HomeMy WebLinkAbout8.2 LegislaRptRestructuringGovmnt
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CITY OF DUBLIN
AGENDA STATEMENT
CITY COUNCIL MEETING DATE: November 8, 1993
SUBJECT: Consideration of State of California Legislative
Analyst's Report on Restructuring Government
(Prepared by: Richard C. Ambrose, City Manager)
EXHIBITS ATTACHED:~eport by Legislative Analyst, Elizabeth G. Hill,
entitled "Making Government Make Sense" dated February
1993
\1A-r/
RECOMMENDATION: \ See below.
FINANCIAL STATEMENT:
Undetermined.
DESCRIPTION: On November 18, 1993, the Association of Bay Area
Governments (ABAG) General Assembly will be considering a resolution based
upon recommendations by the state Legislative Analyst to restructure
government.
The basic premise of the Legislative Analyst's Report is that California's
existing system of government does not work adequately to achieve the
public's goals, and that a fundamental reorganization of state and Local
Government responsibilities is necessary to assure that the public'S goals
are met. The Legislative Analyst identifies the following problems are
reasons for the dysfunctional nature of service provision by State and
local government.
1. Counterproductive Fiscal Incentives
2. Inappropriate Assignment of Responsibilities
3. Failure to Avoid Duplication and Realize Scale Economics
4. Inappropriate Exercise of Administrative Oversight
5. Unproductive Competition of Resources
6. Lack of Accountability for Program Outcomes
7 . Erosion of Local Control
The Basic Principles of Reform proposed by the Legislative Analyst are as
follows.
1. Maximize separation of state and local government duties through
appropriate alignments of control and funding responsibilities.
2. Match redistributive programs with redistributive revenue sources at
the highest level of government.
3. RecQ9Dize program linkages by restructuring to promote coordination of
service delivery mechanisms, removing barriers to innovation.
4. Rely on financial incentives to promote prevention and coordination.
In order to achieve these principles of reform three major types of changes
are identified.
1. Changes in the Assignment of Program Responsibilities
2. Change in state and local revenue sources
3. Establishment of new incentives and sanctions to promote the
achievement of broad public goals.
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.ITEM NO. 8.2
COPIES TO:
CITY CLERK
FILE ~
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1. Changes in the Assignment of program Responsibilities
a. state Government
(1) The state should operate Cash Grant and Health Care Programs
to assure: uniform access for the needy; increased market
power in negotiating for health care coverage; and greater
uniformity of service levels to eliminate migration
incentives.
(2) Assume responsibility for Welfare Administration from
counties to assure: accountability for program outcomes;
eliminates duplication and allows realization of scale
economics.
(3) Assume primary responsibility for public health programs
that focus on individuals.
(4) state should continue to play a role in the area of long
term custody.
(5) Assume control for funding and operation of trial courts.
b. Local Government
(1) Assume responsibility for all community based programs.
(2) Communi ties would be responsible for providing the broad
range of social services and pUblic protection services
including:
Mental Health District Attorney
Child Welfare services Public Defender
Foster Care probation/Parole
Adult Protective Services Jails/corrections
Substance Abuse Services Police
(3) communities would become the primary providers of jOb
training and jOb development programs.
(4) communities would be responsible for costs associated with
correction of convicted criminal offenders.
(5) communi ties would be fully responsible for housing
development including the development of low income housing.
c. SchOOl Districts - would be encouraged to identify and work with
children in need of community based services.
2. Change in Revenue Sources
a. Local Level Changes
(1) Shift property tax allocations from schools to cities and
counties to offset net state-local cost shifts.
(2) Transfer 1 percent local sales and use tax to state level,
offset with increased property tax allocations.
(3) offset reduced school property tax allocations by higher
state assistance.
(4) Redetermine each community'S allocation of property taxes
taking into consideration the need for both municipal and
community based services.
(5) Repeal earmarking of realignment and cigarette tax revenues,
eliminate schools' minimum funding guarantee.
(6) Allow a majority of voters 1 percent limit on local property
tax rates.
(7) Property tax allocated to special districts would be
allocated to Counties and Cities which would then be
responsible for assuming the special district
responsibilities.
(8) The existing property tax base would be redistributed based
on communities' needs for services. The incremental growth
in property tax due to growth would be distributed on a
situs basis.
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b. state Level Changes
(1) Revenues associated with sale of cigarette and tobacco
products would go into the state General Fund instead of
current earmarked programs.
(2) Vehicle License Fee Revenues which are currently earmarked
for health and welfare programs would be transferred to
cities and counties on a per capita basis for general
purposes.
(3) Proposed changes to distribution of fines and forfeitures
are not clear.
(4) Eliminate the prop. 98 minimum school funding guarantee.
3. Establishment of Incentives and Solutions
a. Failure Cost Incentives
Local agencies whose community based programs placed a demand on
state's Cash Grant and Health Care Programs would be required to
pay a local share of the cost for specific State services.
b.
Success Awards
The state would
based programs
programs.
make payments to local agencies whose community
are successtul in reducing demand on state
c. Planning and Performance sanctions
(1) The Genera~ Plan process would require consistency between
local plans and statewide objectives in the areas of
housing; environmental protection, air and water quality,
and transportation.
(2) Compliance with statewide objectives would be required to
quality for state Fuel Tax and Vehicle License Fee
Subventions, transit subsidies, and project inClusion in the
State Transportation Improvement program.
(3) Community service elements would need to be added to General
Plans.
STAFF ANALYSIS
staff concurs that a major restructuring of all levels of government
(State, schools, special districts, counties, and Cities), is necessary if
the best interests of the public are served.
