Redevelopment is one of the Programs Slashed –
On Wednesday Democrats send Governor Brown a budget package that claimed to close nearly ten billion in the budget deficit, although it includes several tricks and maneuvers that the Governor has said he does not want.
“Today we passed an on-time, balanced budget, utilizing for the first time the majority vote authority voters gave the Legislature last November under Proposition 25,” said Senator Mark Leno, Chair of the Senate Budget Committee in a statement released just after the Senate’s passage of the budget plan.
“I am proud of our work to resolve the immediate budget crisis within the state’s constitutional deadline,” he continued. “Without the two Republican votes in the Senate we needed to maintain current revenue levels, the budget we approved today represents the best possible solution we could develop given the tools we had available.”
However, he noted that this was not the preferred budget plan for California.
“Without an extension of current revenues, we were forced to make significant cuts to public education, higher education, social services, our court system, state parks and public safety,” he added. “This is the reality we face with a state that is starved for cash.”
Included in the proposal are some revenue enhancements, including a one-quarter cent rise in the sales tax, a $12 per vehicle raise in vehicle registration fee, and an “Amazon” tax requiring online retailers to collect sales tax.
Education takes another huge hit. It adds another $150 million in cuts to UC and CSU on top of the $500 million hit each took in the earlier budget. At the same time, it defers about $3.4 billion in payments to schools which will force them to borrow money in order to maintain programs.
The budget takes $1 billion from First 5, however that move was already being challenged in the courts.
It takes $1.7 billion from redevelopment. Borrows $740 from state special funds. Cuts $150 million from state courts. And shrinks the reserve to $570 million as opposed to the Governor’s proposal of $1.2 billion.
In general, the sense from Democrats is that they did not want to do this, but they had to. One exception is Senator Leeland Yee who voted against many of the components, including cuts to education and the elimination of redevelopment.
He said in a statement yesterday, “There were certainly difficult decisions to make regarding our state budget and I commend the Democratic leadership for pushing a balanced budget on time.”
“While I voted for billions of dollars in reductions, we should not balance the budget on backs of our kids and thus I did not support draconian cuts to schools,” Senator Yee said.
“I voted against the main budget bill because my constituents didn’t send me to Sacramento to increase class sizes, lay off teachers, and hurt public education,” Senator Yee said and added, “I will continue to push for increased revenue, including an oil severance tax, and my legislation to claw back corporate tax breaks.”
Locally, Senator Lois Wolk and Assemblymember Mariko Yamada reluctantly voted for the legislation.
Senator Wolk called the budget the worst she has voted for in nine years in the Legislature, citing little good in it..
“Today we only did what we had the power to do with a simple majority to meet our constitutional duty,” Senator Wolk said in a statement released on Wednesday. “Unfortunately, Democrats alone cannot produce the kind of budget and reforms that will reduce our long-term debt, realign the state and local relationship, and fund education and public safety to the levels the public wants and deserves.”
“I continue to support the Governor’s plan for an honest, tough, balanced approach with real reforms that will begin solving our long-term budget deficit and restore the fiscal health of our state,” she said adding: “I would not be surprised or disappointed if the Governor vetoed this budget and asked Republicans to join with us to try again and get it right.”
“After months of collective negotiation and transparent legislative action, a majority of the legislature took the necessary and responsible steps today to get an on-time budget using the majority vote authority given to us by the voters last November,” Assemblymember Mariko Yamada said in a statement Wednesday afternoon. “These budget votes were difficult and not necessarily a reflection of our priorities, but we had no other options in the absence of extended revenues.”
She added, “We were elected to fight for education, healthcare, public safety and common sense reform and to seek solutions to the real problems of everyday people. Passing the budget today sends a signal that we are serious about moving California further along on the road to recovery.”
Columnist and Commentator George Skelton wrote this morning that while all parties, the Democrats, the Republicans and the Governor, share blame for this process – and Governor Brown comes out the big loser in this, “having promised gubernatorial effectiveness and not delivered,” the problem here is the system.
Writes Mr. Skelton, “The major blame for ceaseless fiscal dysfunction at the state Capitol is a crappy governing system. With that you get a crappy product. And you — the California voters — pretty much designed this system, led like lemmings by special interests with self-serving agendas.”
He added, “Count the systemic flaws: Term limits that rob the government of legislating experience and policy depth. A runaway initiative system that leads to ballot-box budgeting and legislative straitjackets, including a strict formula tying up roughly 40% of the state’s general fund for schools.”
But the biggest culprit in his view is the the two-thirds legislative vote requirement, a byproduct of… Proposition 13.
He writes, “That measure not only dramatically lowered local property taxes — a worthy cause — but also, the way it was implemented, severely gummed up California’s relatively smooth governing system. It transferred much of the control and funding responsibility for local services — such as K-12 education — to Sacramento while eviscerating the state’s ability to raise taxes to finance the local burden.”
