STATE BUDGET DRAFTED IN MIX OF DIRE ECONOMY, BLEAK OUTLOOK AND FAILED SOLUTIONS Legislature Begins to Analyze Details as It Considers Alternatives

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1 IN THIS ISSUE: Page 6: Governor s Budget Proposes Wholesale Changes to the Bottle Bill Page 7: U.S. EPA Seeks Input on Proposed Rulemaking to Strengthen Stormwater Program Senate Local Government Committee Composition Changes Page 8: Sen. Bob Dutton Set to Become Next Senate Republican Leader Registration Extended - City Manager s Department Meeting Jan. 15, 2010 Issue #2 STATE BUDGET DRAFTED IN MIX OF DIRE ECONOMY, BLEAK OUTLOOK AND FAILED SOLUTIONS Legislature Begins to Analyze Details as It Considers Alternatives Gov. Arnold Schwarzenegger released his FY budget last week stating that the crushing weight of the economy and other factors will make it impossible for the state to close its projected $19.9 billion deficit without a great deal of pain. The Governor contends that California does not receive its fair share of federal funds and that the state has been providing services that are under the federal government s responsibility without being compensated. Although the Governor projected that California is poised for modest growth this year, the news for the state got worse this week when California s credit rating was downgraded yet again to from an A to an A -. For more, see Page 2. CAMPAIGN TO PROTECT TAXPAYERS AND VITAL LOCAL SERVICES MOVES FORWARD WITH SECOND WEEK OF NEWS CONFERENCES Los Angeles, Foster City, Sacramento and Redding More than 60 local government, transportation, business, public safety, labor and public transit leaders rallied at regional news conferences this week to support a statewide signature-gathering campaign. If it qualifies for the November 2010 ballot, the Local Taxpayer, Public Safety and Transportation Protection Act of 2010, would close loopholes to prevent the state from borrowing, raiding or otherwise redirecting local government, transportation or public transit funds. For more, see Page 2. GOVERNOR S TAX REVENUE ESTIMATES GRIM FOR PROPERTY AND SALES TAXES Gov. Arnold Schwarzenegger s proposed budget released last Friday contains revenue estimates applicable to key city revenues, such as property and sales taxes. For more, see Page 5.

2 Budget Continued from Page 1 The Department of Finance (DOF) expected that the economy would be in its current situation when evaluating the budget last year for FY However, there are a number of reasons the budget is almost $20 billion out of whack (approximately $6 billion in FY and $14 billion in FY ). The FY budget was based on solutions which could not be achieved because of the decision in the transit lawsuit, medical costs related to the prison system, the inability to secure federal funds, lack of flexibility to reduce Medi-Cal costs, state caseload increases and the collapse of the plan to sell a portion the State Insurance Compensation Fund. The League presented an initial analysis of the Governor s budget ( impact on cities last week in City Advocate Weekly. The Jan. 8 story can be found on the League s Web site at LAO Releases Budget Analysis State Legislative Analyst Mac Taylor released the Legislative Analyst s Office (LAO) analysis of the Governor s budget on Monday, Jan. 11. Taylor briefed the Joint Legislative Budget Committee on Wednesday on the report. He told the committee that the Governor s budget is the starting point for the budget process and said that the Legislature can now propose alternative scenarios to close the massive deficit. Taylor warned that the Governor s plan to secure almost $7 billion in federal funds is unrealistic. LAO s report also warns that the revenue and spending projections in the Governor s budget aren t viable. To close the deficit, along with the requested federal funds, the Governor also proposes $8.5 billion in cuts and other solutions including the swap of the gas tax funds which the League is continuing to review. LAO s budget analysis can be found at DOF Staff Briefs City Lobbyists Mark Hill, DOF program budget manager, met with League lobbyists and lobbyists representing individual cities on Thursday, Jan. 14 at the League s office. He presented a dire outlook on the economy. Hill explained that California could expect moderate growth in future years which would begin to help the state s budget outlook. Hill told the lobbyists that it was the Governor s personal preference not to raise taxes to close the deficit especially given the state of the economy. Hill answered numerous questions on the effect of the budget on transit, transportation funding, and other matters. League staff is continuing to review the implications of this budget, especially the proposed gas tax swap for an alternative revenue source (excise tax), and will provide additional information to cities shortly. News Conferences Continued from Page 1 The news conference held in Foster City on Monday was the first of several across California this week, including Los Angeles, Sacramento and Redding. Californians to Protect Local Taxpayers and Vital Services, the coalition supporting the ballot measure, plans to collect more than 1.1 million signatures to ensure it meets the required 694,354 valid signatures needed to qualify a constitutional amendment for the statewide ballot. Foster City, Jan. 11 Local officials rallied in Foster City to speak out against state diversions of local funds. 2

