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2008 Legislative Highlights and Recognition

Dan Carrigg is legislative director for the League and can be reached at carriggd@cacities.org.

With the mortgage crisis, credit crunch and other factors sinking the national and state economies, the 2008 legislative year was dominated by a three-way battle among the governor, Democrats and Republicans over how to close a $24 billion deficit spanning two budget cycles.

When cost-of-living autopilot spending formulas meet declining revenue projections, bad things happen to the state budget. By January 2008, the FY 2007-08 budget, which had been adopted only four months earlier, was already wildly out of balance. Administration officials questioned whether there was enough cash to make it to July. Mid-year emergency measures were adopted in February. While some cuts were made, most of the adopted proposals involved borrowing the re maining $3.3 billion through issuing the remaining Economic Recovery Bond, temporarily postponing cost-of-living increases in various programs and withholding payments for numerous programs, including local Highway User’s Taxes, to ensure sufficient cash flow.

Budget Process Bogs Down

But the February adjustments only partially addressed the problem. Gov. Schwarzenegger proposed a 10 percent across-the-board cut to all programs and a lottery securitization proposal for his 2008-09 budget. Of importance to cities, the governor’s budget did not borrow from either Proposition 1A (property taxes) or from Prop. 42 (sales tax on gas). The governor said that borrowing from local government would only make the state budget worse in future years because the funding would need to be repaid. After recounting various gimmicks and revenue grabs of the past, he challenged the Legislature in his State of the State address, saying, "We now have no way out except to face our budget demons."

The Legislature, however, was not in a receptive mood. Term limits brought new players into leadership positions. Karen Bass replaced Fabian Nuñez as Assembly speaker. Dave Cogdill replaced Dick Ackerman as Senate Republican leader. Democrats attacked the governor’s across-the-board approach as not being a serious effort to identify priorities. Republicans and Democrats both denounced aspects of the lottery securitization proposal. Democrats maintained that additional revenues had to be a part of the solution. Republicans signed pledges in opposition to any tax increase.

Months of partisan wrangling followed. The Democrat-dominated budget process produced a budget that relied on $8.7 bil lion in revenue increases. Budgets with tax increase proposals were brought to the floors of both the Senate and Assem bly, but produced no Republican votes. Then Republicans were challenged to put their own budget together and did so, but it yielded no Democratic votes. The governor, chastising both parties for refusing to "come out of their ideological corners," proposed an "August Revise" to the budget that included a three-year one-cent hike in state sales taxes as its central component. With the Republicans hold ing firm against new taxes, this proposal also failed to gain traction.

After a showdown in which the governor threatened to veto the budget and all pending legislation and legislators clamored angrily for a veto override, a budget agreement was finally struck on Sept. 23, 2008 --- 85 days after the constitutional deadline of July 1. It was a "get out of town" proposal that avoided any new tax increases and relied on a variety of cuts, revenue accelerations, internal loans, changes to revenue accrual practices and the closure of several tax loopholes.

The final bargain also included two ballot proposals: one that imposes tighter restrictions on a special budget reserve fund and provides some additional authority for the governor to make mid-year reductions and another that makes changes to the state lottery and authorizes securitization of its revenue. City officials breathed a sigh of relief that the final budget did not include borrowing of local government (Prop. 1A) or transportation (Prop. 42) revenues. However, it did include a one- year, $350 million seizure of redevelop ment funds.

Budget Delay Underscores the Need for Reform

In the aftermath of this historic budget delay and the repeated partisan theatrics between liberal Democrats and conservative Republicans --- all elected to "safe" districts --- newspaper editorials and public policy think tanks are calling for legislative reform. Some fundamental questions are being asked, including: Are the Legislature and its budget process broken? Is the institution capable of meeting California’s challenges? What can be done about it? Whatever the solutions, the next several years and upcoming ballots may be dominated by this discussion if it’s not eclipsed by national economic woes.

League Makes Progress on Strategic Goals for Cities

The League board of directors outlined four strategic goals for the 2008 legislative session under the theme of Building Sustainable Cities:

1. Protect funding for vital community services;

2. Support green and sustainable cities;

3. Expand infrastructure investment; and

4. Enact honest and responsible eminent domain reform.

As always, the cornerstone of the League’s political strength and success is the com mitment and dedication of the many city officials who devote their time and energy to serving in the League’s divisions and on its policy committees, special task forces and board of directors.

