Local leaders hear more budget woes

Local governments already knew that the state's economic woes would force them to slash their budgets next year, but they were told Friday that they may also have to plan for state funding for some programs to arrive months late, if at all.

That could mean fewer police on the streets of some small towns, delays in road construction for state-funded projects in cities, and cuts in municipal health programs.

That unwelcome but not surprising news was delivered by Assembly Member Juan Arambula, D-Fresno, during a round-table discussion with county and city leaders from across his district.

Arambula opened the meeting at Fresno's Hugh M. Burns State Building with an outline of the budget crisis -- a nearly $4 billion shortfall this year that could see the state actually run out of money, followed by a $14.5 billion deficit in 2008-09.

That deficit has prompted Gov. Schwarzenegger to declare a fiscal emergency and call for 10% cuts in every state program and agency.

"Budget deficits are nothing new in California," Arambula said. "But this is different in magnitude to anything I've experienced in recent years."

Arambula said he planned the meeting so that when he returned to Sacramento, he could take recommendations from local leaders with him, including ideas on how to make the necessary cuts without crippling local governments.

Then budget consultant Les Spahnn told the cities the really bad news -- in order to make up the shortfall this year, the state may have to make some hard choices, and use creative accounting techniques. Those options could include delays in Medi-Cal provider payments, reductions in Medi-Cal rates, and the early release of up to 22,000 state prison inmates.

Spahnn also said the state may delay payments to cities for many programs.

"We want to know if you have cash reserves that can carry you for months," Spahnn asked. "Is the condition of your city or county funds enough for you to do your own borrowing?"

Almost universally the city managers and elected officials assured Arambula that they had enough in reserve to last for several months, but would then begin to run out of available funds.

Arambula said later that the reaction to that question is a mark of how bad California's finances have become.

"We've built the state budget layer by layer; now we have to look at what do we need, and what can we live without," Arambula said. "It's going to be a very tough year for the state and these cities."

Fresno County Administrative Officer Bart Bohn said that his main concern was cash flow, how the county would meet its obligations if state money was held up beyond the five to six months Arambula mentioned. Bohn also encouraged Arambula to work to find long-term solutions, including taking a hard look at whether some programs should continue to exist.

"These deferrals and delays just address cash-flow problems for this year, not deficit reductions," Bohn said. "To get real deficit reductions you have to cut programs. And some, if you cut 10%, it might be better to just take them out of the system entirely."

Others cautioned that cuts in some areas, such as public safety, would have immediate effects.

"If the state eliminates [community oriented policing services] grants, it would immediately eliminate several positions in Kerman," said Kerman City Manager Ron Manfredi. "If you are going to cut it, phase it out. We want to be less dependent on the state anyway."

Manfredi's sentiment was shared by many at the meeting and was not surprising to Arambula, who said the state had earned its reputation for fiscal irresponsibility.

"We keep looking for stability, but it's almost like a mirage," Arambula said. "The closer we get, the further away it seems."