Democrats Slash $1.7 Billion from Re-Development
Redevelopment agencies could stay in business but they would be required to give local school districts their usual share of property taxes, which until now have been diverted to local redevelopment efforts.
This would enable the state not to cut educational budget as much as feared previously.
Naturally, the signing provoked strong opposition from the California Redevelopment Association and the League of Cities.
John Shirey, executive director, California Redevelopment Association, issued a statement stating: “A slim majority of legislators has unfortunately voted to kill one of California’s only job-creating engines and robbed local communities of the ability to address high unemployment, poverty, crime, and other problems. While most of the country is worried about a double-dip recession, the California Legislature has done its part to push our local economies over the financial cliff.”
“While many legislators who voted in favor of this package spoke of protecting and reforming redevelopment, these bills do neither. They eliminate redevelopment and are illegal,” Mr. Shirey added. “But, this is not the end of the story. If these bills are signed by the Governor, we will be prepared to take any and all legal action necessary to overturn this irresponsible and unconstitutional legislation.”
Chris McKenzie, executive director, League of California Cities, joined in stating, “Today majorities of the California Senate and Assembly again decided to violate the will of the electorate and our State Constitution in order to meet short-term state budget needs.”
Critics argue that this is just a scheme anyway, that the provision violates the constitution and is in direct conflict with both the recently passed Proposition 22 as well as Prop 1A passed nearly a decade ago.
Stated Mr. McKenzie, “These bills clearly violate numerous provisions of the State Constitution and are in direct conflict with Propositions 1A (2004) and Prop 22 (2010) that were overwhelmingly passed by the voters.”
He added, “If the Governor signs these bills, we will be prepared to defend the constitution and the will of the voters in court very soon thereafter. It is a very sad day for Californians when their State Legislature knowingly acts in such direct violation of our highest laws.”
John Shirey added, “I want to thank Senator Rod Wright, Senator Bob Huff and Assembly Member Luis Alejo in particular. These legislators are strong supporters of redevelopment and made valiant efforts to defeat these measures. We also want to thank the other legislators who listened to their constituents, listened to common sense and voted “no” on the two-bill redevelopment plan.”
Supporters of the redevelopment plan have argued that redevelopment takes money from local government and education. However, Senator Leland Yee noted on Wednesday, “I also voted against the elimination of redevelopment agencies, because now more than ever we need to increase jobs in California, and in San Francisco, our schools receive millions of dollars in funding from redevelopment.”
He added, “Unfortunately, the RDA legislation is just another cut to our schools, which I cannot support and our classrooms cannot afford.”
—David M. Greenwald reporting
[quote]Redevelopment agencies could stay in business but they would be required to give local school districts their usual share of property taxes, which until now have been diverted to local redevelopment efforts.[/quote]
Call me cynical, but just how much of the redevelopment money will end up being given back to the schools at the local level, and how much will somehow be sucked up by the state bureaucracy?
[quote]Supporters of the redevelopment plan have argued that redevelopment takes money from local government and education. However, Senator Leland Yee noted on Wednesday, “I also voted against the elimination of redevelopment agencies, because now more than ever we need to increase jobs in California, and in San Francisco, our schools receive millions of dollars in funding from redevelopment.”[/quote]
Now this is interesting. How did funding from redevelopment find its way into school coffers in San Francisco I wonder?
[i]”Unfortunately, the RDA legislation is just another cut to our schools, which I cannot support and our classrooms cannot afford.”[/i]
This statement simply makes no sense.
Don: Look at this in the long term. If redevelopment does not exist, then we would expect less direct and indirect property tax revenue from blighted areas. For the schools, this would be a short-term gain for long-term pain. It is another budget bailout at the expense of our kid’s future.
LATimes reporting Brown has vetoed the Budget.
[quote]LATimes reporting Brown has vetoed the Budget.[/quote]
Oh, this is interesting…
Brown press release ([url]http://latimesblogs.latimes.com/california-politics/2011/06/jerry-brown-veto-budget.html[/url]): [quote]“Unfortunately, the budget I have received is not a balanced solution,” his statement said. “It continues big deficits for years to come and adds billions of dollars of new debt. It also contains legally questionable maneuvers, costly borrowing and unrealistic savings. Finally, it is not financeable and therefore will not allow us to meet our obligations as they occur.” [/quote]
Jerry on You Tube today ([url]http://www.youtube.com/watch?v=L7dHqjhJz8k&feature=player_embedded[/url]).
Looks like the legislators will not receive their salaries after all since they failed to deliver a budget that works. Good.
Jeff, I don’t think so. Here is what Prop 25 says:
[i]”… in any year in which the budget bill is not passed by the Legislature by midnight on June 15, there shall be no appropriation from the current budget or future budget to pay any salary or reimbursement for travel or living expenses for Members of the Legislature during any regular or special session for the period from midnight on June 15 until [b]the day that the budget bill is presented to the Governor[/b].”[/i]
The legislature met its burden. It presented a budget to the governor.
