It is generally common knowledge that the State of California is facing serious budget problems. As the budget debate drags on, the State is again contemplating taking local money to help balance its budget. Some State officials are threatening to borrow up to $2.5 billion of local government and transportation revenue to help close California’s budget deficit.
On the positive side, Gov. Arnold Schwarzenegger is against such a drastic raid of local funding because it goes against the will of the voters. Under state law, any money borrowed from local government is required to be repaid – including interest – within three years.
The impact to cities with low or no financial reserves could be severe. However, Mission Viejo – with $25 million in discretionary reserves – is in a position to weather this latest legislative assault without reducing service levels significantly. Any funds borrowed by the state will come from the City’s reserves and those funds will go back to reserves when repaid.
This is a ridiculous law which needs to be changed. City Council members should take the lead in organizing an initiative to ban this practice of “borrowing” from local funds. The League of California Cities is a perfect forum for getting an initiative on the ballot.