State funding cuts to county services will hit a welfare-to-work program hardest, but county staffers are still calculating the effect of Gov. Arnold Schwarzenegger’s line-item vetoes Tuesday.

The vetoes were intended to take another $656 million out of the budget approved by the Legislature and create a $500 million reserve.

“It is not an easy budget, but it is a necessary budget that does not raise taxes, solves the $24 billion deficit and includes long-term reforms,” Schwarzenegger said.

However, some advocates said the line-item vetoes targeted vulnerable Californians, including children and seniors.

“We are gravely concerned for the well-being of children across the state and the ripple effects in our local communities,” said Gary Wyatt, president of the California State Association of Counties.

A report by Los Angeles County staff, released before Schwarzenegger’s vetoes, estimated that the county would lose about $189.9 million in funding this fiscal year.

Nearly two-thirds of the cuts were expected to come out of CalWORKS, a program designed to help welfare recipients return to self-sufficiency through services related to jobs training, child care and transportation.

Assembly Speaker Karen Bass responded angrily to the governor’s veto and questioned the legality of Schwarzenegger’s cuts.

“It’s a shame Governor Schwarzenegger is so eager to tear down the safety net that he appears willing to break the law to do it,” she said in a statement. “I am asking legislative counsel for a definitive opinion on the legality of the governor’s actions. The cuts the governor made [Tuesday] will have catastrophic effects on children, domestic abuse victims and seniors.

“The cuts … have broken the lifeline to the state’s most vulnerable and underserved. We sent the governor budget solutions that solved the deficit. … The governor is choosing to make devastating cuts to child welfare services, leaving children and foster kids vulnerable. Earlier in the budget process, the governor threatened to veto bills that charged oil companies the same fair share severance tax they pay in other states and to levy tobacco products for the harm they inflict on the health care system and the state’s general fund. Had the governor not stood up for big oil and big tobacco, these devastating cuts also could have been avoided.”

County officials were also concerned about the state’s plan to borrow what staff preliminarily estimated as $360.9 million in property taxes.

The temporary loss of taxes could be mitigated by effectively borrowing against the state’s repayment of those taxes. But timing issues related to financing would probably still force the county to incur some losses.

County officials spoke with state officials during an afternoon conference call Tuesday to work through the specifics of the final budget and were still calculating the impact to individual programs and services.

Officials were happy that the budget approved by the Assembly last Friday backed away from a plan to borrow $2 billion in local government gas tax revenues over the next two years, preventing a multimillion-dollar hit to tcity and county coffers.

The gas tax borrowing provision would have cost the city $66 million during each of the next two years. Los Angeles County’s Department of Public Works would have lost about $173 million over the next two years, according to Board of Supervisors Chairman Don Knabe.

“I am grateful state lawmakers saw the light and took this proposal off the table,” Knabe said. “These transportation dollars are used for public safety fleets, maintaining our first-responder systems and ensuring our streets don’t crumble away. Taxpayers pay for these funds at their local gas pumps, and the money the state wanted to take will now rightfully stay in place to pay for local projects.”

Los Angeles Mayor Antonio Villaraigosa, who said he was on the phone with state lawmakers lobbying against any raiding of local funds, said “they did the right thing,” noting that the loss of gas tax revenues would have meant layoffs of city employees.

The budget package still includes a plan to borrow local government property tax revenues and community redevelopment funds.

For the city of Los Angeles, that would mean a $120 million loss in property tax revenues and $83 million in redevelopment funds. But Villaraigosa said it would have no impact on the city’s general fund.

“The property tax dollars that the state will be borrowing can be bonded against, and we’ll be able to replace that money that’s been borrowed,” he said.
Meanwhile, community redevelopment funds are in a separate budget and not part of the general fund.

Villaraigosa said the city will sue the state to recover that money, which is intended for construction projects in blighted neighborhoods.

“We will continue to move to litigation,” he said.

The county and several other cities plan to do the same.

Cecilia Estolano, chief executive officer of the city Community Redevelopment Agency, said “gutting [our] budget will mean that we will not be able to complete millions of dollars of redevelopment projects in Los Angeles, resulting in a loss of 2,300 construction jobs and a loss of $30 million dollars in private investment coming into our city.”

She expressed confidence about the lawsuits, saying the last time the state tried to take the city’s community redevelopment funds, a judge ruled it was unconstitutional.

“You can only use redevelopment dollars for redevelopment purposes,” she stressed.

The state Assembly passed 29 of 31 pieces of legislation included in the deficit-closing budget package, but did not act on the gas tax measure. The Assembly also backed away from a proposal to allow new oil drilling off the Santa Barbara coast.

Matt Szabo, Villaraigosa’s spokesman, said the state’s plan to take gas tax revenues from the city would have been illegal.

“When the state instituted the gas tax, it made an ironclad commitment that every penny would go towards street and road repair, so using that gas tax money for other purposes would have totally broken that promise to commuters,” Szabo said.

He also claimed taking gas tax revenues from the city would have “completely undermined” street services and other projects that would have been funded with Measure R, the local half-cent transportation sales tax, and with federal stimulus dollars.

Schwarzenegger conceded that the cuts included in the overall budget package were deep and would have a particularly hard impact on health care, education and the prison system. But, he said, the budget “saves our state from financial ruin and from drowning in the fiscal abyss.”

“This is not an easy budget. It’s a tough budget, but it’s a necessary budget,” he said.

“We have endured the darkest of storms and the harshest of winds,” the governor said. “We have steered the California ship away from the iceberg.”
He also said the state will still have financial challenges ahead.

“Now, in the same spirit of cooperation and compromise, we must continue to forge ahead,” he said. “We cannot sit back and rest on our laurels here. We must immediately roll up our sleeves and do everything that we can to create jobs and bring our economy back and bring our revenues back. I know that we can do it.”