Local governments feel effects of California’s budget pinching 

As Gov. Jerry Brown and legislators struggle — so far unsuccessfully — to close the state’s chronic budget deficit, local governments and schools throughout California face fiscal crises of their own.

The stubborn recession that exacerbates the state’s budget problem has also adversely affected local governments’ property and sales tax income. Meanwhile, counties and schools have been hit by their dependence on Sacramento for support.

The recession’s effects at all levels of government, moreover, have been magnified by the unfortunate — even irresponsible — decisions of local and state officials to make permanent commitments of funds that could not be sustained when the housing bubble burst.

Those commitments drove Vallejo into bankruptcy, and it’s no secret that dozens of other local governments are flirting with insolvency. That’s especially true of those now getting big bills from the California Public Employees’ Retirement System because of its investment losses.

One indication of local fiscal woes surfaced this week as the Fiscal Crisis Management and Assistance Team, which monitors local school finances, delivered its annual report to the Legislature.

The team’s top administrator, Joel Montero, told an Assembly budget subcommittee that rising numbers of local school districts, charter schools and county offices of education are exhibiting fiscal stress. Dozens either have negative fiscal health ratings or are “on life support” and are “dangerously close to cash insolvency.”

Schools are experiencing major cash flow problems as they face delays in receiving state support while Sacramento manages its own income-outgo disconnect, as well as vast uncertainty over how and when the state budget wrangle will be resolved.

Meanwhile, the prospect that other local governments might join Vallejo in insolvency has spawned a new version of union-backed legislation that would make it more difficult for them to seek bankruptcy court protection.

The League of California Cities, the California State Association of Counties and other local government groups are strenuously opposing the bill, Assembly Bill 506. It would require locals seeking bankruptcy to go through hoops set by a state commission dominated by politicians with close union ties.

As local officials see it, they could be held hostage by the commission, forced to protect union contracts and benefits as a condition of filing for bankruptcy.

State and local governments and schools will be facing tough times for years to come, while everyone fights over pieces of a shrinking pie.

Dan Walters’ Sacramento Bee columns on state politics are syndicated by the Scripps Howard News Service.

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Dan Walters

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