California sacred cows get overdue critical eye 

As the fiscal travails of California’s state and local governments grow more acute, hitherto sacrosanct — or ignored — governmental sectors have found themselves under intensifying scrutiny.

An obvious example is the array of state and local government pension funds.

Those funds have been losing money in stocks, property and other investments, reducing their actuarial soundness and demanding higher payments from public budgets that are already leaking red ink. A recent Stanford University study, for instance, said that three big state pension funds might be a half-trillion dollars underwater.

The mind-boggling pension numbers, in turn, have ignited much media interest, an intense political debate over pension costs, concerns about retiree health care and fitful campaigns to throttle back obligations.

Another corner of government facing a critical eye is “redevelopment,” the decades-old local government program that uses tax subsidies, bonds, land seizure and other tools to repackage property deemed as “blighted” and underwrite new construction.

Local governments, cities mostly, have issued many billions of dollars in bonds and skim about $5.5 billion a year off the property tax stream in redevelopment zones, supposedly to be used for civic improvements and affordable housing.

The property tax skim adversely affects counties, which often oppose creating or expanding city redevelopment projects, and requires the deficit-ridden state budget to pay schools about $2.7 billion a year extra to offset property tax losses — in effect a state taxpayer subsidy for local projects.

As they desperately try to balance the budget, Gov. Arnold Schwarzenegger and legislators want to recapture some of that $2.7 billion. Two years ago, they tried to grab $350 million from redevelopment agencies, but a judge ruled against them. Last year, they opted to take $1.7 billion for the 2009-10 budget and an additional $350 million for 2010-11 by shifting the money to schools.

Once again, the shift went to court and on Tuesday, just six days before the first payment was due, the same judge, Lloyd Connelly, a former Sacramento city councilman and state assemblyman, ruled it’s legal.

Simultaneously, the Senate Office of Oversight and Outcomes issued a report saying that no one knows for certain whether redevelopment agencies are spending required amounts of revenue on housing, calling it a “billion-dollar confusion.” The redevelopment industry knows it’s besieged. As it fights the state in court, the California Redevelopment Association is developing an ambitious political and marketing campaign.

Critical scrutiny of pensions, redevelopment, tax loopholes, “entitlements,” bloated prison overhead and other sacred cows is long overdue. We no longer can commit billions of public dollars with scant justification while basic services wither. It’s time to get real.

Dan Walters’ Sacramento Bee columns are distributed by the Scripps Howard News Service.

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A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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