Progress on Protecting Funding for Vital Community Services

With a staggering state deficit, the exhaustion of the previous $15 billion of Prop. 57 Economic Recovery Bonds, Republicans signing anti-tax pledges and Democrats wanting to protect education and social programs, it was clear that 2008 was a year when local revenues would again be placed on the table - and they were. Conventional wisdom in the state Capitol was that legislators would refuse to compromise and would take local revenue because it was better politics for Republicans than raising taxes or, for Democrats, cutting education and social programs. In addition to legisla tors examining how much local revenue could be borrowed under Prop. 1A and Prop. 42, the Legislative Analyst’s Office (LAO) offered an "alternative budget" that proposed a variety of legislative tricks that would pit cities, counties and special districts against each other. The LAO proposals included ideas such as:

  • Taking all Prop. 172 (sales tax for public safety) funds away from cities;
  • Transferring remaining city vehicle license fee revenue to counties;
  • Shifting property taxes from enterprise special districts to counties; and
  • Taking $225 million per year away from local redevelopment agencies for five years and shifting it to schools.

Funding for city Community Oriented Policing Services (COPS) and booking fee reimbursement programs were also zeroed out in other legislative proposals. The League actively fought these cuts on all fronts. Depending on the local funding at stake, various strategies were employed, including launching a "Cut up the Card" website designed to bolster the governor’s and other efforts to combat borrowing of local property taxes. The League also worked with the California Redevelop ment Association to limit the redevelopment funding hit to one year. Cities were able to survive a chaotic year with their budgets relatively unscathed, thanks to the efforts of many local officials working with the League’s regional public affairs managers to make phone calls, write letters and participate in press conferences and other activities.

Progress on Supporting Green and Sustainable Cities

Over the past several years, reducing green house gas (GHG) emissions has become a leading global concern. The focus on GHG emissions, combined with rising oil prices, recent droughts and an economic recession, has forced a re-evaluation of existing energy usage through the lens of climate change. In California, AB 32 (Nuñez) accelerated that discussion by establishing statewide goals for reducing GHG emissions.

Rather than wait and react, the League has opted to lead in this discussion. The League’s Institute for Local Government has compiled and distributed suggested best practices for both city facilities and local communities. While combating legislation that would impose unrealistic restrictions on local water conservation and landfill practices, League lobbyists tracked various state regulatory efforts designed to implement AB 32, including soliciting and coordinating comments on the state Air Resources Board’s draft Scoping Plan. In addition to supporting adoption of a new statewide green building code, the League advocated for additional flexibility for local governments to impose tighter standards at the local level.

The League also worked with many other stakeholder groups in a multiyear process to reach agreement on SB 375 (Steinberg), landmark legislation that brings together existing regional planning efforts for transportation and housing to incor porate regional GHG reduction targets. In addition, the League strongly advocated for increased resources to promote infill development and infrastructure, includ ing protecting redevelopment funds from state raids.

Progress on Expanded Infrastructure Investment

Infrastructure investment remained a high priority for the League during 2008, with a focus in three areas:

1. Providing city officials with informa tion and updates about transportation, housing and other funding available to city governments from the 2006 state infrastructure bonds;

2. Advocating for the allocation of additional bond funds so cities can take advantage of reduced construction costs and expand jobs and economic stimulus activities; and

3. Protecting Prop. 42 (sales tax on gasoline) allocations and redevelopment funds from state raids and supporting legislation that expanded options for funding infrastructure.

In addition to combining with other stakeholders to successfully protect Prop. 42 funds, the League successfully secured an additional $187 million in Prop. 1B local street and road funds for cities. Increased allocations for infill and transit-oriented development programs were provided both in the League- supported AB 1252 (Caballero) and the state budget. A total of $400 million in Prop. 84 park funds will become avail able through the passage of AB 31 (De Leon) and another $200 million for park development and rehabilitation related to housing development through AB 2494 (Caballero). Cities were also given flex ibility to use design-build contracting for construction projects as well as facilities for wastewater, solid waste management or water recycling through the passage of AB 642 (Wolk).

Progress on Securing Honest and Responsible Eminent Domain Reform

On June 3, 2008, the state’s voters passed Prop. 99 with 62 percent of the vote. This measure, sponsored by the League, California Redevelopment Association, California State Association of Counties, and key environmental groups and other organizations, provides protections for single-family homeowners from eminent domain actions. Concurrently, the voters rejected Prop. 98 with 62 percent of the vote. Sponsored by the Howard Jarvis Taxpayers Association, Prop. 98 was a poorly drafted, deceptive measure that --- under the guise of eminent domain --- would have eliminated rent control and environmental protections and undercut local land use authority and investments in new water supplies.

