Tuesday, April 5, 2011




Once again, a logical solution to California’s estimated $25 billion budget quandary stares the state in the face. The money needed to keep all services going, pay all state employees and met pension obligations now sits in government hands.

Back when the deficits ran only about $9 billion to $10 billion (those good old days were only about three or four years ago), it became clear that changing a few of the property assessment rules passed to facilitate the 1978 Proposition 13 tax cuts could solve much of the problem. This could still solve a bit of the problem, but nowhere near all of it.

But the cash that now lines the pockets of a bunch of special districts that are generally unwilling to share their wealth could do almost the entire job.

What are these special districts and where do they get their big bucks? We’re talking about water districts, irrigation districts, publicly-owned bus companies, sewer districts, sanitation districts, hospital districts and more. For the most part, these outfits get their money not from taxes, but fees. In many places, if you want your garbage collected, you pay the sanitation district. If you want water to come out of your tap or your garden hose, you pay the water district. If you want to ride a bus or trolley, you pay the fare.

Altogether, the 250 wealthiest special districts in California had cash holdings of $41.3 billion entering last year, after paying all expenses, money gathered over decades of operation and sitting in bank deposits or other investments. The Orange County sanitation district, for one, had “retained earnings” of $1.35 billion. The same county’s water district had $1.2 billion in reserve.

If any city or county possessed that kind of cash reserve, taxpayers would be up in arms, demonstrating in the streets before district headquarters to demand lowered fees and some kind of distribution of the excess money.

When many cities have a bit of extra cash – nowhere near these sums – they donate at least some of it to the local schools to help prevent cuts.
But with the special districts, there’s nary a peep from anyone. And there’s no movement by their elected boards to use that extra money for anything or helpful. Nope, they’d rather sit on the money, pleading possibly future infrastructure needs.

Water districts justifiably say they never know when they’ll need to repair a burst line that might create a sinkhole in the middle of a major boulevard. That’s happened many times. Money also must be available for sewer repairs, new buses.

In fact, reports the Orange County Register, about half the money is reserved for specific projects or future debt payments. That still leaves about $20 billion unspoken for. No one knows how much the districts might eventually need for repairs to buildings and other equipment, but for sure they won’t be spending $20 billion on those items anytime soon. Let’s say, choosing a random figure, that they might eventually need $5 billion for repairs, above and beyond their planned budgets. That leaves $15 billion that could be handed over to the state – enough to solve 60 percent of the budget problem.

But the state can’t touch the money on its own. It can’t dun the districts as it did city redevelopment agencies over the last two years. And any hope that the state ever could demand the districts’ reserves diminished considerably with last fall’s 60-40 percent passage of Proposition 22, which aimed to keep most local tax revenues in local government hands.

And yet… state government has a lot of power. Gov. Jerry Brown and the Legislature could threaten to withhold other money from areas where special districts don’t offer some of their reserves to help the state out of its jam. Brown could threaten to withhold federal grant money of various types that is allocated by the state.

In short, the governor has plenty of jawboning power. If local voters saw other government services like police and fire protection, schools and road maintenance begin to suffer because special districts refuse to contribute toward helping the state as a whole, it’s possible they might rise up and vote out some district board members.

Political reality, then, means that the special district money is not as untouchable as some laws might suggest. It’s really a question of how tough the governor and the Legislature might be, how much of a battle they wish to fight.

With major cuts to public schools, police forces and health care for children without insurance in the immediate offing, they just might have some incentive to do some far more heavy-handed negotiating than this state has ever before seen. That’s probably what it would take to get at the huge pot of money that’s sitting in the district coffers.

Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

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