The new California state budget reduced spending by $15 billion and potentially includes an additional $2.5 billion in cuts – but it’s not all bad news for Sacramento.

Some of the impacts of the state budget on Sacramento were outlined at the City Council meeting Tuesday, most notably problems stemming from changes to redevelopment, realignment and motor vehicle license fees.

“The best thing I can say is that it was an on-time budget,” said David Jones, lobbyist for the city of Sacramento.

The budget was balanced using $4 billion in projected revenue increases, Jones said, and about 40 percent of that is “just hopeful thinking and subject to litigation or challenges.”

That’s good news for the city, Jones said, because some increases in the budget would result in significant revenue loss for the city if they remain in place.

One aspect of the state budget that will have a deep impact on the city is the restructuring of redevelopment agencies.

According to Jones and Leyne Milstein, city finance director, redevelopment funds from tax increment funding through the state bring approximately $3.5 million to the city and county each year.

Under the state’s new Voluntary Alternative Redevelopment Program, the Sacramento Housing and Redevelopment Agency (SHRA) will have to come up with an initial $22 million “continuation payment” to continue its operations, or it will be dissolved.

If that happens, said La Shelle Dozier, executive director of SHRA, numerous Sacramento redevelopment projects in the works will be stalled unless alternate financing is identified, and some projects would never come to fruition.

Jones said the California Redevelopment Association is filing a lawsuit to stop the new redevelopment agency legislation but, until that litigation is resolved, redevelopment agency activities in Sacramento are on “uncertain ground.”

Another item in the state budget that will impact the city comes from the realignment of public safety programs from the state to local governments.

Senate Bill 89 (SB89) diverts 100 percent of motor vehicle license fee revenues from cities to counties, using it to fund public safety activities that have been realigned from the state to the counties.

Until last year, Sacramento received approximately $1.7 million from vehicle license fee revenues annually.

“Realignment is one of the major features of the governor’s budget,” Jones said. “There will definitely be an impact (to local government) down the line.”

The governor’s realignment strategy involves shifting low-level offenders from state institutions to county institutions and local government programs.

“We’re going to see offenders crowded out of from our county jail and possibly onto the streets,” Jones said.

Other realigned programs, according to the governor’s budget summary, include local public safety programs, mental health, substance abuse, foster care, child welfare services and adult protective services.

“The measure passed in the very last hours of budget talks,” Milstein said. “If this legislation stays on the books, it will be a real hit to the city.”

The state budget isn’t all bad news, though, said Jones.

The Community Oriented Policing Services public safety grant has been approved, Jones said, and that means $763,000 in funding to the city.

Assembly Bill 678 (AB678), which provides reimbursement to local fire departments for emergency medical transport, is progressing through the Legislature and may be out of committee and onto the governor’s desk by the end of August, Jones said.

Additionally, transit agency funding has reached a higher funding level this year – the second-highest in its history.

“We’ve seen better-than-anticipated sales tax from the first quarter,” Milstein said, “So we’re keeping an eye on it, and it looks like a positive trend. Then we can adjust for it later in the year.”

Read the governor’s budget summary here.
Read the text of SB89 here.
Read the text of AB678 here.

Melissa Corker is a Staff Reporter for The Sacramento Press. Follow her on Twitter @MelissaCorker.