Although the Legislative Analyst's restructuring proposal has some features
that deserve consideration, it is Staff's position that the proposal is
basically flawed for the following reasons.
1. The proposal assumes that the state has a set of Objectives in the
areas of housing, environmental protection, air and water quality, and
transportation. For those who are familiar with government, it is
apparent that the statewide Objectives are currently fragmented and
otten times conflict with one another. Until the state develops a
comprehensive set of objectives in these areas which are internally
consistent and also address the issue of an ever increasing state
population, a reorganization proposal such as the Legislative Analyst
would be difficult to implement.
2. Although lip service is given to providing more local control, many of
the elements of the proposal continue to place the State in a role to
either penalize or reward cities for meeting some poorly defined state
standard. In fact, the LegiSlative Analyst points to the review
process for General Plan Housing Elements as a model process for
accompliShing such a review. Most cities who have dealt with the
State regarding General Plan Housing Elements would not point to this
process as a model process because the state staff are unwilling to
look at local conditions in making their determinations. This process
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would assure that local government would not have greater control over
the services they provide.
3. Counties are visibly absent from the restructuring discussion. Their
role appears to be ill defined.
4. There is a little discussion regarding the elimination of low priority
services that the state currently provides.
5. The shift of all City Sales Tax to the state in exchange for more
property tax would further weaken local governments' economic base by
making it almost entirely dependent upon the property tax.
RECOMMENDATION
For the above reasons, Staff would recommend that the City Council support
the concept of restructuring government, but not support the Legislative
Analyst's proposal to be considered by ABAG.
a: l1Bgovt.agenda#14
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OCT 25 1993
CITY o~ DUBLiN
LAO
so years of servil:e
February 1993,-
MAKING GOVERNMENT
MAKE SENSE
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Elizabeth G. mil
Legislatil/e Analyst _ i
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MAKING GOVERNMENT MAKE SENSe:
A MORE RATIONAL STRUCTURE FOR
STATE AND LOCAL GOVERNMENT
HowcShou/d the. Legislature Reorganize State- and Local. -
; Government PrograrrrResponsibilities?.'
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California" citiiensreceive goverriment:'services from a> variety of ..
federal, state, and local agenCies. Althoughjrial1'/ofthases8rvices may.....
appear -to. be" providedbya . singleagency,lriinost cases;mofe than ....
one -agencYis il1vo",e~ in paying forthe~efvicejdeteririjningjjo.ftmuch
of that service is provided. and lncontf'(]ffjng~ the specifics' of how . the
service Is acttiallyprovlded. Because therolescf the difterenttypes.of
governmentsareso'Jntsrrelated,it is.iJppropjiatetovievlthemas -a
.system- of govemfTI~f/t; ThiS .system/shc;LJlcibecrrganizedlO such a',
fashion thateachbf Its component paitswciiks togethertciachfeve the
public~s goals. '. ...... ........... ',.,..'" -. .'> '.. ....... <.. ..' ....
California's . eXistihg.systern.ofgovein-",ent~cfearfydoesnot work
together to achieve .thepublic'sgoals;-Rather, in our system,' the
component parts have no common conception of mission,and often
work at cross-purposes with each other. Local governments complain
that state requirements interfere with' their ability to satisfy local
community needs. . The state, in turn, . issLJes more requirements to
ensure that its service objectives are uniformly achieved. Governments"
compete amongst themselves to obtain larger shares of dwindling
resources. Citizens observe declining levels and quality of services and
find that they cannot hold any particular agency responsible. In short. we
find that California's existing .system. of government is dysfunctional.
While the difficultfes inherent in attempting to reorganize our system
of government may appear to be Insurmountable. we believe that a
fundamental reorganization of state and focal government responsibili-
ties is required. Only in this way can the Legislature assure the
achievement of the public's goals. the future health of the California
economy, and the fiscal integrity of its government entities. We offer a
model of a more rational system of g()vemment for the state, and
recommend that the Legislature proceed to develop a specific plan for
the implementation of these changes.
Summary;.....
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112 Part V: Restructuring California Government
INTRODUCTION
The relationship between the state and other entities of government
in California is currently characterized by substantial fiscal and pro-
grammatic tension. Scarce resources and increasing service demands at
all levels of government dominate the picture. These conditions have
exacerbated long-existing conflicts over the state's role in the under-
mining of local government spending priorities and the state's control
over local program and fiscal decisions. The increased fiscal pressure
has also exposed other weaknesses inherent in our existing system of
government, including its encouragement of cost-shifting between levels
and entities or government, and the lack of accountability for program
results.
Figure 2 summarizes the major problems we have identified in the
existing state-local relationship. Most of these problems have been
previously documented in "The County-State Partnership" (please see
the 1991-92 Budget: Perspectives and Issues, pp. 159-188). The remainder
reflect problems characterizing relationships between other entities of
government, such as exist between cities and counties.
Legislation enacted in 1991 (the so-called "program realignment"
legislation) attempted to address some of these issues in the context of
county-operated health and welfare programs. This legislation effective-
ly reduced some of the counties' incentives for cost-shifting by making
the counties' share of costs more equal across programs, and provided
greater flexibility for counties to determine spending priorities by
allowing some limited shifting of state-provided funds between health
and welfare program areas. It also contained features which encourage
a more coordinated approach to service delivery, recognizing that,
often, more than one type of service is provided to an individual service
recipient. In our view, this legislation demonstrates the potential for
achieving better program outcomes through restructuring government
fiscal and program relationships.