Rich: Cr@p, you are right. So, they submit a budget that they must have known the governor would veto… one that he could use to draw voter points demonstrating his fiscal toughness via veto. The end result is that all politicians benefit, but the residents are still left with a state with unsustainable budget deficits.
[quote]Rich: Cr@p, you are right. So, they submit a budget that they must have known the governor would veto… one that he could use to draw voter points demonstrating his fiscal toughness via veto. The end result is that all politicians benefit, but the residents are still left with a state with unsustainable budget deficits.[/quote]
Don’t you just love politics/politicians? NOT!
This story in the Bee ([url]http://blogs.sacbee.com/capitolalertlatest/2011/06/controller-delays-decision-on.html[/url]) says John Chiang makes the decision on Prop 25: [quote]“I will move quickly to complete our analysis of whether the budget bills passed Wednesday meet the constitutional definition, or fall short, which would require my office to forfeit their pay under Proposition 25,” Chiang said. “We are awaiting the final budget bill language before we begin our examination. In addition, we have asked the Department of Finance, which tracks and tallies the Legislature’s budget activities, for data to inform our decision.” [/quote]
[img]http://www.8asians.com/wp-content/uploads/2009/02/john_chiang.jpg[/img]
[i]”If redevelopment does not exist, then we would expect less direct and indirect property tax revenue from blighted areas.”[/i]
I see little evidence that RDA’s finance projects in blighted areas, and certainly they don’t in Davis.
Don: A report from [url]http://www.ppic.org/content/pubs/rb/RB_298MDRB.pdf[/url]
[quote]In dollar value, the 38 projects collectively received $78 million in tax increment revenues, about $40 million of which can be explained by the RDAs’ effect on property values. Thus, the subsidy from other jurisdictions to the RDAs totaled $38 million in FY1994–1995.[/quote]
From this study dataset, without RDAs there would have been $40 million less property value appreciation.
The recommendations of the study are to reform, not do away with RDAs:
[quote]1. The legislature should formally clarify the goals of redevelopment.
2. The definition of blight should be aligned with the goals of redevelopment and should be made more precise.
3. Some form of oversight authority should be established to monitor RDA behavior.
4. If the legislature intends redevelopment to be self-financing rather than heavily subsidized, the pass-through rate should be increased significantly.[/quote]
That is an interesting study. It would be even more interesting to see something reviewing projects since 1978 – 82, the study period given.
More to the point:
“This study’s results suggest that the [b]existing tax increment
system is not an effective way to finance redevelopment.[/b]
Few projects generate enough increase in assessed
value to account for their share of these revenues, and those
projects that came closest defined blight broadly and included
large amounts of vacant land. Tax incentives can lead
cities to designate too many areas as blighted, and if true
blight is targeted, an area is unlikely to generate enough revenue
to earn the tax increment revenues.”
That was in 1998, when your study was published. I suspect municipalities are even more likely to use a broad definition of blight now. Davis RDA projects have not been even remotely related to blight by any common-sense definition. The Davis RDA was founded as part of the development agreement process that led to Mace Ranch. From Mike Fitch’s history:
“Now that it had an accord on how to handle the Ramos project, Davis needed a strategy for avoiding similar predicaments in the future. Its solution was an historic accord with the county reached in November 1987. Known as the Davis-Yolo Pass-Through Agreement, the accord is based on a simple principle: the county can approve urban development near Davis if it wants to, but it’s going to take a big hit financially if it does. County officials kept their legal authority to decide whether unincorporated lands near Davis should be developed or not, but the practical impact has been to give the city control of a planning area that stretches from County Road 27 on the north, the Yolo Bypass on the east, County Road 35 and the Interstate 80 interchange at Pedrick Road on the south and County Road 97D on the west. The planning area covers about 84 square miles of territory, including the seven square miles of land located within the city limits at the time.
The city’s ace up its sleeve was its plans for setting up a redevelopment agency for the downtown area and South Davis to raise revenue for a host of major traffic projects, including construction of a new freeway overpass across Interstate 80 and widening of the Mace Boulevard interchange. Typically, a city’s redevelopment agency gets money by claiming a large share of property tax revenue created by new developments in redevelopment areas, siphoning off funds that otherwise would go to the city general fund, county and other local government agencies. In the agreement with Yolo County, Davis agreed to pass along to the county and a local library district tax revenue that normally could be claimed by the city’s redevelopment agency. Rosenberg emphasized the county retained its authority to determine whether projects proposed for land located outside the city’s sphere of influence should be approved or not. The pass-through deal would last, however, only as long as the county did not approve urban development over any city objections. Informal procedures were worked out for the county to notify the city when projects were proposed for unincorporated lands located within the Davis planning area and for the city to notify the county whether the projects are considered to be urban development.”
Davis RDA funds were never intended for use in the truly blighted areas.