California Raids City Funds

The mayor and city manager of Lafayette, California, have spilled the beans about how California balanced its budget.

It was not done through aggressive cost-cutting alone, but by raiding city funds:

Last week, the state Legislature passed a devastating take of $2.05 billion from
local redevelopment agencies as part of a 30- bill package that purports to
close most of the state’s current budget deficit. Because the state is too broke
to meet its Prop. 98 obligations to schools, the Legislature chose to hijack
redevelopment funds from cities and use them to pay the state’s bills instead.
The Legislature also voted to “borrow” $1.9 billion from cities’ property
tax revenues…We don’t recall being asked by the state to borrow our money, and we’ve yet to meet another mayor or city manager who believes the state will make good on their debt within three years.

In total, the budget deal amounts to nothing less than an unwanted and aggressive molestation of California’s already- suffering cities…

In 2004, 84 percent of California’s voters passed Proposition 1A, which sought to prohibit the Legislature from raiding local funds. Since 84 percent of Californian’s can’t typically agree on the color of an orange, that passage should have sent an
crystal clear message to the state that local governments should be left untouched. Yet, not even five years later, state lawmakers are at it again, disregarding the clear direction of voters while picking local pockets to bail themselves out from their own irresponsible actions. Democrat and Republican lawmakers are equally guilty. It’s no wonder that legislators are held in such low esteem…

Local officials now believe that cities, counties, school districts and special districts must chart a radical path that makes them fiscally independent from state government. There have been too many raids for too many years by the too-dysfunctional state Legislature.Total and complete fiscal independence appears to be the only way to avoid future molestations by an unfettered and irresponsible state government.

Given that California is a bellweather state, and the richest state in the nation, I predict that other states will follow suit by raiding city funds.

And note that Lafayette’s mayor and city manager seem to almost be talking about secession when they mention “a radical path that makes [cities] fiscally independent from state government” and “total and complete fiscal independence”.

As I wrote in December:

One precipitating factor in the [potential] break up of the U.S. may be the bankruptcy of the states. California, Connecticut, Florida, Hawaii, Illinois, Massachusetts, Michigan, Nevada, New Jersey, Ohio and Wisconsin are all in really big trouble, and on the verge of defaulting. The rest of the states won’t be that far behind as the financial crisis intensifies. If the federal government isn’t helping them in their most dire crises since the founding of the country, and if the feds impose the heavy hand of martial law without any benefit to the states, they will have less incentive to remain a part of the union.

I was discussing the Federal government failing to help the states, but California’s raiding of city funds – is the same idea, and the town of Lafayette does not seem to be taking it lying down.

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