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Deficit prediction staggers county, state

The Union Staff and the Associated Press
John HartRick Keene, state assemblyman for Nevada County, blames Gov. Gray Davis for budget crisis.
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SACRAMENTO – With California in the throes of its worst-ever fiscal crisis, Nevada County along with the rest of the state reeled Thursday after Gov. Gray Davis forecast a $34.8 billion deficit was coming. The report accelerated fears of:

— A battle in the Legislature over how to deal with perhaps the bleakest budget picture in a nation full of states drowning in red ink. In a visit to Grass Valley, new State Assemblyman Rick Keene laid the blame solely at the feet of Davis. “In my mind, (the budget deficit) is because of irresponsibility,” said the Republican from Chico, who has been named to the Budget Committee for the next legislative session. “It’s plain and simple overspending.”

— Further cutbacks in education. Students at the Nevada County campus of Sierra College will have fewer choices for classes next semester thanks to budget cuts, said provost Tina Ludutsky-Taylor. Nevada County schools already have begun planning for drastic budget-trimming.



— Further delays in county transportation needs that already have been put off for years. A study ordered by the Nevada County Transportation Commission shows a $10.7 million shortage in state and city monies to pay for key road projects.

Davis’ declaration that California is facing an unprecedented shortfall in the next 18 months – more than $10 billion higher than earlier estimates – sent a shudder through national credit agencies as Davis warned of sweeping actions to help fill the gulf.




The deficit would more than $1,000 per each of the state’s 34 million residents. It exceeds the entire general fund budget of every state but New York.

”We obviously have to look everywhere we can to solve this problem,” Davis said. ”We can’t run from this problem, we can’t spend our whole time wringing our hands, we have to deal with the problem straight on.”

Thursday, Standard & Poor’s dropped its ratings on California bonds, warning that ”the increased gap poses an enormous test for the state compared to the size of its annual budget.”

Davis said he believes other states will also be downgraded by the credit agencies. He noted most are suffering their second straight year of plunging revenues, and the stock market didn’t pick up this year as expected.

But in a visit to The Union’s Editorial Board Thursday, District 3 Assemblyman Keene blamed an explosion of 42,000 new state government workers, coupled with a reliance on a tax structure fostered by the telecommunications boom in the late 1990s, for California’s poor financial health.

The former Chico mayor, who has 420,000 constituents in a district encompassing Nevada, Butte and parts of five other counties, said Republican legislators warned the governor’s administration several years ago that applying the surplus from California’s boom economic times to long-term salaries and contracts would come back to haunt them. At one point, California had a $9 billion surplus that, within the span of four years, has swung nearly $50 billion in the opposite direction, he said.

A member of a Budget subcommittee that will oversee general government spending, said that when the Legislature reconvenes Jan. 6 “they need to get serious and cut the fat out of government spending.”

Because of the state’s financial crisis, Keene said services that Nevada County relies on from state money – mental health and social service programs, for example – could be in peril.

Keene said that he will not propose any tax increases to close the budget gap, but he foresees administration attempts to double or triple vehicle license fees, or tobacco and alcohol taxes.

“We believe you’re going to see a whole new set of taxes we’ve never heard of,” said Keene, 45.

Even before the announcement of the larger deficit prediction, county schools were bracing for a $1.9 million hit, or a cut of 3.6 percent.

At Sierra College’s Nevada County campus, 50 out of 299 course offerings will be cut, said provost Ludutsky-Taylor. The college already had cut its budget $1.1 million to balance its budget earlier this fiscal year.

Three part-time counselors will be furloughed for February and March, when their workload is typically low, she said. Vacant and new positions won’t be filled.

Also, she said 10 percent of student workers won’t be hired for the spring semester, and travel for college employees to conferences or meetings will be cut.

“Unless it’s absolutely necessary, I’m not going,” Ludutsky-Taylor said about travel for professional development or meetings.

A task force to study how the budget should be cut further will meet Jan. 15 in Rocklin. “We’re trying not to affect students,” Ludutsky-Taylor said. “We’ll try to get them into other classes.”

Meanwhile, a tax increase – either a county-wide sales tax or a property tax, along with other options – could be discussed next year, the Nevada County Transportation Commission said after its budget study was reported.

But Supervisor Peter Van Zant, who chairs the commission, doubts any elected body in Nevada County will go out and ask for a tax hike, even though he called the report “good information.”

“You have a challenge (ahead) of you and I don’t envy you at all,” the commission was told by Arthur Bauer, the Sacramento-based consultant who did the study predicting the $10.7 million shortage.

The report said that while the construction of the $12-million Dorsey Drive interchange is fully funded, others – including a $500,000 roundabout at the Idaho-Maryland/East Main intersection, as well as improvements at the South Auburn/Colfax/Neal intersection near Hennessy School – are not.

And the Dorsey Drive project is not a done deal yet. After multiple delays, the interchange on the Golden Center Freeway near Sierra Nevada Memorial Hospital, originally planned for the fiscal year 2006-2007, has been delayed for another year, according to Caltrans and the Nevada County Transportation Commission. The reason, in part, was said to be because traffic studies have yet to be completed,

The latest delay worries Ed Sylvester, president of SCO Engineering & Planning Inc. of Grass Valley, who has lobbied for the interchange for more than a decade. With the state budget crisis, funding for the interchange may be jeopardized, Sylvester said Thursday.

He said the interchange is necessary to give better access to the hospital, Sierra College’s campus, and because of the growth in the Glenbrook Basin.

“It has been the No. 1 priority need for a long, long time,” Sylvester said.

But much more than road projects are at risk if the state’s deficit is as huge as predicted. If it comes to pass, it will be by far the largest ever experienced in California. The state suffered a $14 billion deficit during the recession of the early 1990s. Republican Gov. Pete Wilson then used a combination of tax increases and cuts to bridge the gap.

Davis has proposed $10.2 billion in cuts already, and has said he likely will propose tax increases when he submits his 2002-03 budget in January. Legislators previously rejected significant tax increases as they faced last month’s election.

Davis also said he plans to release plans in January to make structural changes in the state’s budget that would make California less reliant on the volatile stock market in the expectation.

Davis said he believes other states will also be downgraded by the credit agencies. He noted most are suffering their second straight year of plunging revenues, and the stock market didn’t pick up this year as expected.

”We are in this mess because of a national recession which has greatly depleted the income of 46 states,” Davis said. ”We are also required after 9-11 to provide a lot more services through law enforcement than ever before.”

California’s budget shortfall for the current fiscal year ending June 30 – now estimated at $10.4 billion – is the largest in size and ranks second only to Alaska in percentage.

California’s shortfall amounts to 13.5 percent of its general fund, which pays for most state services, while Alaska’s is 20.6 percent, said Arturo Perez, a senior fiscal analyst at the National Conference of State Legislatures.

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The Union staff writers David Mirhadi, Grace Karpa and Kerana Todorov contributed to this report.

Sierra College Nevada Campus student assistance line: 274-5302

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