This Yes on 99/No on 98 victory was the result of a protracted and exhaustive effort to counter cynical efforts to exploit the U.S. Supreme Court’s Kelo decision to satisfy broader agendas. Prior to Prop. 99’s passage, the League worked to assist in the defeat of Prop. 90 (the predecessor to Prop. 98) in 2006, and sponsored ACA 8 (De La Torre) in an unsuccessful effort to secure consensus reforms through the Legislature.

Looking Ahead

As this issue of Western City was being finalized, more bleak news about the state budget deficit was breaking. Current estimates put the 2008-09 budget at least $11 billion in the red, with an anticipated shortfall of $17 billion for FY 2009-10. However, some state officials believe that both numbers could actually be much higher than currently estimated. It’s clear that there is much work ahead, both for the governor and the Legislature as they attempt to close the gap and for city officials who are grappling with revenue shortfalls and immense uncertainty in the face of the state deficit.

2008 Legislative Recognition

The 2008 legislative session was dominated by the state budget crisis, as legislators debated whether to cut programs, raise revenue or resort to accounting mechanisms and borrowing to close the state budget deficit. City officials faced similar challenges due to declining property tax, sales tax and other revenues and made tough decisions by cutting local programs and making other adjustments to their budgets in order to live within their means. At the state Capitol, however, polarized politics produced indecisiveness, delay and stalemate.

Despite the standoff over the state budget, throughout the year many legislators offered assistance to the League or were supportive of city issues in various ways. The following four legislators --- three Democrats and one Republican --- were recognized by the League’s lobbying team for their outstanding efforts in working with the League and supporting local government during the 2008 session.

 

Assembly Member Tom Berryhill (R-25, Modesto). As a freshman Republican, As sembly Member Berryhill demonstrated dogged determination as he sought to respond to an issue that was plaguing farmers in his Central Valley district as well as cities around the state: metal theft. Millions of dollars in damage to public works projects, utilities and private property have occurred when thieves steal copper and other valuable metals and sell it to unscrupulous scrap dealers. Berryhill encountered and overcame many legislative obstacles in his effort to secure the passage of his League-supported AB 844, which imposes strict accountability on the metal recycling industry to limit the market for stolen goods. The League appreciates his efforts to make this bill workable for cities.

 

Assembly Member John Laird (D-27, Santa Cruz). As a former mayor of Santa Cruz and former member of the League board of directors, Assembly Member Laird needs little introduction to city officials. His talents were quickly acknowledged in the Assembly where he rose to be chair of the Assembly Budget Committee. Always accessible, thoughtful and ready to listen to the concerns of cities, Assembly Member Laird’s departure from the Legislature due to term limits leaves a void. In 2008, he was very helpful to League lobbyists in the budget process and on a variety of other issues. He also added to his legacy for cities and the environment through the passage of his bill AB 2466, a mea sure that will generate additional public investment in renewable power by authorizing a public agency to receive full credit against its electric utility bill for any surplus power produced by an eligible renewable generating facility.

 

Assembly Member Lori Saldaña (D-76, San Diego). Assembly Member Saldaña has provided balanced leadership in the difficult role of chair of the Assembly Committee on Housing and Community Development. In 2008, in addition to her work related to common-interest developments, she took on reforming the Density Bonus Law. Saldaña put a great deal of work into AB 2280, and though many of the bill’s provisions were taken out as part of the legislative process, it makes several important improvements to the law --- an accomplishment in itself --- including an important correction of an absurd court interpretation of the law related to the bonus awarded to affordable senior projects within larger scale developments.

 

 

Assembly Member Lois Wolk (D-8, Davis). A former two-term mayor of the City of Davis and an established leader on flood control and environmental issues, Assembly Member Wolk has been a solid supporter of local government during her six years in the state Assembly. In 2008, she assisted cities throughout the state through the passage of her bill AB 642, which allows cities to use design-build contracting for building construction projects as well as wastewater facilities, solid waste management facilities or water recycling facilities. At the end of the legislative session, the League and the California Redevelopment Association were seeking amendments to mitigate some of the impacts of a $350 million shift of local redevelopment funds. While that effort was ultimately unsuccessful because legislators were given little opportunity to read --- much less amend --- the details of the final budget package, the League appreciates the concern and assistance demonstrated by Wolk and her staff in that effort.