3 Several local officials spoke at the news conference including: Morgan Hill Mayor Steve Tate Mountain View Council Member Mike Kasperzak Jim Gleich, deputy general manager, AC Transit and California Transit Association executive committee member Belmont-San Carlos Fire Chief Doug Fry Hercules Vice Mayor Ed Balico Other local government officials that participated: San Carlos Vice Mayor Omar Ahmad Daly City Council Member David Canepa Millbrae Council Member Marge Colapietro Pacifica Mayor Sue Digre South San Francisco Council Member Pedro Gonzalez San Carlos Council Member Bob Grassili Hayward Council Member Barbara Halliday Foster City Council Member Pam Frisella Pittsburg Council Member Ben Johnson Foster City Council Member Linda Koelling Cupertino Council Member Orrin Mahoney Los Gatos Mayor Diane McNutt Rich Napier, executive director, City/County Association of Governments of San Mateo County Pacifica Mayor Pro-Tem MaryAnn Nihart Los Gatos Council Member Joe Pirzynski San Carlos Mayor Randy Royce Sunnyvale Council Member Ron Swegles A large number of news media attended the Foster City press conference or conducted phone interviews with local officials including: San Mateo Daily Journal San Mateo County Times World Journal KTVU-TV2 (FOX) KTSF-TV26 (Independent) KCBS-AM740 KPFA-FM94.1 Los Angeles, Jan. 11 A number of local officials spoke during the Los Angeles press event including: Los Angeles City Controller Wendy Greuel Doran Barnes executive director, Foothill Transit, chair, California Transit Association Alice Goff, president, AFSCME District Council 36 Los Angeles Council Member Janice Hahn More than 25 elected officials and union representatives assembled for the Los Angeles event including: Covina Mayor Walt Allen III Pasadena Mayor Bill Bogaard La Habra Heights Council Member Stan Carroll Rosemead Mayor Margaret Clark Glendora Council Member Doug Tessitor Claremont Council Member Peter Yao Signal Hill Council Member Larry Forester Long Beach Council Member Suja Lowenthal Maywood Council Member Ana Rosa Rizo 3

4 South Gate City Treasurer Carmen Avalos Agoura Hills Mayor Bill Koehler Santa Clarita Council Member Marsha McLean Santa Clarita City Manager Ken Pulskamp Rolling Hills Estates Council Member Judy Mitchell Santa Monica Council Member Pam O Connor Culver City Council Member Michael O'Leary Redondo Beach City Manager Bill Workman Ed Rendon, director, Teamsters Joint Council 42 Mark McNeil, president, California Association of Professional Employees The Los Angeles news conference was widely covered by the following media outlets: KABC-TV7 (ABC) LNS News KNBC-TV4 (NBC) KTLA- TV5 (WB) KTTV-TV11 (FOX) KBS (Korean Broadcasting Station) KNX-AM1070 LA Daily News Long Beach Telegram Pasadena Star News San Gabriel Valley Tribune Whittier Daily News La Opinion Chinese Daily Santa Clarita Signal Metro Radio Network City News Service Sacramento, Jan. 12 Sacramento Mayor Kevin Johnson began the news conference speaking of the need for local funds to stay within the city. Other local government representatives addressing the media about the devastating effects to their communities including: Sacramento City Council Member Steve Cohn Brent Meyer, president, Sacramento Police Officers Association Rusty Dupray, captain, Sacramento Metropolitan Fire District Government Affairs Joe Cruz, director of transportation policy, CA Alliance for Jobs Other participants present for the Sacramento event including: Elk Grove Council Member Gary Davis Galt Mayor Randy Shelton Grass Valley Vice Mayor Jan Arbuckle Loomis Council Member Miguel Ucovich Sacramento Council Member Bonnie Pannell Sacramento Assistant City Manager Patti Bisharat Jerry Way, Sacramento director of transportation Reuben Meeks, director, Rancho Cordova Police Department Rocklin Mayor Scott Yuill Rocklin Council Member Kathy Lund Winters Council Member Cecilia Aguiar-Curry Woodland Council Member Dr. Bill Marble Yuba City Mayor Cash Gill Several media outlets attended Tuesday s news conference including: KCRA-TV3 (NBC) KTXL-TV40 (FOX) 4

