"Balancing the Budget with the Challenge of ERAF"
By Dave Rosenberg
Yolo County Supervisor, District Four
In the middle of a major recession in 1992, the Legislature balanced California’s books, in large part, by transferring property tax revenue from cities, counties and local districts to schools. In 1993, the Legislature transferred additional funds. In those two years alone, the State shifted about $4 billion in property taxes to schools, which, in turn, allowed the State to decrease its use of the general fund for schools. More than two-thirds of the shift (shaft?) came from counties. In each county, these property taxes were deposited into a newly created countywide fund for schools, the "Educational Revenue Augmentation Fund" ("ERAF"). These on-going shifts are commonly referred to as ERAF shifts.
In 1993, in partial recognition of the ERAF shift impacts on local budgets, the Legislature extended a temporary 1/2 cent sales tax allocated to counties and cities for financing local public safety. In November 1993, the voters passed Proposition 172, a constitutional amendment, permanently extending the program. The proceeds were allocated so that they offset an average of 50% of each county’s 1993 ERAF shift statewide. However, in reality, the impacts were highly uneven with offsets ranging from only 29% in Calaveras County to over 80% in Butte and Orange Counties.
The ERAF shifts made local officials profoundly unhappy, and we continue to complain. There is no question that the ERAF transfers impacted local budgets, but did these transfers have consequences for California citizens? In response to legislative interest in better understanding the service impacts of the ERAF shifts, addressing local officials’ concerns, and the more general interest in reshaping California’s state-local relationship, the Senate Local Government Committee asked the California Research Bureau ("CRB") to gather new information on local government services.
To determine the consequences of the ERAF transfers for California citizens, the CRB conducted a survey of eight selected California counties. Recognizing the dual role counties play in providing services, CRB asked about countywide services such as jails, courts, general assistance and the county assessor, as well as municipal-type services that counties provide primarily to their unincorporated areas such as sheriff protection, roads, libraries and parks. CRB specifically asked how budget cuts affected these services and how the public was impacted (if at all) by the changes.
The conclusions are mixed. Counties are not all the same. Some had to make major adjustments. Revenues in other counties bounced back rather quickly.
In the hardest hit counties, public employees were certainly affected. Pay cuts (of 5% to 10%) were common. County employees were compelled to take furlough days (that is, to take what would ordinarily be work days off without pay). Layoffs occurred, in more than trivial numbers. Full-time employees with full benefits were sometimes replaced with temporary workers without benefits, although in some counties, union agreements prevented this approach. Overall, there was a lot of local employee unhappiness.
But these effects are not of especially grave consequence to the non-government public. Did the cuts affect them? Again, the answer is yes, in some counties. In some counties there were grave consequences. In the hardest hit counties, effects included:
- Accused felons awaiting trial spent less time in jail, and more time out on the streets.
- People who were convicted of misdemeanors did no jail time at all.
- People on probation often received no meaningful supervision.
- County offices were open fewer hours to the public.
- Libraries were open fewer hours and bought fewer books. Bookmobiles were sold off.
- County recreation programs disappeared, perhaps putting more young people on the streets with time on their hands.
- Parks were less well maintained.
- Roads were under maintained, with potential long-term costs.
- Sheriff’s no longer responded to some kinds of calls.
- District Attorneys and Public Defenders were stretched thin.
In Yolo County, the ERAF shift dramatically affected County revenues. It is estimated that since the ERAF shift occurred in 1992, Yolo County has lost $72 million in revenues. Even when offset by Proposition 172 monies, the net loss to Yolo County has been about $50 million. That’s substantial. And it grows every year!
There is, however, light at the end of the tunnel. The State this year seems to be awash in revenue due to economic "good times." As a result of term limits and a constantly changing Legislature, forty of the eighty members of the Assembly now have local government experience, having served previously as county supervisors, mayor, councilmembers and school board members. Our own Assemblywoman Helen Thomson (a former County Supervisor) and our Senator Maurice Johannesson (also a former County Supervisor) have been working hard to restore some stability to local county government finance.
Hopefully, by the year 2000, the State will staunch the flow of money from counties to the State and will restore a major portion of the funds shifted away from local government to balance the State’s books. Fair is fair.