Ultimately, however, more fundamental change will be required to
address the problems of our existing system of government. These
problems are inherent to our system, and stem from its failure to assign
responsibilities clearly among government agencies and provide them
with the authority and tools to get their jobs done. The 1993-94
Governor's Budget would make these problems worse by further
reducing local government property tax allocations. Despite its
recognition of the need for "a fundamental re-examination of what
services local government can realistically provide and how those
services can best be provided," the Administration's approach to these
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Making Government Make Sense 113
problems merely transitions local agencies to lower levels of revenues.
As such, it does not attempt to address the fundamental problems of
our system of state and local government.
Problems in California's
State.Local Relationship
Counterproductive Fiscal Incentives
Fiscal incentives are present which encourage decision-makers to choose
the least costly option from their perspective, even when this option is the
least effective or most costly option from a statewide or overall program
perspective.
Inappropriate Assignment of Responsibilities
Existing assignments do not recognize constraints on the ability of the
state or local government to carry out program responsibilities.
Failure to Avoid Duplication and Realize Scale Economies
The existing system requires extensive duplication of efforts by local
agencies and the state in the administration of programs, and precludes
the realization of scale economies that might be achieved through consoli-
dation of these efforts.
Inappropriate Exercise of Administrative Oversight
Existing program reporting and monitoring requirements are serving little
useful purpose, and are diverting scarce resources from more productive
uses.
Unproductive Competition for Resources
The eXisting system pits local agencies against each other in a
competition for taxpayer resources. This competition sacrifices good land
use practices. job development, and interagency cooperation in the
process.
Lack of Accountability for Program Outcomes
The system fails to adequately link program spending control and funding
responsibility, 50 that decision-makers are not accountable for program
outcomes.
Erosion of Local Control
The system has eroded local fiscal capacity by redirecting local resources
to pay for increasing costs of state-required programs.
In this piece,. we offer a model of a rational organization for our
system of government. While this model does not represent ;1 detailed
;Jlan of action, we believe that it offers a realistic framework for the
Legislature to consider in its efforts to resolve the Froblems of govern-
ment in California. We also briefly discuss some of the im;::olementation
issues associated with the modeL
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114 Part V: Restructuring California Government
THE PROPOSED REORGANIZATION
In developing this reorganization model, we have relied on the four
basic principles summarized in Figure 3. These principles essentially
reflect a consolidation of the basic reform principles we first outlined
in our 1991-92 Perspectives and Issues document. In addition, however,
they reflect a recognition that there is a significant practical interrela-
tionship between all of the services provided by government. That is,
better efforts to provide services in one program area can reduce the
demand for services in other areas. Further, greater use of collaborative
efforts across program areas can be more successful than program
~fforts pursued separately. As a result, greater cooperation and
coordination between all entities of government must be achieved if the
"system" as a whole is to function most effectively.
Basic Principles of Reform
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Maximize separation of state and local
government duties through appropriate
alignments of control and funding
responsibilities.
Match redistributive programs with
redistributive revenue sources at the
highest level of government.
Recognize program linkages by restruc-
turing to promote coordination of service
delivery mechanisms. removing barriers
to innovation.
Rely on financial incentives to promote
prevention and coordination.
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The Importance of Local Communities Working Together
We believe that one of the keys to achieving this greater effectiveness
lies in promoting the interest of local communities in working together
towards .::ommon goals. Local entities-schools, cities, and coun-
ties-share a common interest in achieving the higher levels of health,
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Making Government Make Sense 115
productivity, and safety their local citizens desire, but they currently
pursue their individual goals in a mostly disparate fashion. While some
communities have begun their own efforts to work more cooperatively,
there remain substantial barriers to these efforts.
The state also has an interest in the success of local communities, as
this translates into both lower demands for state services and a stronger
economy. The state's existing fiscal relationship with local governments,
however, is threatening their very survival. In addition, the state's
support for local communities is not distributed in a way that provides
equal opportunities for local community success. The resolution of these
problems is a central objective of the reorganization model.
Greater Attention To Outcomes Needed
Another key objective is to promote a greater level of attention to the
outcomes of government social service programs. Essentially, the basic
objective of these programs is to restore some degree of individual
independence and lessen the need for additional social services or treat-
ment. In most cases, recipients of these services need more than one
type of assistance to achieve this independence. For example, an adult
criminal offender may require a mix of substance abuse, mental health,
education, probation, low-cost housing, and job training services in
order to resolve his situation successfully. Other types of typical service
recipients require different mixes of services, but in each case, the focus
should be on delivering the appropriate mix necessary to minimize the
need for further government intervention. Accordingly, we believe that
local agencies must be given greater flexibility as to delivery choices,
but they also should be held more accountable for both program
failures and successes.
The Advantages of Full Program Control
One of the most often cited complaints about the existing system is
that, while local agencies must operate and fund state-required
programs, they have little control over service levels or approaches to
service delivery. The lack of control over service levels precludes local
government entities from effectively responding to their citizens' service
level and service mix preferences. Further, because local funds are
expended for these programs. this lack of control has eroded local
resources available for other local programs.
The lack of flexibility in approaches to service delivery has precluded
or restrained the potential for innovation at the local level. as legislation
or regulatory changes are required before such changes can be made.
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116 Part V: Restructuring California Government
Thus, the final key to greater effectiveness lies in allowing local
agencies to exercise full control over service .levels and delivery
approaches in locally operated programs. In addition, this control must
be provided if local governments are to be held accountable for
program outcomes.
A Three.Step Process
There are three major types of changes contemplated by the model:
. Changes in the assignment of primary program control and delivery
responsibilities.
