County supervisors threaten to withhold tax revenues

Grappling with a state budget stalemate that has left them $105.6 million in the hole this month, Los Angeles County supervisors this morning threatened to withhold tax revenues from the state to pay for local social services.

“We’re declaring our own Boston tea party,” Supervisor Gloria Molina said at this morning’s board meeting, adding that withholding money from the state would send a message to state legislators to take immediate action and "make their pain more acute.”

Supervisors directed the county's auditor controller, its CEO, William T  Fujioka, and county counsel to explore the legality of withholding money -- including reimbursements and property and sales tax revenue -- from the state. The board plans to reconsider the option during closed session next week.

“It’s a delicious idea,” Supervisor Zev Yaroslavsky said. “It may be deliciously illegal, but I think the state’s action may also be illegal.”

The state controller delayed $105.6 million in health and human services payments to Los Angeles County for at least a month, and the supervisors voted to cover those payments with reserves.

Supervisors have said they will be unable to cover the shortfall if Gov. Arnold Schwarzenegger follows though with plans to defer an estimated $1.4 billion in state payments to the county for welfare and other social services over the next seven months.

The county already had to transfer $29.1 million from county reserves last month to cover an upsurge in welfare and construction costs, and supervisors have said they may have to cut services and jobs next month if state lawmakers do not take action.

Molina and other supervisors said they are not receiving any new information about budget negotiations from Sacramento and have few answers for worried constituents and officials at agencies such as county-funded day-care centers.

“If they can defer our money, why can’t we withhold theirs?” Supervisor Don Knabe, who chairs the board, said of the state.

Knabe and Supervisor Michael Antonovich said the county should try to withhold the money to cover programs the state has delayed funding.

“If it’s legally possible, we ought to use all resources possible to protect the public safety of Los Angeles residents,” Antonovich said.

County Counsel Ray Fortner said he has been researching the legality of the county withholding money “for some time” but could not say yet whether it would be legal for supervisors to do so under the circumstances.

-- Molly Hennessy-Fiske

Photo: L.A. Times

Comments

[Peter]

Good idea but it won't solve the problem. According to Dan Walters, the dean of California political journalists, writing in the Sac Bee: About 10 years ago, the state boosted its police and fire pension benefits to as much as 90 percent of salary on CalPERS' assurances that it could do so without incurring new costs to taxpayers. Most local governments followed suit. Now, the higher benefits and lower investment earnings are hitting everyone hard. According to the San Jose Mercury News, San Jose's pension costs for police and fire personnel have grown by 167 percent since 2000, thanks to much-improved benefits, twice as much as costs for civilian city workers. However safety employees i.e. cops, fire and prison guards are EXEMPT from furloughs.

[susan]

This makes sense. The reality is, the state budget is being held hostage by a bunch of drown-the-govt-grover-norquist conservatives who veto every decent budget proposal that has been produced since Prop 13 gave them their disproportionate power. As a result, LA county, and the SF Bay Area, are essentially being forced to live with the politics of Alabama even though their residents would like something more like Denmark. If this is the first step toward Western California shedding the right-wing portions of the state for good, the more power to them. LA and SF would both be far better off without the eastern half of the state - which pays little into the state's coffers in the big picture. LA knows this, and that's why they're pursuing this tact.

[Jeffrey Goodrich]

If there is no state law prohibiting setoff, the common law allows a debtor (the county) to "setoff" its debt against obligations its creditor (the state) owes to the debtor. The only requirement is that the debts be mutual, ie., the entity owing the debt must be the same as the entity to whom the debt is owed. For example, if the county owes the state money and the state owes the county money, the two debts can be setoff and only the net amount is owing. But if the county owes the state and the state owes social benefits to Californians who apply for them (i.e., the county is merely an agent for the benefit of others, and is not a direct creditor of the state), then the county is out of luck

[Robert Laughing]

Yeah, like Molina obeys the Law....remember her huge (no permits) pool??? We would like to see ALL Govt leaders AUDITED and held ACCOUNTABLE....lots of Daschels in L.A.!!!!

[Jim]

I wonder if this means Molina would be on my side if I decide to pay my property taxes with my income-tax-refund IOU...

[Rickman Matisse]

I'm not certain how Gloria intends to withhold sales tax revenue from the state when retailers pay those funds directly to the state in the first place. After collection the state allocates the funds to the county. If, after all these years, Gloria still can't remember how the county derives most of its operating funds, perhaps she should consider another, less taxing, type of employment.

[Rickman Matisse]

I'm not certain how Gloria intends to withhold sales tax revenue from the state when retailers pay those funds directly to the state in the first place. After collection the state allocates the funds to the county. If, after all these years, Gloria still can't remember how the county derives most of its operating funds, perhaps she should consider another, less taxing, type of employment.

[Boston tea party time!]

Sorry Susan, but you have the facts wrong. CA has the highest taxes in the country. We have the highest personal income tax, highest business tax, highest gas tax, etc.