5 KFBK-AM1530 KXJZ-FM90.9 Sacramento Bee Roseville Press Tribune Redding, Jan. 14 A late news conference was held on Thursday in Redding. Almost all elected officials from Redding, Anderson, Shasta Lake and Shasta County were present at the event. Several local officials spoke at the news conference including: Redding Mayor Patrick Jones Shasta Lake Mayor Greg Watkins Anderson Mayor Norma Comnick Shasta County Supervisor David Kehoe Several city administrators and representatives attended from the following organizations: Greater Redding Chamber of Commerce Shasta Voices Shasta County Association of Realtors The news conference was covered by the local media including: KRCR Channel 7 (ABC) KHSL Channel 12 (CBS) KNVN Channel 24 (NBC) KCHO 91.7 FM/KFPR 88.9 FM (NPR) KQMS 1400 AM Record Searchlight Revenues Continued from Page 1 The Department of Finance (DOF) estimated that the assessed value of taxable real property will decrease 2.9 percent from the FY to the current FY During FY it is estimated that these figures will further fall by another 2.2 percent. Sales tax estimates are not much better. The Governor s proposal estimates that final taxable sales figures will decrease by 12.8 percent for the FY over the prior year and a further decrease of 7.5 percent in the FY However, DOF has projected that FY will show a slight turn around and a modest increase of 6.3 percent in statewide taxable sales. For more information on how these revenue estimates will affect your city, please visit To keep updated on events affecting municipal finance, become a Facebook fan of California City Finance. ( Local-Government-Finance-Almanac/ ) Governor s Budget Proposes Wholesale Changes to the Bottle Bill League Seeks Comments from City Officials A major overhaul to the California Beverage Container Recycling Program is included in Gov. Arnold Schwarzenegger s January budget proposal. The proposal includes loan repayments, changes to the program s structure and altering language definition. CalRecycle (The Department of Conservation) announced in July 2009 that the program s Beverage Container Recycling Fund had a significant deficit and instituted an 85 percent cut to many of the programs paid by the fund. The shortfall in the account was largely due to more than $270 million in loans over the past two years by the Department of Finance to close massive 5

6 gaps in the state s General Fund. Additionally the program faces a deficit of approximately $60 million in the FY budget. The Governor proposes to repay loans to the fund by transferring $58.4 million from the General Fund to address the current deficit and $98.2 million in FY In addition to loan repayments, the Governor is pursuing changes to the program s structure. Provisions that would eliminate a guaranteed city grant program, providing funding for city recycling and curbside collection programs are of considerable concern for cities. Current law provides a $10.5 million annual allocation to cities and counties for grant payments of $5,000 for beverage container recycling and litter cleanup activities. Current law also provides a $15 million annual allocation to curbside programs. These funds are typically used to supplement city curbside container pick-up programs, making recycling of containers convenient for city residents. The Governor s proposal, as of July 1, would eliminate these guaranteed grant funds and force cities and counties to annually compete for these funds. The overall amount of funding available would vary from year-to-year based on the money available in the fund. Included in the Governor s FY proposed budget is language that would change the definition of supermarket and a convenience zone recyclers ability to locate within the immediate vicinity of a supermarket. Current law defines a supermarket by gross annual sales of $2 million or more. The Governor s proposal would increase the gross annual sales threshold to $6 million. Certain supermarkets in rural areas may not meet this new threshold. Convenience zone recyclers would not be allowed to locate near these supermarkets. If this happens, rural communities will not have a convenient way to recycle their beverage containers and will further add to the material disposed of in landfills. The Governor declared a fiscal emergency and called the Legislature into special session to address the larger budget deficit, including the Bottle Bill proposal. Take Action The League is requesting feedback from city officials to demonstrate how the Governor s proposed changes will affect cities. What will be the impact of losing the $5,000 city grant? What will be the impact of losing funds under the curbside supplemental program? Are there other opportunities for city residents to recycle if the supermarket definition is changed? Please your responses to Kyra Ross, legislative representative at kross@cacities.org or Dane Wadlé, legislative analyst, at dwadle@cacities.org. U.S. EPA Seeks Input on Proposed Rulemaking to Strengthen Stormwater Program The U.S. Environmental Protection Agency (EPA) announced that it will initiate national rulemaking in 2010 to improve and strengthen its existing stormwater program. EPA is seeking input from stakeholders, including cities on a number of stormwater issues, including the promotion of practices that retain stormwater on-site through infiltration, evapotranspiration, or stormwater reuse to reduce these impacts nationwide. The agency is also considering how to strengthen the municipal separate stormwater sewer system (MS4) permit regulations, including expanding the MS4 regulated area to include rapidly developing areas and establishing specific post construction requirements for stormwater 6

