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Budget Impasse Threatens City

Friday July 04, 2003

The state Legislature’s failure to pass a budget on time is creating short-term financial headaches for public and private agencies in Berkeley and could lead to the temporary closure of a local community college and the elimination of vital health care services if the stalemate lingers into the fall, according to education and health care officials. 

“This is a bad situation,” said Shirley Fogarino, spokesperson for Berkeley’s Vista Community College, who warned that the school may have to close its doors in September or October. 

Late budgets are nothing new in Sacramento. This year marks the 17th time in 26 years that the June 30 deadline has come and gone without a final budget. But a May ruling by the State Supreme Court has upped the ante—preventing the state from making a host of interim payments while the Legislature gets its act together. 

Under the court ruling, the state cannot make a $200 million monthly payment to California community colleges due in late July and can make only partial payments to K-12 education. In addition, trial courts and certain health care programs will face delayed checks, Cal Grants for college students will be withheld and the University of California will receive funding for payroll expenses alone.  

The state will reimburse the funding for all programs when the Legislature passes a final budget, but education and health care advocates say they will feel the pinch in the meantime. 

Karen Grimsich, executive director of Alzheimer’s Services of the East Bay, said her agency stands to lose $12,500 monthly payment from the state during the budget crisis—a delay the program cannot afford. 

“You can’t take a break from having Alzheimer’s,” she said. 

Grimsich said the center, which serves about 100 clients at facilities in Berkeley and Hayward, also faces delays from city and county officials who are waiting for state dollars before doling out funds. 

“All of that is slowing down,” said Grimsich, estimating that 20 percent of her $2 million budget may be affected. “Everyone is frozen.” 

The economic downturn has already hurt Alzheimer’s Services, she said, cutting gifts from private foundations. With a shrinking budget, the agency shortened its hours and laid off three staffers in April and is planning to refinance its building. But even with the cuts, the center faces a $40,000 to $50,000 deficit. 

“We’re going to get right down to the wire now running out of cash,” said Grimsich, who warned that the program could be forced to close in the fall if the state’s budget crisis lingers. 

David Dowell, associate vice chancellor for budget and finance for the Peralta Community College District, which oversees Vista in Berkeley and three other schools in the East Bay, said the district stands to take a $3 million hit this month when the state ends its $200 million monthly payment to community colleges across the state. 

Dowell said Peralta can tap a $5 million reserve and $36 million in bond money to get through October, but will run into trouble if the stalemate in Sacramento bleeds into the late-fall. 

“We’re better off than a lot of districts because we happen to have more reserves,” he said. “Some will close their doors in September.” 

Peralta, anticipating heavy cuts when the state passes a final budget, has already chopped $11 million from its $87 million budget and plans to cut 10 percent of its classes system-wide in the fall, putting dozens of part-time instructors out of work. Vista, in particular, is laying the groundwork for a 25 percent to 30 percent cut in courses, according to Fogarino. 

The University of California is in better shape. Their faculty and staff are considered state employees and must be paid. The court, however, has ruled that the state must revert to paying most of its employees minimum wage with no budget in place.  

State Controller Steve Westly originally balked at enforcing the minimum wage provision, arguing that it was too complicated to reconfigure the payroll system. But he said last week that he would make the shift by late August or September. 

“That is certainly a concern, but it’s a concern for late in the summer,” said UC spokesperson Brad Hayward. 

In the meantime, UC will not receive funding for non-payroll expenses, shutting off the dollars it uses to pay vendors. But Hayward said the university’s payments to vendors typically lag a couple of months behind services. So in July and August, the university will be paying its May and June bills with last year’s money. However, if the crisis lingers into late-August, Hayward said, it would “certainly be a problem.” 

Hayward said UC should also be able to handle delayed payments for Cal Grants in the short term. Faced with a similar crisis last year, the university stepped in to bridge the gap for UC Berkeley students, who start school in August. UC hopes to do the same this year, Hayward said, but could run into trouble in late September when classes begin at its other eight campuses, which are on the quarter system. 

Eric Smith, associate superintendent of business and operations for the Berkeley Unified School District, said the delayed payments should only affect about 10 percent of the school budget. The district will make up the shortfall by borrowing dollars from a number of its special funds to buttress its general fund. State law allows the district to pursue this strategy for 120 days, Smith said.