We are in this mess not because the Republicans have stood up for working families. We are in this mess because Democratic legislators continue to spend and spend without any thought for tomorrow. Had they SAVED some money during the good times, (instead of spending it) our problem would not be as acute. We already pay enough taxes in California. It is time for the state government to put itself on a reasonable budget like the rest of us. (Btw, I am a Democrat and ashamed of my party and their inability to manage the state's revenues)

[Wade]

"If, after all these years, Gloria still can't remember how the county derives most of its operating funds, perhaps she should consider another, less taxing, type of employment." There are many kinds of taxes that are collected and redistributed in a myriad of ways.

If Rickman Matisse can't remember to only click the "Post" button once, maybe he should consider another, less taxing type of communication.

[PasadenaProgressive]

I wonder if this means Molina would be on my side if I decide to pay my property taxes with my income-tax-refund IOU...
I agree with Jim. We are the ones who should be screaming tax revolt!!

[Wade]

Actually, California's personal income tax rate is only the highest for millionaires, at 10.3%. It is 9.3% for incomes up to 47T-plus. Rhode Island and Vermont tax at 9.9% for incomes of 357T-plus and over, which in California would net a lot of people. Washingtonians pay the highest gas tax, at 38 c. per gallon versus 35 c. for Californians. California's corporate tax rate for non-S corporations is 8.84%; Massachsetts's is 9.5%. All of this info is available on the Internet if you'd bother to look.

[J]

Without the Republicans in the legislature, we would be waaaay worse off.

Everyone keeps blaming them for blocking budget deals, but they have to because the Democratic proposals call for absurd amounts of spending.

[Jeff]

The California democrats are not a tax & spend party. They are a SPEND & TAX party. They spend more money than they tax and then raise taxes to cover the overspending. This happens every 10 years. A couple more cycles of this will run the remaining taxpayers out of California.

[larry]

California does not have the highest income tax--far from it. It does not have the highest gas tax, far from it. It does not have the highest property tax--far from it. People who claim this should check facts before spouting opinions.

[Robert]

Someone said "CA has the highest taxes in the country"...

You don't get out much do you? I live in a 2 bedroom condo I bought in 1987 that is now worth $350,000 even after the real estate downturn. My property taxes are $1,500 per year. My sister lives in a 2 bedroom house in New Jersey she bought about 4 years ago. Her property taxes are over $9,000 per year for an equivalent sized home. Now, explain to me again how our taxes here are the highest in the country?

Our states problems are due to the majority of taxes coming from personal income tax which fluctuates more in economic boom and bust times than real estate taxes do. You can thank Prop 13 for that if you bought a long time ago like I did. Personally, I believe the state should be getting more of it's income from property tax, a partial rollback of Prop 13 is in order. I would rather pay a few dollars more per year and have a functioning state government than the perpetual slipping over the cliff we are about to experience. All you Howard Jarvis cultists can burn my effigy at the stake at your convenience ;-)

Robert

[Robert]

This link completely busts the myth of California being a high tax state. It was until Prop 13 went into effect. Now we are very close to the norm, with our property tax being much lower on average than most other states like I explained earlier.

http://tinyurl.com/6zssy5

[CA Secession from the USA]

California should withhold taxes to the Federal Government till we are reimbursed for the cost of illegal immigration. Maybe that would send a clear message to them finally.

CA would be better off seceding from the United States given all the North East Wall street crooks and politicians that are robbing CA and the rest of the country blind. The Federal government needs CA much more than we need them. Let's do it now. It’s going to happen anyway. CA is a window to the country’s future.

[Steve Allan]

I agree with the writer stating that public pension costs are driving the state and local gov'ts to go down the tube. You can't give upwards of 80-100% of salaries for the rest of someone's life when they can retire at 50 years old. That in addition to health care etc. Come on now I respect the cops but most don't have a college degree and don't contribute to their own retirement. I know their job is tough and dangerous but lets face it a soldier has a much more dangerous job and they don't make 20% of most cops. We need to get a handle on these costs, especially police and fire pensions and benefits, or we will have another melt down when it will cost more to pay for the retirees than the ones actively doing the job.

[Ronin]

We do not want more of our taxes put onto our property instead of what we have in income tax. In down years, there is less money we have to pay our taxes and it proportionately goes down. But if it was on property tax instead, even when people made less, taxes would still be high. The state needs to do as its citizens do when times are tight. Tighten the belt a bit. That may include cutting salaries.

[JOE KILOZ]

AND US TAXPAYERS SHOULD DO THE SAME TO THE COUNTY BY NOT PAYING PROPERTY TAXES UNTIL THEY GET THEIR ACT TOGETHER

[LAT1X]

It's about time that someone expresses outrage against the Nazi governor and his fascist flunkies. Too bad Bush and Cheney aren't able to offer them multi-million dollar bailouts for their incompetence.

[John Bisceglia]

Our families are seriously harmed by legal inequity, and issues like THIS substantiate a tax revolt?! ANY American who pays taxes needs to realize that they are responsible for our taxes also. We stopped.

Amend the Civil Rights Act of 1964 to include Sexual Orientation, Gender Identity, and Gender Expression!

EQUALITY TAX REVOLT - Wednesday, April 15, 2009