January 19, 1999
The Honorable Board of Supervisors
County of Los Angeles
383 Kenneth Hahn Hall of Administration
500 West Temple Street
Los Angeles, CA 90012
Dear Supervisors:
RECOMMENDED LEGISLATIVE POLICIES AND GOALS FOR THE
1999-2000 STATE LEGISLATIVE SESSION
On January 4, 1999, the Legislature returned to take up the business of the 1999-2000 Legislative Session. On Friday, January 8, 1999, Governor Davis presented the Proposed State Budget for Fiscal Year 1999-2000. This letter contains this office's recommendations for State legislative policies and goals for the 1999-2000 Legislative Session and will become the basis for our advocacy efforts. It has been prepared in consultation with the affected departments, commissions, and task forces; our legislative representatives in Sacramento; our Legislative Strategist; and the Legislative Working Group.
THEREFORE, IT IS RECOMMENDED THAT YOUR BOARD:
1) Approve the specific policy and goal recommendations on key issues contained in this letter;
2) Approve the policies, contained in Attachment 1, which also cover the County's key issues and are designed to permit our advocates to respond in a timely manner to the vast majority of bills that are likely to be introduced;
3) Approve for support or sponsorship, if necessary, the departmental recommendations for program-specific legislative goals set forth in Attachment 2;
4) Amend or reaffirm the previously-adopted Board goals contained in Attachment 3; and
5) Instruct the County's Sacramento representatives, working with the Legislative Strategist, affected departments, and other interested individuals and organizations, to advocate these policies and goals on behalf of Los Angeles County.
As we update our legislative policies and goals for the 1999-2000 Session, it is important to review the current State budget and the legislative actions of 1998. Further, it is also important to assess the general economic condition of the State so that our revised policies and goals may be considered in the proper context.
Counties did not fare particularly well in 1998. Despite a State budget surplus that exceeded $4 billion, financial relief for counties was limited and program specific. Counties were relieved of $40 million of the disproportionate share hospital (DSH) administrative fee ($8 million for Los Angeles County), the COPS program was continued for another year at $100 million ($9.1 million for Los Angeles County), and the State agreed to increase its support for trial courts by $96 million commencing in Fiscal Year 1999-2000 ($19.4 million for Los Angeles County).
The County was not able to make progress toward the return of property tax revenues. In fact, the County had to fend off a potentially disastrous reduction in Vehicle License Fees.
Most experts agree that economic growth will slow somewhat in the near term. On November 19, 1998, the Legislative Analyst's Office (LAO) released its economic forecast for the 1998 through 2004 period. Generally, that report projected that the Asian economic crisis would cause economic growth to slow somewhat in late 1998 and early 1999 for both the United States and California. As a result of slowing economic growth, personal income growth was projected to slow from 6.8 percent in 1998 to 5.2 percent in 1999.
The LAO's projections are mirrored in the Governor's Proposed State Budget for Fiscal Year 1999-2000. The Governor expects growth in gross domestic product to decline from 3.5 percent in 1998 to about 2 percent in 1999 and 2000. Growth in California's non-farm employment is expected to decline from 3 percent in 1998 to 2.1 percent and 2.4 percent in 1999 and 2000, respectively. The Governor also projects a decline in the growth rate for personal income. He forecasts a decline from an estimated 6.3 percent growth rate in 1998 to 5.1 percent in 1999 and 5.5 percent in 2000. Against this backdrop, the Governor anticipates slower growth in State revenues.
The rumors of a State budget shortfall were confirmed by the Governor when he unveiled his Proposed State Budget. As a result of increasing expenditures and declining revenue growth, the Governor identified a $2.3 billion shortfall. To eliminate the shortfall, theGovernor rescheduled certain appropriations to match actual expenditure patterns ($170 million), refinanced some capital projects ($225 million), increased anticipated Federal revenues ($430 million), increased unspecified revenues ($150 million), anticipated receipt of tobacco settlement revenues in June 2000 ($560 million), and significantly reduced the budget reserve for economic uncertainties ($800 million).
Upon further investigation, it was revealed that the $170 million saved by rescheduling appropriations actually entailed program expenditure reductions, many of which specifically impacted counties. The $96 million planned augmentation of State assistance for trial court funding was reduced by 50 percent, $44 million in flood control subventions were deferred, and a statutory appropriation of $20.2 million for the County Medical Services Program was deleted. In addition, we were advised that counties will be required to share in $90 million in Federal penalties for the Child Support Automation Program ($37 million in the current year and $53 million in the budget year).
On a positive note, the Governor indicated a willingness to discuss a mitigation of the property tax shifts. However, the Governor made it clear that he views the public safety sales tax, COPS and trial court funding as clear offsets to the property tax shift. The Governor further indicated that any return of property tax would have to be based upon a "fair accounting of the net effect of the various financial transactions that have taken place between the State and local governments over the last decade." The Governor did not acknowledge that the offsets to the loss of discretionary property tax revenues had been replaced by earmarked revenues, some of which were provided to offset shortfalls that pre-dated the property tax shifts.
The Governor did leave some hope for future financial relief for counties; however, that relief is contingent upon an improved State budget and the results of various studies. Due to this uncertain outlook for counties, it is even more important that we continue our efforts to secure financial assistance for local government. Specifically, it is essential that counties continue to press for a return of the property taxes shifted to the State and pursue other measures which increase discretionary revenue. It is also important that counties move forward with the lawsuit which challenges the Commission on State Mandates' rejection of our SB 90 claim for reimbursement of shifted property taxes.
