Cities Likely Headed to Court Following Signed State Budget

With a new fiscal year beginning Friday and a budget in place, state lawmakers may be breathing a sigh of relief, but local leaders aren’t feeling as relaxed. 

The budget package, and the rest Thursday, calls for the displacement of city’s redevelopment agencies and steering $1.7 billion to the state when the fiscal year begins Friday.

The signed budget garnered the criticism of local city officials, who said the budget was much like the previous budget vetoed by Brown.

“The governor and majority party have again come up with a budget full of smoke and mirrors, ambitious revenue projections and more borrowing,” said City Manager Chris Jeffers.

The $85.9 billion budget—which was approved in both houses on Tuesday without Republican support—relies on $4 billion more in state revenue and deep cuts to higher education and courts.

Of the budget bills approved by the Legislature late Tuesday, two seek to change the way redevelopment works in California.

Assembly Bills 1X-26 and 1X-27 seek to restructure redevelopment agencies—which allow cities to develop blighted areas—in a way that diverts money to the state, strategies Jeffers called an extortion of redevelopment agencies.

Though the League of California Cities—an association of city officials—plans to sue the state by the end of the week over the two redevelopment bills, many cities made moves in an attempt to protect as many local dollars from Brown’s initial proposal to completely eliminate redevelopment agencies.

“We think we have a strong case for all redevelopment agencies and what the Governor proposes to do is illegal against recently passed Proposition 22,” said Jeffers. “We’re now going to have to fight it in court and it’s going to take time. As a result of that, an uncertainty will prevail over redevelopment agencies.”

Jeffers said a fallout from the approved budget could be a reluctance from developers unwilling to do business with the city. He said the next six months will be ripe with discussions with city officials on how to deal with the signed budget.

Though the budget was approved by Democrats, the party hasn't expressed complete contentment with the results, as their original budget was vetoed by the governor on June 16.

In a statement, Senate Majority Leader Darrell Steinberg said, “This is not a budget to celebrate. There’s a lot of pain here for a lot of people. We enacted a plan that preserves our opportunity for economic recovery, and look forward to giving Californians the chance to vote on making that recovery even stronger.”

This is the sixth time in two decades that the budget was approved on time, largely due to Proposition 25, which was approved by voters in November and allows lawmakers to pass a no-tax-hike budget with a simple majority.

Though the deferment of redevelopment funds to local schools is what lawmakers are promising, the budget still postpones about $3 billion in payments to schools.