The city of Sacramento and advocates for local governments are cheering the passage of a state ballot measure that bans the state from taking or borrowing local funds. 

However, the new measure does not eliminate the $4 million the Sacramento Housing and Redevelopment Agency owes the state in May 2011, according to the California Redevelopment Association. 

California voters’ approval of Proposition 22  on Nov. 2 helps the city while the state continues to face budget troubles, said Sacramento Mayor Kevin Johnson.

The state is now looking at a $6 billion budget shortfall during the current fiscal year, said H.D. Palmer, deputy director of external affairs for the California Department of Finance. In the next fiscal year, the state’s projected deficit is at least $19 billion, he said.

“When I hear the projections of the state deficit going up a little higher than people anticipated, that’s not good for anybody,” Johnson said at his weekly press conference on Tuesday. “But (Prop. 22) allows us to have a little more comfort and security, knowing that they no longer are allowed to take our dollars to balance their budget.”

Palmer noted that Prop 22 will cost California $1 billion in the current fiscal year, according to the state Legislative Analyst’s Office. 

“The total annual fiscal effect from these changes is not possible to determine, but could range from about $1 billion (in most years) to several billion dollars (in some years),” according to the Legislative Analyst’s report on Prop. 22.

Voters passed Prop. 22 with 60 percent of the vote.

Under the measure’s rules, the state can no longer take redevelopment property tax funds. It also bans the state from funding schools with property taxes from local governments. The state also won’t be able to use fuel tax revenues that go to local governments.

In one local government example, the Sacramento Housing and Redevelopment Agency was required to give $19.6 million to the state in May, said John Shirey, executive director of the California Redevelopment Association. In May 2011, SHRA will have to pay another $4 million to the state, he said. Even though Prop. 22 is now in effect, it has retroactive language requiring the payments to be made in May, 2011.

The California Redevelopment Association is fighting the state in a lawsuit that’s currently at the Third District Court of Appeal in Sacramento, he said.  The lawsuit aims to reverse 2009 state budget legislation that allowed the state to fund schools with $2 billion in local redevelopment funds from most of the state’s redevelopment agencies, according to Shirey. The $19.6 million that SHRA paid last year and the $4 million it owes in May made up SHRA’s share of the $2 billion. 

Shirey had harsh words for the state: “There’s no borrowing here; it’s straight theft.”

Photo by Brandon Darnell.

Kathleen Haley is a staff reporter for The Sacramento Press.