. Changes in state and local revenue sources to support the program
assignment changes.
. The establishment of new incentives and sanctions to promote the
achievement of broad public goals.
Each of these components is critical to the potential for achieving the
benefits of the proposed reorganization. Indeed, the model should be
adopted in its entirety, as a package, rather than taken incrementally,
although implementation could occur in stages.
Changes in the Assignment of Program Responsibilities
Figure 4 displays the proposed assignment of responsibilities under
our model. As indicated earlier, the model contemplates a dear
separation of the assignments between entities of government. In this
section, we describe the basis for the model's suggested assignments of
responsibility.
State Government
The duties assigned to the state are determined primarily on the
basis that they represent truly statewide functions, in that state control is
needed to ensure adequate service levels. There are three primary
criteria we have used to make this determination:
. The costs or benefits of a program are not restricted geographi-
cally.
. Service level variation will create adverse incentives for migra-
tion.
. Uniformity is needed to achieve statewide objectives.
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Making Government Make Sense 117
LAO Reorganization Model
Proposed AS,signment of Basic Responsibilities
,~tate . -. '. ,', .
Uniformity Needed ,
Cash grant programs:
Aid to Families With Dependent
Children (Family Group and
Unemployed Parent)
General Assistance
Basic health care:
Medi-Cal
Indigent health
In-Home Supportive Services
Developmental Services
Public health
Welfare administration
Child support enforcement
Unemployment Insurance and Disability
Insurance administration
'statewide Benefits' ,
Higher Education
Long-term custody:
State prisons
State hospitals
Trial courts
Appeals courts
State parks
K-14 school funding
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L1nkage.Drlven (Communlty.basedservlces) ".,""
Mental health
Child welfare services
Foster care
Adult protective services
Substance abuse services
Job training and employment
Greater Avenues for Independence
District Attorney
Public Defender
Probation/parole
Jails/corrections
Police
Local Benefits (Municipal services)
Fire
Paramedics
Sanitary inspections
Culturelleisure
Housing
However, in some cases the need to preserve linkages between
services is a more important consideration. For example, while mental
health services meet the three criteria mentioned above to some extent,
these services often should be provided in conjunction with other
community-based services, such as child welfare services and job
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118 Part V: Restructuring California Government
training, to most effectively resolve the problems of an individual. The
specific changes in state responsibilities are discussed below.
Cash Grants and Health Care. The model recognizes that state
intervention is needed to ensure that certain minimum service levels are
provided for cash grants and basic health care services provided to
needy individuals. Under the existing system, counties provide widely
differing service levels in their General Assistance and indigent health
care programs, causing incentives for migration between counties.
Further, it is impossible to effectively achieve the basic objective of these
programs-redistributing income-without state-level control and
funding. (Ideally, the federal government should playa greater role in
these programs.) For these reasons, the model assigns responsibility for
Aid to Families With Dependent Children (Family Group and Unem-
ployed Parent), General Assistance, Medi-Cal, Developmental Services,
and Indigent Health Care to the state government. Also, because the In-
Home Supportive Services is becoming predominantly a Medi-Cal
program under recent legislation implementing the Personal Care
Option, it also is assigned to the state level. Figure 5 lists some of the
benefits from state assumption of these functions.
Benefits of State-Operated Cash Grant
And Health Care Programs
Uniform access for the needy.
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Increased market power in negotiating
for health care coverage.
Greater uniformity of service levels will
eliminate migration incentives.
Welfare Administration. The model contemplates state takeover of
welfare administration functions from the counties, in order to reflect
its complete assumption of responsibility for cash grant programs and
basic health care functions. The state could carry out this function
directly, or do it by contract with counties or other providers. Figure 6
s"L1mmarizes the benefits from the state's assuming these responsibilities.
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Making Government Make Sense 119
Benefits of Consolidating
Welfare Administration
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Ensures accountability for program
outcomes.
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Statewide computer system allows better
uniformity. data capture.
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Allows consolidation with Unemployment
Insurance and Disability Insurance
systems.
Eliminates duplication, allows realization
of scale economies.
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Public Health. Communicable disease is a threat to all the state's
residents. For this reason, the model assigns to the state the primary
responsibility for those public health programs that focus on individuals,
such as immunization programs. This arrangement also provides the
state with a greater incentive to provide for the public health needs of
individuals covered under its basic health care programs, because
effective provision of public health services can prevent the higher cost
of treating these persons for communicable diseases.
Custody. It appears necessary for the state to continue to playa role
in the area of long-term custody, albeit one that is much more limited
than now exists. Our model places a great emphasis on community-
based institutionalization and alternatives to incarceration and institu-
tionalization, as will be discussed in greater detail later. However, even
with this greater emphasis, it appears that the state should continue to
be the custodian in very long-term situations, such as for persons
sentenced to life imprisonment and for the severely mentally and
developmentally disabled. The state also could provide prison beds to
local communities on a "cost-recovery" basis, as is now done under the
1991 realignment legislation for state hospital services. However, the
state would be financially responsible for the custody of fewer prisoners
than it is currently.
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120 Part V: Restructuring California Government
Trial Courts. Responsibility for funding and operation of the trial
courts would be shifted to the state government. A partial shift of
funding responsibility has already been started under existing law. This
arrangement recognizes the state's existing role in controlling trial court
operations, and facilitates the state's ability to redirect resources as
workload conditions change.
