Chapter Highlights Printable Budget Documents

Assistance to Local Government
State-Local Fiscal Relationship

With the passage of Proposition 1A in 2004, local governments have a more stable funding relationship with the state, which can no longer shift costs, fail to reimburse mandates on a timely basis, or reallocate local revenues to benefit state priorities.

In addition to being protected from future property tax revenue shifts, local governments have experienced significant tax revenue increases since 2000-01, especially when compared to state government. While state revenues increased by an estimated 31 percent from 2000-01 to 2007-08, we estimate that city and county tax revenues increased by 50.4 percent and 80.5 percent, respectively. While cities and counties are using much of this new revenue to provide services to an expanding population, this nevertheless reflects a significant revenue gain for local governments in comparison to the state.

Local governments also have benefited from the Vehicle License Fee (VLF) "swap," which allows them to retain additional property tax revenues to backfill the revenues they lost when the VLF was reduced from two percent to 0.65 percent. The backfill amount annually grows with the increase in property tax revenues, instead of the annual increase in VLF revenues. Because property tax revenues have increased significantly more than VLF revenues since 2004-05, we estimate the VLF swap has allowed counties and cities to retain an additional $2.1 billion in property tax revenues that otherwise would have been redirected to K-14 schools.

The Governor's Budget proposes no net reductions in discretionary assistance to local government. While the Budget eliminates the net operating deficit in 2007-08, future state budgets may have to be reduced. Given the many responsibilities that are shared between the state and local governments, particularly for law enforcement, the Administration looks forward to working with the cities and counties to further improve the state-local fiscal relationship to ensure the efficient delivery of services and to strengthen the long-term fiscal health of both state and local governments.

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CHAPTER HIGHLIGHTS for Assistance to Local Government Back to Top

	State-Local Fiscal Relationship
	Local Government Fiscal Conditions
	State Aid to Local Government

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PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - Assistance to Local Government (pdf * - 4K) -
Provides this entire Assistance to Local Government Chapter in pdf format.