May 5, 2004 - From the Dec., 2002/Jan., 2003 issue

County Supervisor Yaroslavsky Assesses Impact Of State Budget Crisis On County

In his latest budget proposal, Governor Davis seeks to relieve the state's expenditure burden by realigning $8.2 billion of social services programs from the state to the county governments. Such a shift in responsibility would come at a time when counties already are severely strapped to meet the most basic needs of their residents. For example, Los Angeles County residents in November voted for a property tax increase in order to keep open trauma care factilities. Metro Investment Report is pleased to present this interview with Los Angeles County Supervisor Zev Yaroslavsky in which he discusses the challenges and stark realities with which counties are faced as a result of the state's current budget environment.

Zev Yaroslavsky

Zev, government at both the state and local level are bracing themselves for severe budget cuts as result of the size of the state budget deficit. From the perspective of a Supervisor, what are the likely fiscal and programatic impacts on the county of the likely scenarios the state may mandate to balance their budget.

The state is facing an unprecedented budget shortfall caused by a combination of a downturn in the economy, reduced incomes, and the spending of a big portion of the surplus on energy a couple of years ago. The deficit is estimated to be somewhere between $20-35 billion in the next year and a half. That is huge. It necessarily will have an impact, not only on the state government, but on local governments, counties, and cities. It will probably fall disproportionately on counties, especially on the area of human services.

Typically, when the state has a downturn, it is human services that suffer. It is complicated this year by the fact that the state and the county are trying to negotiate an extension of our funding partnership between the federal government, the state, and the county in order to keep the county's health system afloat. It is further complicated by the fact that the people voted on a property tax increase in November for trauma and emergency care which infuses $170 million a year into the county's health system, and part or all of that could be lost depending on how deep the state cuts are. We're bracing ourselves for what the state's going to do.

The solution, if there is a solution to this unprecedented deficit, is to raise revenues and make cuts simultaneously. The state cannot balance the budget on cuts alone and they will not do so on taxes alone. They're going to have to do a combination, as Pete Wilson, our Republican governor did in 1991, when faced with a $14 billion deficit. He supported and engineered the raising of $7 billion in taxes and making $7 billion in cuts. I think that's the precedent that needs to be followed in this particular budgetary year.

What are the ramifications of having to formulate a county budget in this depressing state budgetary environment? How does the board and staff set priorties and engage with the Legislature and Governor on the matter of fiscal relief for local government?

We always formulate our budget earlier than the state does. The law requires us to have our budget finalized and passed by the first of June so that it takes effect the first of July. The state often doesn't finish its budget until the end of June and sometimes goes well into the summer, as it did last year, to finalize the budget. We have to make certain assumptions, and the county has made some conservative assumptions, about revenues, and state revenues in particular, in the hopes that whatever changes are made at the state level in a normal year are easily manageable if the state does something that is at variance with our assumptions.

This year, because of the size of the deficit, we can't make worse case assumptions because we'll eviscerate our own budget and fundamentally undermine our mission. So, it makes it very difficult for us to plan. It's normally difficult for us to plan but it would be virtually impossible to accurately plan for the next fiscal year in this kind of environment. Again, the easiest thing for the state to do is whack human services. Human services have a limited constituency. Law enforcement, the police force, prisons, and education all have huge constituencies. Poor people are a small constituency. As a result, whenever the state is faced with a deficit, it has disproportionately whacked human services because the recipients of these funds don't talk back. They are not perceived to be electorally consequential in Sacramento.

The only hope we have this coming year is that a huge number of local elected officials have now been elected to the state Legislature, in both the Senate and in the Assembly. It's an unprecedented number of former local officials who now find themselves in the state Legislature. The hope there is that some of them will remember where they came from and try to make the difficult balancing decisions required at a time like this, which means stepping on the toes of the constituencies that do have clout. You can't get away without making tough decisions in this kind of environment.

One of the advantages of having been around for 27 years, like I have, is that I'm living proof that you can make difficult decisions and live to talk about it. The only thing worse than making difficult decisions is not making them and then facing the consequences, which is why we're in this mess to begin with. Two years of obliviousness to what was happening on the energy front and on the budgetary front have put the state in this unprecedented situation. Had decisions been made over the last couple of budget years that would have better positioned the state financially, we would have had a soft landing rather than a crash landing, which is what we're faced with in the 2003-04 fiscal year.

Zev, most political consultants and pollsters note that the public really doesn't understand or care which level of government provides which public services. But insiders seem to care. What are the consequences of the county being so dependent on the state for setting its own budgetary priorities? How important is local control and local fiscal management of programs central to the County's responsibilities?

It's very difficult to prioritize. If you're not a master of your own budget, you're not a master of your own priorities-somebody else is setting your priorities for you. That's the danger. For local governments, it creates uncertainty and fiscal instability, and it creates a disconnect between the local government's priorities and the funding opportunities that exist. It's really undemocratic. You elect people at the local level to perform certain duties, to fulfill certain missions that are reflective of the priorities of the people, and they're often powerless to do so.