Other. The model continues other existing state responsibilities, such
as those in the areas of transportation and economic development. State
funding of these activities, whether through tax incentives or expendi-
ture programs, recognizes the need for a cooperative partnership
behveen the state and local communities in these areas. Lastly, the
model proposes no changes in the existing division of responsibilities
for regulatory functions (such as the Department of Corporations) and
other special fund program areas supported by program~related
revenues. Such changes are beyond the scope of the model.
Local Governments
As noted above, changing the "system" so that its component parts
do a better job of working together to achieve common goals is a central
objective of the proposed reorganization. To this end, the model assigns
responsibility for all community-based service programs and housing
to local government, with city governments financially responsible in
the case of city residents, and counties financially responsible for
unincorporated area residents. This arrangement recognizes that cities
and counties face the same set of problems, and provides an incentive
for them to work together to find solutions to these common problems.
These agencies would be accorded complete flexibility to provide
these services as they see fit, including through multi-agency contract-
ing arrangements. Counties would retain responsibility for certain
existing county-wide functions, such as sanitary inspections, property
tax assessment and collection, recording, and elections. Cities would
need to establish, or contract with the county for, other existing county
services like jails, district attorneys, and public defenders.
Incentives and sanctions would be built into the system to encourage
responsibility in service provision while maintaining local control of
decision-making (see discussion of these provisions below). In addition,
a new constitutional provision would be needed to ensure the indepen-
dence of local decision-making from state intervention in areas of local
responsibility.
Critical Program Linkages. The assignment of responsibility for all
community-based service programs to local governments recognizes the
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Making Government Make Sense 121
linkages that exist between the services. As noted above, a mix of
different services often must be provided individual social service
recipients--or even entire families--if their needs are to be resolved
successfully. In addition. there has always been a relationship between
traditional types of municipal services, such as police and fire services,
and other social service programs. That is, success in resolving
individual social service needs can reduce the need for these other
municipal-type services. The model seeks to eliminate the artificial
barriers that now exist between the different providers of these critical
services, and to facilitate a more collaborative approach to the resolution
of community-wide problems. (For a more complete discussion of this
opportunity, please see "Collaborative Efforts to Coordinate Service
Delivery," following this section.) To this end, local decision-makers
would have the t1exibilitv to determine the mix of services and methods
of delivery appropriate for their community.
Social Services. Communities would be responsible for providing the
broad range of existing social service programs shown in Figure 4.
Because, at least initially, cities probably would contract with counties
for these services, this would not differ dramatically from how the
operating responsibility for these programs is now assigned. What would
differ is that communities would bear the full financial responsibility
for the programs, and the state would not exercise program control. The
state, in many cases, would have to distribute federal funds to the
communities and disseminate state program and client data. In
addition, some state oversight or monitoring role would probably be
needed to comply with federal requirements in some areas.
Job Training. The development of job skills and work aptitude
among the unemployed is critical to the success of all communities,
both in terms of limiting the costs of social services and correctional
programs, and in terms of making these communities more desirable
places for people to live and for businesses to locate. For this reason,
communities would become the primary providers of job training and
job development programs. Existing state funds and programs
committed to these purposes would be channeled through the commu-
nities in order to most effectively integrate them with community
efforts.
Corrections. The model contemplates a greater reliance on communi-
ty-based institutionalization and alternatives to state prison sentences
for convicted criminal offenders. Although communities would have the
option of placing offenders in state prisons on a cost-reimbursement
basis, the high costs of this alternative would provide an incentive for
them to explore local options. Because each community would remain
responsible for any costs associated with individual offenders, it would
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122 Part V: Restructuring California Government
have a great incentive to develop alternative methods of incarceration
and to provide whatever services would be necessary to minimize that
individual's risk of repeated offenses. Ultimately, the treatment of
mental illness or substance abuse problems, and job placement
assistance are needed to achieve this result. Figure 7 notes some
potential benefits of this community corrections approach.
Benefits of Community Correctional Approach
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Potential for greater integration with other
community-based service programs.
[i2r Potential for reduced recidivism.
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Cost reduction for treatment of nonviolent
offenders.
Housing Development. The availability of housing for Californians of
all incomes and ages is critical to community success. Specifically, a
diverse housing stock enables businesses to recruit and maintain a full
work force (without the need for lengthy commutes)-and enables
family members of differing incomes and housing needs to live near
one another. Local governments playa very major role in ~etermining
the cost and availability of housing in their communities-through the
ado!'tion of local zoning, growth management, building fee, and other
regulatory policies. Finally, there are numerous linkages between the
provision of housing for certain groups and the provision of social and
public health services, such as in the case of the homeless mentally
disabled. For these reasons, the model assigns communities full
responsibility for housing development, including the development of
low-income housing.
School Districts
K-12 schools and community colleges would continue to play their
traditional LJle of providing education and vocational education.
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Making Government Make Sense 123
However, the model seeks to encourage greater involvement of K-12
school districts in the provision of services for children. Again, this is
a linkage issue, in that community-based services are often needed to
ensure the success of children in school, and in that successfully
educated children may be less prone to needing other community-based
services. This greater involvement would be achieved through the use
of incentives for schools to identify and work with children in need of
community-based services. Similarly, the model seeks to encourage
greater coordination of community college districts' vocational
educati::m efforts with other community job training programs. In
generaL this would involve providing additional state funding in the
form of matching grants or pilot project funding to districts that have
entered into agreements with their local communities.
Changes in Revenue Sources
The changes in program responsibility would have the net effect of
shifting program costs from the state to the local government level. One
objective of the model's revenue system is to counterbalance these cost
changes. The other primary objectives are to (1) eliminate barriers to
priority-setting at both the state and local levels and (2) eliminate the
existing counterproductive fiscal incentives and fiscal disparities of the
existing local revenue system. Figure 8 summarizes the changes in
revenue allocation that would be needed to accomplish these objectives.
