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Nervous Berkeley Officials Await State Budget Cuts

Tuesday January 13, 2004

Despite the unveiling last Friday of Governor Arnold Schwarzenegger’s proposed $76 billion 2004-05 budget with its restoration of Vehicle License Fee monies to California’s cities and counties, Berkeley’s top two officials say it’s far too early to tell how big an economic hit this city will take. 

“It’s all subject to the whims of the legislature,” said Mayor Tom Bates. “And after that, the Governor has the ability to reduce items or eliminate items that the Senate and the Assembly put in. So we’re a long way from knowing what we have to deal with.” 

As for City Manager Phil Kamlarz, he is not even counting on $3 million in lost state Vehicle License Fee funds (commonly called the “VLF backfill”), which Schwarzenegger has promised to restore. 

“The legislature has said that the governor overstepped his bounds by authorizing the backfill payment without their approval,” Kamlarz said, “so I’m sure that will be played out when they come back in session.” He said Berkeley expects a check from the state for half a million dollars sometime early this week, representing the city’s full monthly VLF payment. 

“We haven’t gotten it yet. When we do, I told our people to run to the bank as soon as possible and cash that sucker,” Kamlarz added. 

In his first public action following his election last November, Schwarzenegger cut the VLF, depriving cities and counties of a combined total of $4 billion per year in funds. For Berkeley, that meant an immedidate subtraction of $350,000 from December’s VLF payment from the state, with an added notation that the city would have to return similar amounts from both the October and November checks which the city had already received. 

After howls of complaint and threats of a lawsuit by several municipalities and counties, Schwarzenegger unilaterally announced that he would pay the cities and counties their full amount, and make up for the lost VLF money by cuts in other areas of the budget. 

If the governor’s action stands, that lost $350,000 in December monies should be sent to Berkeley sometime in the future, and the city will be allowed to keep the full October and November amounts. 

But that is only if the governor’s action stands. 

“His actions [providing the cities and counties with their full VLF backfill payments] are very questionable as to whether what he did is legal,” Bates said. “Elizabeth Hill (Legislative Analyst for the State of California) has said that they were illegal. So if somebody who that money might have gone to—education or mental health agencies—could sue, and the governor could lose, and that would throw the whole thing into a mess. So the cities have been taken care of, temporarily. But it could fall apart at any minute.” 

Following Schwarzenegger’s VLF restoration announcement, Bates said a lawsuit planned by several California cities and counties (including Berkeley) against Schwarzenegger on the issue is presently on hold, but the option is being kept open. “There’s no sense for us to sue, of course, if we get the [full VLF] money.” 

Bates said that if the full VLF checks arrive, the lawsuit will be dropped, but if they don’t, “I would certainly urge that the lawsuit go forward.” 

As far as the current (2003-04) Berkeley budget is concerned, the uncertainty about the VLF backfill will have no effect. Last December, on City Manager Kamlarz’ recommendation, City Council approved $2.75 million of the projected $3 million loss in VLF funds for this year (Council recommended that the remaining $250,000 be taken out of the fire department budget, with Kamlarz and fire department officials to decide the details). 

Kamlarz said that if the VLF backfill is upheld, those $3 million in 2003-04 cuts will most likely remain in place, with the money put into the city’s reserve fund “until we see what comes up next year.” 

Finally, Mayor Bates believes that Berkeley must brace for more bad news, even if it gets the VLF backfill. “If the governor and the legislature make cuts in health care, mental health, homeless, transportation money—that all impacts us,” Bates said. 

“That all plays out on our streets,” he said. “So even though we don’t get that money directly, we have more expenses, we have more problems, we have more difficulties that we have to deal with. Those problems don’t play out on a state level. They play out locally.” 

Council’s next order of business on the budget front will be to hear—and make decisions on—Kamlarz’ specific fiscal recovery plan at its Jan. 27 meeting. Thereafter, budget discussions will be the subject of the 5 p.m. work session preceding every City Council meeting through March.