The significance of Measure B this year was that the County of Los Angeles decided to ask its own taxpayers to assess themselves a tax for a function that is essentially federal and the state's responsibility. I can speak to it quite personally because I authored it against my better judgment, but I decided we have no choice. If we leave it up to the state and federal government, we will never have enough money to adequately provide for the health, trauma and emergency care needs of our citizenry. Rather than whine about it, we decided we'd do something about it. That is an act of desperation on our part. It doesn't begin to solve our problems. You can replicate this in virtually every category, whether it's child welfare, welfare itself, childcare, education, probation, other aspects of criminal justice-it's an ongoing problem.

What's the fix going forward? And why have all the fixes failed to date?


I'm not sure how many people have tried to fix it. I don't think there's been a great effort to fix it. There's been a lot of talk about it, but there hasn't been a comprehensive proposal put before the people on restructuring the state, local and county fiscal relationship. There really hasn't been an effort to tackle the constraints that exist in the state constitution to having a truly local government that's accountable to its taxpayers and that has a self-determination about its operation. I think that may change.

I think this particular budgetary crisis is so deep and widespread that the voters of California may, for the first time in 25 years, really be open to some sweeping changes to the state constitution and to the constraints that have been established, whether it be 2/3 requirement for the passage for a budget, 2/3 requirement for the passage of a tax, or 2/3 requirement for the passage of a bond. People are prepared to take a look at those because the alternative is a potentially devastating collapse of many of the services upon which many people depend.

You're assuming the chairmanship of the MTA board next year. The Governor has indicated he may be taking transportation funds to help deal with the shortfall in the budget deficit. What are you taking on in assuming the chairmanship next year and what are the consequences for transportation as you see it today, given the budget shortage?

We have a big challenge in Los Angeles County. The budget is only going to aggravate that challenge. We have a lot of projects and opportunities to provide better regional transportation in Los Angeles County and we need to be funded to do that. Nobody can operate under any misconception or under the illusion that there is going to be unlimited funding for projects. There isn't, and the state budget cuts on transportation are predictable and they are going to happen. We're not going to have the kind of funding for transportation from the governor's transportation plan of two years ago that we may have assumed we'd have. I think you saw that last week when the California Transportation Commission started to make its cuts.

I would hope that the state doesn't suspend projects that are under construction or that are under contract for construction. The East-West Valley Busway is on its way. The bids are in and the contract is going to be awarded shortly. Properties are being acquired; people are being evicted from properties that they have been leasing on a month-to-month basis for many years. The Eastside Light Rail Line is a project that is well underway in terms of planning and design. It should be allowed to be completed. I don't think we can expect projects that have not gotten to this stage to be funded to the same extent, or to any extent in this current state budgetary environment.

However, at the federal level, we have a lot of work to do. We have a lot of opportunities. We've turned the MTA around. I think we have a case to make in Washington that we haven't been able to make in many years. I think we have a good team at the MTA. We have scaled back our appetite for big construction projects and we've become much more functional. We have a ways to go, but we've become more functional in our planning.

One last question, Zev. However daunting the fiscal challenges, what accomplishments from 2002 would you like to highlight for our readers?

Considering all of our difficulties, it was a good year. There's no question that Measure B was the greatest event of the county's life this year, maybe for many years. It is certainly something that I take a great deal of satisfaction in. Of all the things I've ever been involved in as an elected official, I think this is the most important thing I've done. And, it may be, for all time, the most important thing I've ever been involved in.

It's a measure that may, at the end of the day, save two of our hospitals in our trauma system and in our emergency medical care network. It will save thousands of lives every year. That's something I'm very proud of. I'm proud of my board for having the confidence to proceed with it. And, I'm especially grateful to the people of Los Angeles County who had the confidence to vote for it. Almost three out of four people voted for a property tax increase for health care in this county. That's literally just an unbelievable political development. I'm very proud of that.

In addition, as the chair of the Prop 10 commission-Children and Family First Commission-we launched two major initiatives. One was to set aside $100 million for universal health care for all children ages 0-5, up to 300% of the federal poverty level. Once this plan goes into effect in the early part of 2003, there is no excuse for children between 0-5 not to have health care. We will provide it as a provider of last resort through the fifty cent per pack cigarette tax that we passed back in 1998.

The second thing we did with Prop 10 was set aside another $100 million for a universal preschool program preparing kids who are three and four years old for entering into kindergarten and schools so they could be in a position to fully realize their potential and be able to compete in schools with kids who are more fortunate than they are. That was the Rob Reiner initiative and it's the beginning. The $100 million will barely scratch the surface, but it's the first time in this county we have made such a huge investment in preparing kids ages three and four for school. So, with those three things accomplished, it's been a good year.


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