The remainder of this section discusses these changes in greater detail.
Local-level Changes
As noted above, the model would offset the cost shifts by allocating
a higher share of the local property tax to cities and counties, and a
lower share to school districts. Recognizing that local communities
differ in the needs of their residents for community-based services, the
allocation of base property tax revenues would be initially equalized
across communities, in a fashion that promotes equal opportunities for
local community success. In addition, in order to eliminate unproduc-
tive competition between local agencies over the siting of retail
operations, the existing Bradley-Burns local 1 percent sales tax would
be replaced by a corresponding increase in the state sales tax rate.
Allocation of Property Tax Revenues. Local property tax allocations
for cities and counties would be increased by the aggregate amount of
shifted costs and local sales tax revenues. The increased property tax
revenues, together with existing local property tax revenues, \vouid
.
.
124 Fan V: Restructuring California Government
~
: Changes in Revenue Allocations
i
Offset Cost Impacts ot Program Responsibility Changes.
Shift prooerw tax allocations from schools to cities and counties to
offset net state-local cost shifts.
Eliminate Counter-Productive Fiscal Incentives
Transier 1 percent local sales and use tax to state level. offset with
increased property tax ailocations.
Higher State Funding tor Schools to Offset Property Tax Shift
8educed school property tax allocations offset by higher state assistance.
Equalize Opportunities tor Community Success
Redetermine each community's allocation of property taxes. taking into
consideration the need for both municipal and community-based services.
Facilitate Priority-Setting
Repeal earmarking of realignment and cigarette tax revenues, eliminate
schoois' minimum funding guarantee.
be entirely reallocated among local agencies. This would take place in
two steps:
· An allocation for traditional municipal seroices, such as fire, parks,
and libraries would be determined, taking into consideration
other existing sources of local revenue.
· An aliocation for community-based seroices would be determined,
oased on each community's relative needs for these services,
including police and community corrections.
Thus, the initial allocation of property taxes is intended to equalize
revenue allocations on the basis of communities' relative needs for
services, in order to promote equal opportunities for local community
success.
Following the initial allocation, the annual growth in property tax
revenues would be ailocated to the jurisdictions in which the growth
occurs (situs), as is now the case. The use of the situs basis for
allocating growth provides a feedback mechanism which reHects the
levei of community success. To the extent communities are successful,
they become more attractive places for citizens and businesses, leading
':0 mcreased propeny vaiues and higher tax revenues.
':-lle model also recognizes the need of local communities for control
over the level of the 10c;;1 revenue stream. The ability or local ag.;;ncies
.
.
Making Government Make Sense 125
to determine the appropriate mix and level of expenditures to retlect
their community's preferences is dependent upon the community's
ability to raise-or lower-,the level of local taxes they pay. To this end,
the model would allow a majority of local voters to alter the existing
1 percent limit on local property tax rates, either for services or to fund
improvements in public infrastructure. The existing provisions of
Proposition 13 limiting increases in assessed values would be retained.
Property tax revenues now allocated to special districts would,
instead, be entirely allocated to counties, or to cities in the case of city-
dependent districts. These counties or cities would be responsible for
funding them or taking over their operations.
Local Sales Taxes. The existing local sales tax encourages cities and
counties to make land use decisions that are not optimal from a
regional perspective. That is, in order to gain the increased revenues
generated by a retail operation, local governments will make siting
decisions that increase traffic congestion and other problems for nearby
local jurisdictions. In addition, this fiscal incentive causes retail
operations to be favored over other types of nonresidential develop-
ment, which may be preferable from employment and community
development perspectives. To remedy this problem, the model
eliminates the existing Bradley-Burns 1 percent local sales tax, and
replaces it with a corresponding increase in the state sales tax. As noted
above, local property tax allocations would replace the revenues lost, on
a statewide basis. The existing county-wide 1/4 cent levied for transit
purposes and the existing authority for county-wide local option sales
taxes would be continued.
State-Level Changes
Changes also are necessary at the state level. Specifically, the model
makes changes in the allocation of existing revenues dedicated for "pro_
gram realignment," Jnd in the Cigarette and Tobacco Product Surtax
(CTPS) funds, which help to facilitate the changes in program responsi-
bilities. Changes in the allocation of trial court and vehicle-related
revenues are needed for similar reasons. Finaily, in order to facilitate
priority-setting, changes are needed in existing constitutional provisions
related to school funding. In the remainder of this section, we discuss
these aspects of the model in greater detail.
Realignment Revenues Ilnd Tobacco Taxes. Under existing law,
certain portions or the state's sales and use tax revenues and of the
Vehicle License Fee (VLF) revenues are deposited in the Local Revenue
Fund and transferred to counties to pay health and welfare program
costs associated with the 1991 realignment legislation. In addition,
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III ............. -
. .
126 Part V: Restructuring California Government
revenues attributable to the CTPS are earmarked for health services,
health education, and resources programs. This model eliminates the
earmarking of the existing realignment and CTPS-related revenues to
provide greater flexibility at the state level for the prioritization of state
expenditures. The loss of realignment revenues at the local level would
be taken into consideration in determining the level of property tax
revenues needed to support costs shifted from the state level. Sales tax
revenues associated with the realignment program and the CTPS
revenues would instead be deposited in the state General Fund. The
realignment-related VLF revenues, in combination with the basic VLF
revenues, would be allocated to cities and counties on a per capita basis
tor general purposes.