The recommendations contained in this letter primarily focus on key County issues. However, it is certain that many of the legislative proposals from the past will bereintroduced. Therefore, in addition to specific policies covering the County's key issues, it is necessary that we also have general policies to enable the County's advocates to timely respond to the many other legislative proposals which are likely to be introduced, and which may have impact upon the County's finances or programs. The majority of our recommendations for legislative policies are contained in Attachment 1. In addition, our departments have requested that the County seek or sponsor, if necessary, a number of program-specific legislative goals. Those goals are presented in Attachment 2. Attachment 3 summarizes a number of legislative goals previously approved by your Board; however, one or more offices have requested that these items be reconsidered for possible amendment.
Governor Davis has pledged to make education his top priority, and he has committed to provide salary increases for State employees. These commitments will drive much of the budget debate in Sacramento; however, it is also likely that individual legislators will insist upon revisiting issues that could not be pursued under Governor Wilson. It is important that we make sure that the debate includes issues which are of key importance to Los Angeles County. These include return of the property tax, increased discretionary revenue, implementation of welfare reform/welfare to work programs, the healthy families initiative, funding for the Los Angeles County Drainage Area (LACDA), protection of the County share of the tobacco settlement, and avoidance of potential erosion of property tax revenues due to State Board of Equalization (SBE) actions.
Return of the Property Tax and Increase Discretionary Revenue for Local Government
Local governments continue to suffer from the effects of the property tax shifts of 1992-93 and 1993-94. Even if an offset credit is allowed for the Public Safety Sales Tax, funds which were earmarked, counties and cities still have an annual net loss of over $1 billion. Los Angeles County is still experiencing an annual shortfall of nearly $500 million.
Recommended County position - support State budget actions which return the property tax and increase discretionary revenues for local governments through greater State participation in Trial Court Funding, and State assumption of the schools' share of county property tax administration costs.
Implementation of Welfare Reform/Welfare to Work Programs
County efforts over the last two years were quite successful in shaping the State's legislative implementation of welfare reform and the creation of the CalWorks and welfare-to-work programs. There is still much that can be done to simplify the administrativerequirements of the CalWORKS program and to ensure eligibility for all who need and deserve assistance. Further, there is always a possibility that new legislation might be introduced that would negate some of what was accomplished over the last two years. Therefore, the Department of Public Social Services has updated the policy recommendations of the Board-established Welfare Reform Task Force to reflect the current status of welfare reform and the CalWORKS program.
Recommended County Position - adopt the updated policy recommendations of the Welfare Reform Task Force, which are included as Items I and II in Attachment 1.
The Healthy Families Initiative
Enactment of the Healthy Families Initiative was a significant legislative achievement in 1997. The Department of Health Services has updated our policies for advocacy on legislative and regulatory issues in this area to bring the initiative into conformity with the Board's goals for maximization of Federal funding, administrative simplicity, and adequacy of coverage for indigent children and children in the public's care.
Recommended County Position - adopt the policy recommendations prepared by the Department of Health Services, which are included as Item V in Attachment 1.
LACDA Funding
The Board-approved Los Angeles County Drainage Area project has been approved for Federal funding. It is not eligible for State funding since it has not been included in the State Water Code as an eligible flood control project.
Recommended County Position - pursue legislation that authorizes LACDA in the State Water Code as a flood control project eligible for State funding and establishes legislative intent that future projects be multi-purpose.
Protection of Tobacco Settlement Revenues
Some have speculated that there may be efforts to substitute tobacco settlement revenues received by counties for existing State subventions.
Recommended County Position - oppose any effort to invalidate or subordinate the Memorandum of Understanding between the Attorney General and local government or that attempts to use county tobacco settlement revenues to supplant existing State subventions.
Potential Erosion of Property Tax Revenues due to SBE Actions
Over the past ten years, Los Angeles County played a key role in negotiating settlements with the SBE and industry groups that provided long-term stability in revenues received from property tax assessments on properties assessed by the SBE. All of those agreements have expired or will expire within the next year. We already have seen a resumption of litigation with the cellular telephone industry. In addition, while the State Constitution exempts intangible property (licenses, permits, franchises) from property taxation, the courts have opined that tangible properties must be assessed assuming the presence of intangible rights or attributes. Controversy has arisen over the statutory and judicial interpretations of which intangible rights and attributes can be assessed. Some have speculated that property tax revenues on the State and local rolls could be impacted by as much as $2 billion per year.
Recommended County Position - instruct the Chief Administrative Office and County Counsel, and request the Assessor, to continue working with the SBE and industry groups in an effort to resolve outstanding disputes, including litigation, and, to the extent necessary, draft legislation for pursuit by our Sacramento representatives to implement agreements reached with industry and the SBE.
In large part, the recommended program-specific goals requested by our departments are the direct result of prior Board action or are consistent with previously adopted Board policies.
The Legislature has established January 22, 1999, as the deadline for submitting language for new bills to the Legislative Counsel. The actual deadline for bill introduction is February 20, 1999. Due to the early deadline for submitting language to Legislative Counsel, and in anticipation of your Board's approval of the program-specific legislative goals, our Sacramento representatives are arranging for bill language to be timely submitted for all goals requiring County sponsorship. It should be noted that there is no commitment to proceed with bill introduction should your Board decide not to approve any of the items included in Attachments 2 or to reapprove any of the goals contained in Attachment 3.
The policy recommendations contained in this Board letter and Attachment 1, and the program-specific legislative goals contained in Attachments 2 and 3, are submitted for your Board's consideration as the guiding principles for our advocacy efforts in Sacramento during the current two-year session. The policies and goals contained in this package arein addition to, and are not intended to be exclusive of, other positions adopted by your Board. As in the past, the Legislative Agenda will be updated to reflect your Board's actions over the course of the legislative session.
Respectfully submitted,
DAVID E. JANSSEN
Chief Administrative Officer
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