur if the propositions didn’t pass. The grab of local property tax dollars was among the latter cuts. It’s all there in black and white in the May Revise on the DOF website.

    And if you think this property tax borrowing is the worst thing coming, think again. Health care and social services are going to be blown up in California if other alternatives aren’t found. Ending CalWORKs as we know it, Healthy Children, and the state’s share of cost for child welfare services is going to hit Oakland residents a lot harder than the proposed cuts to the city. It’s an unprecedented attack on the poor, which is really saying something in this state. That’s where the outrage, and the advocacy, needs to be if you’re really concerned about how Oakland will fare after the next round of cuts.

  20. Ralph

    I hate that Sacramento won’t do its job. I also hate that the CA electorate goes hogwild with iniatives that hamstring Sacramento. If the measures that cut into the the ballot box initiatives would have decimated them whole hog I would have been all over them. It would have not have solved the problem but it would have been a step in the right direction.

  21. V Smoothe Post author

    The May revision referred to above included the borrowing as a contingency proposal based on an anticipated deficit almost $3 billion lower than the current anticipated deficit, even anticipating failed propositions. We would be facing this either way.

  22. SW

    I disagree. A whole different set of strategies for dealing with the $3B was released on Friday!

  23. Chris Vernon

    Isn’t it clear that Sacramento really can’t “do it’s job” as long as there is a 2/3 majority required to pass a budget? A tyranny of the minority has persitsted for too long. This has always been a recipe for disaster. That in combination with Prop. 13 have made California largely unsustainable.

    The 2/3 majority requirement must be repealed and Prop. 13 must be either repealed or rewritten.

    Chris Vernon

  24. len raphael

    Reversing some of Prop 13 say by excluding all non-residential commercial properties, is very tempting and i could see it passing at the ballot. Other than achieving the very practical immediate goal of raising revenue, it would be dumb policy which would shift the burden of taxes without regard to ability to pay or matching the burden with the benefits of state and local spending. it would also distort investment by encouraging capital to leave commercial real estate which would lead to higher rents for businesses that generate other forms of tax revenue directly and indirectly.

    -len raphael
    temescal

  25. V Smoothe Post author

    Just wanted to give an update on this issue. The Budget Conference Committee yesterday rejected the proposal to take the money from local government. More info on their decisions here.