Trial Court-Related Revenues. Revenues derived from the wide
. variety of existing fines, forfeitures, penalty assessments, and filing fees
would be retained by the state and deposited in the General Fund.
Local agencies would retain parking and other vehicle-related fines, and
jurisdiction over these infractions would be transferred from the trial
courts to local agencies.
Schools' Minimum Funding Guarantee. The changes in revenue
allocation discussed above cannot be accomplished without, at a
minimum, modifications in the existing Proposition 98 minimum
funding guarantee. This is because the guarantee is based, in part, on
levels of General Fund revenues, and these levels would be increased
by the model's changes. While the model does not address the
appropriate aggregate level of school funding, the earmarking of
specific portions of state-level resources is fundamentally inconsistent
with the overall changes the model seeks to implement. For this reason,
the model eliminates the existing funding guarantee, rather than
attempt to modify it to accommodate the model's revenue changes.
Establishment of Incentives and Sanctions
Even with the separation of state and local functions we propose, a
great deal of interdependence would remain. For example, the success
of local communities in providing job training to needy individuals
could reduce the demands on the state for cash grant payments.
Similarly, greater effectiveness of local land use planning and develop-
ment practices can contribute to the reduction or regional environmental
problems for which the state has assumed responsibility. In order to
promote a greater consistency of local actions with statewide objectives,
the model relies upon incentives and sanctions to achieve this goal. This
~ection discusses the general types of incentives and sanctions that
appear to be necessary.
.
.
Making Government Make Sense 127
"Failure Cost" Incentives
As noted above, the effectiveness of local efforts in the provision of
community services can reduce the demands placed on the state's cash
grant and health care programs. In order to provide a greater incentive
for communities to be successful in certain critical areas, the model
would impose a local share of cost for specific state services provided
to community residents. Specific examples of where these "failure cost"
incentives would impose a local share of cost include:
.
Prenatal and pregnancy services provided by the state, to encour-
age more effective provision of family planning and education
services locally.
AFDC-U payments to individuals, where those individuals
remain on welfare past some period of time, to encourage greater
efforts to employ these persons. .
Success Awards
Similar to the "failure cost" incentives, the success awards attempt
to increase the incentive for effective community service provision by
rewarding local actions that have a positive effect on reducing the
demand for state cash grant programs. For instance, this would take the
form of state payments to local agencies which successfully convert
long-term AFDC Family Group payment recipients to financial
independence.
Another area where such an incentive is appropriate is to encourage
the establishment of alternative dispute resolution mechanisms. Civil
cases account for a large share of court workload, and often wind up
being settled after trial procedures have already begun. To the extent
that these mechanisms are successful, they reduce trial court workload,
as well as reduce the legal expenses of community participants.
Planning and Performance Sanctions
This portion of the model addresses the need for a mechanism both
to motivate better coordination between levels of government and to
promote achievement of state\vide objectives. It accomplishes this
through revisions and expansions of the existing local planning process.
reinforced by the use of sanctions. There are two major lypes of changes
contemplated:
.
Changes that better integrate statewide objectives into the local
land use planning and development process.
.,..,. --- ~1rlL
.
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128 Part V: Restructuring California Government
Changes that incorporate objectives and goals for local community-
based services into the planning process.
The nature of these changes essentially converts the existing local
general plan process into a community strategic planning process akin
to that now pursued by major corporations.
.
Land-Use Planning and Development. Essentially, the model seeks
greater consistency between local plans and statewide objectives in the
areas of housing, environmental protection, air and water quality, and
transportation. It also contemplates that plans include standards by
which their progress towards meeting these objectives may be mea-
sured. While communities are not required to comply with these
changes, the model makes compliance a condition of state assistance.
Specifically, local agency plans would have to pass a consistency review
in order for the agency to qualify to receive state fuel tax and vehicle
license fee subventions, transit subsidies, and priority for project
inclusion in the State Transportation Improvement Program. As is now
the case with general plan housing elements, the model would require
state or regional agency review of new and existing plan elements to
determine consistency. In order to ensure that progress is made towards
the achievement of these planning goals, the model would grant broad
standing to bring legal actions asserting lack of compliance. The
primary remedy in such actions would be the loss of state assistance
funding.
In addition, the model would make alterations in existing environ-
mental review procedures to facilitate "master environmental impact"
statements for these plans. This would allow local agencies to issue final
development permits for projects that do not require special or unusual
review procedures, instead of requiring that multiple permits be
obtained from several different agencies, as is now the case.
Community-Based Service Plans. Local plans would contain a new
community services element to layout the community's general
approach to the provision of community-based services. It would
specify how services would be coordinated and delivered for different
categories of recipients, the roles of different public and private
organizations in the communities, and how it would meet its job
training and development needs. In this case, state review would be
limited to those aspects needed to address federal requirements, but the
same broad standing to bring legal action would be provided to address
performance concerns.
.
.
Making Government Make Sense 129
IMPLEMENTATION ISSUES
The reorganization model discussed above obviously involves some
dramatic changes in the current structure of state and local govern-
ments. There are a wide variety of legal and other obstacles to its actual
implementation, and its scope probably dictates that the package of
changes be phased in over time. In this section, we discuss some of the
larger constitutional and federal issues that would need to be dealt with
in proceeding to develop this model, and in providing for a transition
to the new system.