7 discharges from new development and redevelopment, both inside and outside the MS4 boundary, that may be contributing to waterbody impairment. EPA is interested in input on the following preliminary regulatory considerations: Expansion of the area subject to federal stormwater regulations; Establishing specific requirements to control stormwater discharges from new development and redevelopment; Developing a single set of consistent stormwater requirements for all MS4s (serving populations of 100,000 or more); Requiring MS4s to address stormwater discharges in areas of existing development through retrofitting the sewer system or drainage are with improved stormwater control measures; and Exploring specific stormwater provisions to protect sensitive areas. The deadline to submit comments is Feb. 26. To read the Federal Register Notice and submission directions, please visit EPA s Web site at Upcoming Virtual and In-Person Seminars on Proposed EPA Regulations As part of the stakeholder input process, EPA has scheduled six workshops for stakeholders to learn about the proposed regulation and provide comment. The sessions will be both in-person and via webinar between Jan The only in-person event in California will be held on Jan. 20 in San Francisco. It is scheduled from 10 a.m. to 3 p.m. at EPA s Region 9 office. To attend, please register before Jan. 15 on EPA s Web site at EPA will also be holding a webinar listening session on Feb. 3 from 9 a.m. to 12 p.m. This session will include a brief presentation by EPA staff followed by public telephone comment. Please register online at Additional information on the EPA stormwater regulatory program and proposed rulemakings is available at Senate Local Government Committee Composition Changes Cox Replaces Wiggins as Chair Senate President Pro Tem Darrell Steinberg (D-Sacramento) announced last week that the Senate Rules Committee had approved changes to committee composition in an effort to improve the Senate s operations. Sen. Steinberg says that he believes that the new committee structure and sizes will allow senators to spend more time on the most pressing issues confronting California. Cities should be aware of the changes to the Senate Local Government Committee, including the recent appointment of Sen. Dave Cox (R-Fair Oaks) to chair. He replaces Pat Wiggins (D-Santa Rosa) as chair. Sen. Wiggins will remain on the committee. Sen. Cox also serves as the vice-chair of the Senate Appropriations Committee and serves on the following committees: Banking, Finance and Insurance; Budget; Energy, Utilities and Communications; and Health. First to the Senate in November 2004, Sen. Cox was re-elected in He represents the residents of the First Senate District, which include Alpine, Amador, Calaveras, El Dorado, Lassen, Plumas, Modoc, Mono, Sierra and portions of Placer, Nevada, Sacramento counties. Along with Senators Cox and Wiggins, the committee also includes: 7

8 Vice Chair Sen. Christine Kehoe (D-San Diego); Sen. Sam Aanestad (R-Grass Valley); and Sen. Curren Price (D-Los Angeles). City officials are urged to review the composition of all Senate committees and identify the committee positions held by their senators. This information is especially useful when the League asks city officials to contact legislators on specific legislation of importance to cities. The Senate Web site includes a list of each committee at Sen. Bob Dutton Set to Become Next Senate Republican Leader Sen. Bob Dutton (R-Rancho Cucamonga) was unanimously selected as the next Senate Republican leader during a caucus meeting earlier this week. The Republican Leader-elect has outlined many priorities for California, including private sector job creation and balancing the budget without creating new taxes. Current Senate Republican Leader Dennis Hollingsworth (R-Murrieta) issued a statement announcing the selection of the new leader. My Republican colleagues have unanimously selected an exceptional leader in Bob Dutton, said Sen. Hollingsworth. Together we will work to control spending and end the regulatory barriers that prevent job growth in our state. While there is no official timetable for Dutton to become the next caucus leader, the transition is expected to happen later this year. Registration Extended - City Manager s Department Meeting The deadline for the League s 2010 City Manager s Department Meeting has been extended to Jan. 20. The conference is scheduled for Feb. 3 5 in Carlsbad. More than 315 city officials are already registered for this premiere educational conference for California city managers. The conference will be an opportunity to learn about issues facing city managers and network with colleagues. For session details, please read the registration form on the League s Web site ( eting.pdf). Register online on the League s Web site at 8