Sacramento to Cities: “Give us your revenues, AND we’ll tear down your buildings!”

The headline reads, “State budget deal depends on borrowing, accounting tricks, and gimmickry.”

Which state is it?

In this case, California; the headline is from the Contra Costa Times. On Monday night the state made a deal to close its $26.3 billion deficit; the package includes $15 billion in spending cuts, and $11 million in accounting gimmicks, borrowing, and overly optimistic assumptions. These include:

  • $2 billion borrowed from local governments’ property tax revenues (to be repaid with interest in 3 years),
  • $2 billion in cuts to local transportation and redevelopment funds,
  • $9 billion in payment deferrals to education, and
  • Deferring state employee’s paychecks by one day – essentially putting $1 billion in salaries on next year’s ledger.

Here’s a rundown.

As you might guess, local governments’ reply to Sacramento’s, “Can you spot us some revenues, just ’til we get by?” isn’t positive. The Los Angeles Board of Supervisors voted to sue if the state pursues its plans to borrow their revenues. Other local governments are expected to follow.

As Leonard Gilroy at the Reason Foundation writes, when California borrows money — not lends, but borrows — there are strings, really serious ones. The state isn’t content to merely dip into the municipalities’ coffers; it would also like to help level its buildings.

Access to local redevelopment funds means, according to the Los Angeles Times:

Lawmakers will also be given the option to greenlight a controversial plan that would give some local redevelopment agencies broad new discretion to tear down and rebuild neighborhoods under their jurisdiction for decades to come, regardless of whether those areas are blighted.

Loan, unconstitutional revenue seizure, or license for destruction?