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State Budget While Proposition 1A, passed by voters in 2004, provides some protection from sales and property tax shifts, the State faces a $17.2 billion deficit for the coming fiscal year. This raises concerns that the potential exists for loosing the remaining few State subventions and State shared revenues the City receives. The Governor’s May revision of his budget proposes to securitize the State lottery to close the budget gap and fund a budget stabilization account with $5.1 billion of revenue going into the 2008-09 budget. The proposal provides an “insurance policy” guarantee of a 1% sales tax trigger should the proposal fail to receive voter approval in November. It should be noted that the Legislature would need to approve 1% sales tax trigger for it to actually go into effect. The Governor’s proposed budget, as it stands today, does not borrow local sales or property taxes through Proposition 1A and continues to provide full Proposition 42 transportation funding. As it relates to the operating budgets for cities, the Governor’s budget proposes a 10% reduction in both the COP’s public safety annual grant and the annual booking fee reimbursement. The City currently receives $132,210 annually for the COP’s grant which has been used to purchase a variety of equipment for the Police Department. No revenue has been expected for the booking fee reimbursement, and the City stopped budgeting for that revenue years ago when its viability as a reliable revenue source came into question. As it relates to capital project funding for cities, the Governor’s budget does not propose any changes to funding from Proposition 42 or Proposition 1B. Over the next three years the City of Pleasanton is slated to receive around $2 million in Proposition 42 funding (sales tax on gasoline) and $1.1 million in Proposition 1B funding (State infrastructure bonds), both of which are programmed in the Streets CIP budget. The Legislative Analysts Office (LAO) has released an alternative budget to the Governor’s proposal which introduces some “wild cards” and has recommendations which are a greater threat to local revenues. The LAO’s proposals include ideas on how to save the State money by shifting State parolees to county probation, but by paying for it largely by taking city public safety dollars, such as Proposition 172 public safety sales tax. Other LAO proposals include taking 100% of the remaining Vehicle License Fee revenues that currently go to cities. In addition, the LAO has proposed to save additional State dollars by eliminating 100% of the funding cities receive for the annual COP’s grant program and booking fee reimbursement. In summary, the Governor has included in his proposed budget cuts to some State subventions to cities (cuts COP’s grant & booking fee reimbursements by 10%) but does not propose using local tax funds to shore up the State budget. If the Legislature doesn’t support the Governor’s direction, the result will be a fresh effort to identify other ways to close the budget gap. This could involve additional proposals for cuts to State programs, raising tax revenues through various means, transferring or borrowing local government revenue, or other solutions. In short, expect the political climate to be volatile and budget deliberations could drag on into summer and possibly the fall. í