Changes in the Slate Constitution
Several of the changes described above would require the elimination
or addition of provisions in the State Constitution. In addition to these
specific changes, however, there are other changes needed to eliminate
provisions which are now or would become obsolete, or changes which
would be appropriate for other reasons. Because of the scope or changes
envisioned by this model. the Legislature should propose them in the
form of a package of changes to be submitted to the voters. Some of the
more important changes include:
State and Local Appropriations Limits. The existing Article XIII B
provides for limitations on the growth in tax-funded spending of the
state, schools, and local agencies; requires adjustments in these limits to
reflect transfers of financial responsibility; and requires state reimburse-
ment of costs mandated on local agencies. Because of the scope of
changes envisioned, the improvement in accountability, and the
restoration of local control over spending decisions provided by the
model, we believe that Article XIII B in its entirety could be eliminated.
Local Government Powers. Article XI now describes the powers of
cities and counties, including provisions governing the adoption of
charters, ordinances, and boundary changes. These provisions should
be revised to reflect the changes in the roles of cities and counties under
the model. At a minimum, these changes should include the granting
of equivalent municipal powers to all cities and counties.
Homeowners' Property Tax Exemption. The Constitution now
provides for a small exemption from property taxes for homeowners
and requires that the state provide reimbursement for the associated
revenue losses. This provision was originally rationalized on the basis
that it encourages home ownership. We believe that this goal is fully
addressed by the existing Proposition 13 assessment limitations and by
income tax deductions for mortgage interest, and that the provision of
~-
.
.
130 Part V: Restructuring California Government
state reimbursement for the revenue losses associated with the
exemption is inconsistent with the changes contemplated by this model.
Accordingly, these provisions of the Constitution should be eliminated.
Trial Courts. Article VI prescribes the powers and composition of the
judiciary. These provisions would need to be revised to transfer the
responsibility for operating the trial courts to the state from the
counties.
Changes in Federal Laws and Regulations
Some of the changes contemplated by the model may not be
permitted under existing federal laws or regulations, or would require
the creation of new oversight mechanisms at the state level. The state
would need to seek law changes or waivers to obtain the necessary
authority, or find other ways to satisfy the existing federal require-
ments. Because the state has had some success in addressing these
requirements in the past, these difficulties do not appear to be unsur-
mountable. For example, federal requirements to maintain a certain
funding level for mental health programs did not prevent the transfer
of responsibility for these programs to counties under the 1991
realignment legislation.
Issues Involved With the Transition
The scope of changes contained in this model, and the amount of
time that would be needed to work out its details, clea'rly preclude its
immediate implementation. Further, difficulties associated with aligning
service capabilities with the changes in responsibility argue that a
transition period is needed, during which the features of the model
would be graduaJiy implemented. While we have not attempted to
identify all of the issues that would need to be addressed, they would
certainly include the following: .
o
Facility Constraints. The shift in emphasis to community
corrections suggests an eventual expansion in the capacity of
local jail and youth custody facilities. In part, this could be
accommodated by the state's turning over title to some state
prisons and Youth Authority facilities to local agencies, perhaps
in recognition of trial court-related facilities the state would need
to assume irom local agencies. However: the location of these
existing state faciLties may not match local jail capacity needs,
and time would be needed to accommodate their development.
Sentences of Current Prisoners. The model assumes that the
sentencing of existing inmates to state prison could be altered to
o
.
.
Making Government Make Sense 131
enable their transrer to local arrangements. A speciric method for
accomplishing this would have to be developed.
. Existing Local Financial Commitments. The changes in the
allocation or revenues could undermine the basis of certain
existing contractual arrangements betvveen local agencies and
lenders. For example, local agencies may have pledged local sales
tax receipts as security for notes of one type or another. Thus, it
may be necessary to find ways to facilitate the restructuring of
such arrangements.
Public Employees. The model would effectively change the status
of many state and local employees. Actions to facilitate the
transfer of state employees to local employment, and local
employees to state employment, would be necessary.
CONCLUSION
The model we have outlined above requires a major reworking of
our system of government, and the changes are potentially disruptive
to both the citizens and institutions of this state. Notwithstanding this
fact, we believe that continued reliance upon our existing system of
state and local government entails a far larger risk to the public-the
failure to move forward in resolving the social and economic problems
of the state. The restructuring we are calling for, in contrast, would
provide expanded opportunities for improving the effectiveness and
quality of public services needed to ensure the state's future social and
economic health.
The realization of these opportunities cannot be accomplished
without fundamental changes in how the state assigns responsibility for
program operations. This includes allowing those designated to carry
out the responsibility to determine how best to carry it out. The public
could then hold them completely accour.table for the achievement of
program outcomes.
As discussed earlier, the development and implementation of the
proposed changes would take a period of time to achieve, and we do
not underestimate the difficulties inherent in overcoming the implemen-
tation problems. Despite these impediments, we believe this model
otters a useful framework for making government make sense in
California. In the context of resolving the current fiscal crisis.. it argues
against transferring the local property tax away from local governments
to schools, as proposed by the Governor, because this would leave local
dgencies insufficient incentive to increase the property wealth of their
.
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132 Part V: Restructuring California Government
communities. Fundamentally, it suggests that the review of the roles
and duties of government at all levels must be considered prior to
making revenue allocation decisions. The model we have described shows
how state and local government program roles can be changed in ways
that allow increased flexibility and program control to help mitigate
reductions in fiscal capacity. We see no alternative to such a reorganiza-
tion in the long run and, accordingly, we recommend that the Legisla-
ture set in motion a process for implementing a major restructuring of
state and local government responsibilities.
This report was prepared by Peter Schaafsma with the assis- I
tance of many others in the office. For information concern- I
;ng this analysis, please contact the author at (916) 445-6442. 'I