The headline says it all. We?re in for a bumpy ride. Today Governor Davis gives his State of the State Message. He will present his financial plan for California. You already know that the state has a budget deficit of $34.8 Billion over the next 18 months. Today we well get more of the details of how the Governor proposes to solve this problem. Our concern as Foster City residents, both residential and business, must be ?What impact this deficit will have on Foster City??
We know from history that when Governor Wilson was faced with a serious budget shortfall in the early 90?s, he proposed a raid on property taxes. The vehicle for this transfer is the Education Revenue Augmentation Fund. ERAF, as it is commonly known, takes money away from city property taxes to make up for shortfalls in education funding. I predict that we will see ?son of ERAF? legislation that once again takes away property taxes from the cities.
However, even without a ?son of ERAF?, Foster City, like every other California city, faces both increased state expenses due to a drop in the California Public Employees Retirement System (PERS) reserves. During euphoric stock market era, PERS was ?superfunded?. There was more money in PERS than was required to meet all retirement needs. Therefore, although employees continued to pay into PERS, cities were not required to match those payments. Superfunding is gone.
In budget year 2003-2004 the city will need to pay slightly over $500,000 to PERS. In budget year 2004-2005, this will be over $1 Million, and in 2005-2006 the PERS payment is predicted to be $2.1 Million. If the state does not take away additional property taxes, our normal growth due to property transfer will cover much, but not all of these increases. A ?son of ERAF? will exacerbate this problem.
Foster City receives revenue from the State in the form of grants for public safety and for roads. The combined total of grants from the State to Foster City adds close to $1 Million to city revenue. I believe Governor Davis will be forced to end these grants to reduce the budget deficit. So we will have an increase in expense due to PERS and a loss in revenue form Grants. Double Whammy!
The School Districts throughout California face similar problems to those facing cities. Those who believe we can have a new public high school in Foster City should work with San Mateo Union High School District to get the facts regarding the financial condition of that District.
Foster City has maintained a General Fund Reserve that will enable our City to weather these losses BUT WE MUST MANAGE OUR RESERVES VERY CAREFULLY. I am confident that your City Council will be diligent in protecting Foster City?s infrastructure, i.e. streets, parks, public safety and essential services.
Your opinions and ideas on how we do this can be offered at our Policy Planing Study Session, Saturday, 25 January from 9AM to 2PM and at our regular City Council meetings in the coming months. Your input is important.
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