- The Washington Times - Friday, January 10, 2003

SACRAMENTO, Calif., Jan. 10 (UPI) — Gov. Gray Davis called for more than $20 billion in spending cuts and $8 billion in new taxes Friday to help cover California's staggering budget deficit, although he proposed not to sully his hands with the new revenues and instead planned to send them all down to the municipal level.

As part of the plan to lead the state out of a revised $34.6 billion budget hole, city and county governments and local school boards would receive block grants that would be used to administer a variety of social programs currently run by state bureaucrats.

"We're not short-changing the counties," Davis elucidated to a packed news conference in Sacramento. "We are sending them sufficient money to maintain those programs at their current levels."

Davis, who must next guide the total $68 billion package past Republican lawmakers who have vowed to fight any new tax increases, painted the budget strategy as one that would not enrich the state Treasury and would give local officials greater control over programs that affect their citizens.

"These decisions should be made at the local level; most of these programs are already administered at the local level, and we are providing enough revenue to maintain these programs at their current level," said Davis.

Programs that would be affected by the shift include a variety of social programs and courthouse security, and the funding would come from a combination of a 1-cent sales tax increase, a $1.10 increase in the levy on a pack of cigarettes, and raising the income tax rate for residents earning six-figure salaries to 2 percent.

"All of those revenues will go to local government," Davis declared. "None will come to the state."

Under the plan, Sacramento would collect the additional revenues and then distribute them back to the cities and towns in the form of a block grant. Davis's top finance aide, Tim Gage, said it was anticipated that the move would pay off in the form of increased efficiency by removing a layer of bureaucracy and giving local officials greater spending discretion.

"We will discuss the issue of additional flexibility for the counties," Gage said.

The plan should also enable Davis to go before the Legislature and tell lawmakers that even though taxes may go up, his administration is holding the line on spending while at the same time maintaining necessary services at the local level.

The $8.2 billion in new taxes compared with another $20 billion in cuts that will likely include nearly 2,000 layoffs and belt-tightening in virtually every government sector. Education was penciled in for a $4.5 billion cut. Medical health care providers faced a 5-percent reduction in reimbursements and recipients the loss of services such as physical therapy and optometry.

Attorney General Bill Lockyer issued a statement shortly after Friday's news conference in which he urged the Legislature to consider the impact cuts to state law enforcement would have on cities and counties.

"I believe my department must continue to provide critical assistance to local law enforcement agencies by analyzing crime scene data in our state crime labs at no cost," Lockyer said, adding that "first-rate forensic services" should be available to all communities, "no matter how rural or cash-strapped."

The California State Association of Counties concluded that while the Davis plan promised new tax revenues, at the same time it let stand scheduled reductions in the Vehicle License Fee program that will cost the state's 58 counties about $4 billion in annual discretionary revenues. About three-quarters of VLF revenues go to city and county treasuries.

"On one hand, the budget proposal recommends giving counties more program responsibility. On the other hand, it proposes taking away revenues for critical local services," said association President Tim Smith. "The VLF backfill is a primary source of revenue that counties use to provide public health and public safety services."

Roy Romer, superintendent of the huge Los Angeles Unified School District, told reporters that the district stands to lose $100 million in funding.

"That is a very, very tough cut," Romer lamented. "Let's not make the hardest cut on the poorest kids."

Statehouse observers don't expect legislators on either side of the aisle to rubber-stamp the budget without contesting either spending cuts or tax increases — or perhaps both.

Davis said he took no pleasure in crafting his tight-fisted budget and did not expect it to receive a hero's welcome at the capital, however he also expected lawmakers to do what was necessary to pass a balanced budget as they had during tough times under previous governors.

"At the end of the day, the Legislature has always come through and acted responsibly," said Davis, a former state controller and member of the Assembly. "I can't tell you precisely how we will get from here to there, but all of us were elected to solve California's problems, whether we're conservative Republicans or liberal Democrats. We have to face reality."

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(Reported by Hil Anderson in Los Angeles)

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