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May 21, 2004

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Publication Date: Friday, May 21, 2004

Tough budget call for city Tough budget call for city (May 21, 2004)

Mountain View needs to cut $1.4 million or dip into reserves

By Corey Pride

Mountain View city officials are preparing to either make tough budget cuts or dip into reserve funds as they brace for Gov. Arnold Schwarzenegger to take away more than $2.8 million from the city over the next two years.

Faced with a state deficit projected to top $15 billion in the next fiscal year, Schwarzenegger released his May budget revision proposal last week, which asks cities to contribute about $1.4 billion to the state in 2004-2005 and 2005-2006. Mountain View's proposed contribution is $1.4 million each year.

City Manager Kevin Duggan said the city has two options in handling the state takeaway.

"The city council has to either reduce operating costs or use reserves," Duggan said.

Mountain View has a $9.3-million budget transition reserve fund it could use to make up for the lost monies.

Council member Mary Lou Zoglin said she thinks it's more desirable to use the reserve funds since the takeaway will only last two years. However, some council members aren't convinced.

Council member Rosemary Stasek does not trust the state to stick to a two-year limit.

"Yeah, right. I'll believe that in year three," she said.

Further complicating matters is the state government's tendency to pass the state budget after the start of the fiscal year and the possibility that an initiative will be passed in November that will return money to cities.

Finance Director Bob Locke said the city council usually budgets a far lower amount of expenditures than it expects to receive in revenue in order to safeguard against surprises in late state budgets.

Council member Nick Galiotto said he prefers the conservative approach.

"Why would you want to make draconian cuts in your budget now when you may get the money back in November?" he asked.

The $1.4 million Schwarzenegger is asking for is less than some anticipated.

"My fear was it would be more than $2 million for a longer (period of) time," said Council member Greg Perry. "With this figure, I'm not strongly worried."

In a Narrative Budget Report dated March 26, two contingency plans were laid out for the city council to choose from in the event the state wanted to take away more money than the city could handle. Both plans call for eliminating jobs and reducing services, the first plan being the more severe of the two.

Galiotto is against using either contingency plan to cover the money proposed to be taken by the state. He said there is $3.2 million the city has left over from a land deal on the San Antonio Road loop and he would like to see it used to cover the take-away.

Duggan said a bad economy has already led to the city cutting positions in the past.

"Less businesses in the area has led to less jobs and less travel, " he said. "We have already [cut jobs]."

Duggan, like many city officials around the state, had to reduce 60 positions in the last three years and does not believe the state should take money from cities.

"There is no best-case scenario because we don't think the money is the state's to take," Duggan said, after being asked if Schwarzenegger's revise was better news than expected.

The California League of Cities, an advocacy association of cities, is in full agreement with Duggan. It has gathered signatures to place an initiative on the ballot to prevent the state from taking money from cities except in cases of emergency, which voters would have to approve.

"Local government has no other source of revenue it can draw from if it's in a deficit. Local government has to make cuts," said League of Cities spokesperson Megan Taylor. "If local government has to live within its means why can't the state?"

In response to the League of Cities' proposed initiative, Schwarzenegger is floating the idea of a compromise initiative that would ban the state from taking money from cities but would allow two years of take-aways before going into effect.

E-mail Corey Pride at

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