Please ensure Javascript is enabled for purposes of website accessibility
Walters: Local Governments Are in Distress
dan_walters
By Dan Walters, CalMatters Commentary
Published 4 years ago on
November 13, 2019

Share

California’s economy has been booming for most of this decade and has generated a cornucopia of tax revenues for state and local governments.
The state has benefited most, because it collects income taxes. Californians’ taxable incomes have been soaring, especially for those atop the economic ladder, whose tax rates also have been increased.


Dan Walters
Opinion
The state has shared much of its multibillion-dollar windfall with schools, as required by the California constitution, increasing per-pupil spending about 50% in recent years.
Nevertheless, many school districts are in financial distress due to declining enrollment, unsustainable, irresponsible salary increases and, finally, state-mandated increases in payments to the California State Teachers Retirement System to offset its unfunded pension liabilities.
Last week, state Auditor Elaine Howle reported that audits of three big school districts revealed that state aid meant to enrich the educations of poor and English-learner students has often been diverted to cover budget holes.
Many school districts have asked voters for tax increases to close their budget gaps, most commonly through “parcel taxes,” which are levied on real estate. And the California School Boards Association is sponsoring a 2020 ballot measure that would hike personal and corporate income taxes to raise about $15 billion a year for schools.

The Ratings Are Based on Several Factors

Schools, however, are not the only local governmental agencies in fiscal distress. Cities, which receive almost no state aid and depend largely on local property and sales taxes, are also feeling the pinch for many of the same reasons.
Prior to issuing her report on schools, Howle released another revealing study on the fiscal health of California’s nearly 500 cities, highlighting those in the worst straits.
Generally, most in trouble are small cities, either in rural areas or in urban cores, whose residents have low incomes. No. 1 on the list is Compton, whose travails have been well documented over the years.
However, there are also a few larger cities that Howle highlighted, such as Oakland, No. 13 on the statewide list, and San Diego, deemed to be one of the top three “fiscally challenged” cities in its region.
The ratings are based on several factors, including liquidity, debt burden, financial reserves, revenue trends and retirement obligations. It’s clear that the last one looms very large.
The California Public Employees Retirement System saw its trust fund plummet in value during the Great Recession as its pension obligations mushroomed, leaving it with only slightly more than 70% of the assets needed to fully pay promised pensions and — so far, at least — unable to recover fully from its investment losses.

Cities Have Asked Their Voters for Tax Increases

Therefore, CalPERS has been ramping up mandatory payments from local governments to reduce what it calls its “unfunded actuarial liability.” Cities get hit the hardest because they employ large numbers of police officers and firefighters who have the highest pensions and therefore the highest pension costs.
It’s not unusual for contributions for employees in so-called “safety systems” to reach 50% of payroll, and CalPERS has told city officials they will continue to climb.
Throughout the state, cities have asked their voters for tax increases, usually sales taxes but sometimes parcel taxes, to close their budget gaps with mixed results. But tax increases are particularly difficult to pass in communities with large numbers of low-income residents.
Howle’s report not only shines some much-needed light on municipal finances but includes an Internet portal for Californians to check on their own cities. And sunshine is the best disinfectant for bad management.
CalMatters is a public-interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.
[activecampaign form=31]

DON'T MISS

When Newsom Gives His State of the State, He Should Be Candid About California’s Economy

DON'T MISS

CA’s Liberal Government Has a Long History of Caving to Special Interests

DON'T MISS

Newsom, Legislators Opt for Gimmicks and Wishful Thinking to Close California’s Budget Deficit

DON'T MISS

Courage to Embrace Change: El Rio Reyes Conservation Trust Boldly Rebrands as Kings River Land Trust

DON'T MISS

Committed to Politics or Committed to Fresno’s Children?

DON'T MISS

Repealing Prop. 47 is a Misguided Battle Cry. It Won’t Make California Safer.

DON'T MISS

Misty Her Might Be Best Superintendent Candidate. But Fresno Unified Still Needs a Statewide Search.

DON'T MISS

How California’s Prized Solution for Methane Gas Is Backfiring on Farmers

DON'T MISS

Many Californians Rely on This Farmers Market Program. Newsom Wants to Cut It

DON'T MISS

Carbon Capture Storage Is Key to California’s Economy & Energy Future

No data was found

Facebook News Tab Will Soon Be Unavailable as Meta Scales Back News and Political Content

14 hours ago

Stock Market Today: Wall Street Rises to More Records to Close Out Its Latest Winning Month

14 hours ago

A Fresno County First: Kerman Council Passes Amended Gaza Cease-Fire Resolution

14 hours ago

UN Top Court Orders Israel to Open More Land Crossings for Aid into Gaza

14 hours ago

How Involved Is Southern California Consulting Firm in FUSD Executive Dealings?

15 hours ago

Biden’s Fundraiser with Obama and Clinton Nets a Record $25 Million, His Campaign Says

15 hours ago

Fresno Unified’s Self-Protection Racket Is Hurting Our Kids

16 hours ago

Rockin’ Out or Laughing, the Valley Has Its Pick of Weekend Events

16 hours ago

Ex-Correctional Officer at Women’s Prison in California Sentenced for Sexually Abusing Inmates

19 hours ago

Caitlin Clark and Iowa Draw Nearly 5 Million Viewers for Second-Round NCAA Win

19 hours ago

PGA HOPE at Riverside Golf Course Introduces Military Veterans to the Game

PGA HOPE, now underway at Fresno’s Riverside Golf Course, is designed to introduce golf to veterans and active duty military members t...

12 hours ago

PGA HOPE at Fresno's Riverside Golf Course
12 hours ago

PGA HOPE at Riverside Golf Course Introduces Military Veterans to the Game

14 hours ago

Cronenworth’s Big Hit Helps Lift the Padres to a 6-4 Win Over Melvin’s Giants

14 hours ago

Shohei Ohtani Reaches 3 Times in Home Debut as the Dodgers Rout the Cardinals 7-1

14 hours ago

Facebook News Tab Will Soon Be Unavailable as Meta Scales Back News and Political Content

14 hours ago

Stock Market Today: Wall Street Rises to More Records to Close Out Its Latest Winning Month

14 hours ago

A Fresno County First: Kerman Council Passes Amended Gaza Cease-Fire Resolution

14 hours ago

UN Top Court Orders Israel to Open More Land Crossings for Aid into Gaza

15 hours ago

How Involved Is Southern California Consulting Firm in FUSD Executive Dealings?

MENU

CONNECT WITH US

Search

Send this to a friend