Song remains the same for city Song remains the same for city (March 05, 2004)

Success of Props. 57, 58 don't alter city's attitude toward state

by Bill D'Agostino

Despite the passage of propositions designed to temporarily ease the state's fiscal crisis, the rhetoric among Palo Alto officials has not changed -- many are still worried the state will rip into city finances to balance its budget.

"I am not convinced that local governments are going to be shielded from continuing takeaways," said Councilwoman Judy Kleinberg, who admitted she held her nose to vote in favor of Propositions 57, which refinances the state's debt through a $15 billion bond, and Proposition 58, which requires a balanced budget.

"The bond is going to have to be paid out of somebody's pocket," said Kleinberg, the chair of the city's finance committee. "It's somewhat of a shell game."

Much to that end, the League of California Cities is attempting to get a proposition on the November ballot that would prevent the state from dipping into local revenues. The Palo Alto City Council gave its support to that proposed measure during its meeting on Monday night, and Kleinberg is helping to collect signatures locally.

Palo Alto will be examining its 2004-2005 budget later in the year. After years of declining tax proceeds, city financial prognosticators are feeling that revenues have finally hit bottom, although a needed recovery to prevent further cuts is still elusive.

"We are still concerned about the number of job losses that have occurred in the Bay Area," said Carl Yeats, who heads the city's budget division.

Over the last two years, the city has cut more than $20 million in expenditures -- freezing positions, cutting special events and closing a library, among other cuts.

There's some historical precedent for the city's suspicion toward the state. In the midst of the early 1990s recession, the state drew from local property tax funds for schools, establishing the Education Revenue Augmentation Fund (ERAF).

Although the city thought they'd ultimately get that money back, the state continued the program and this year threatened to expand the amount taken. Overall, the state has already relocated more than $30 million from Palo Alto, city officials said.

It is unclear at the moment what else, or how much, might need to be cut from the city's 2004-2005 budget. The budget is expected to be passed in May.

Bill D'Agostino can be e-mailed at bdagostino@paweekly.com.

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