There has been an interesting fallout from California’s recent budget crisis in which our betters in Sacramento were forced to acknowledge the existence of an economic equivalent of the first law of thermodynamics, namely, that you can’t create wealth out of thin air, and that if you continuously spend more than you have coming in, you wind up dead-broke. After months of higgle-haggling between the legislature and our governator, California finally came up with a budget that may, but probably will not solve the problem, and will likely precipitate another “budget crisis” in a few months.
One of the interesting features of that budget is that it transfers some $1.7 billion from redevelopment agencies to the state. As you can imagine, that has caused anguish within those agencies and much outrage on their part, that reduces itself to a cry of “They can’t do that to us!” Ah, but they can and they did, and in the process the California legislature rejected a sneaky amendment to the redevelopment act, that would have extended the life of redevelopment agencies for another 40 years without a need to show the existence of blight.
What provides an element of poetic justice to this events is that, even though redevelopment agencies are plainly local, municipal entities, California law deems them to be state agencies — a legislative gimmick that was inserted into the law to make local challenges to redevelopment more difficult, but has now bitten those agencies good and proper. After all, if they are “state agencies” then the state can control their finances.
For commentary on this point, see the column in the Orange County Register by Steven Greenhut, a knowledgeable reporter who has written a book on eminent domain abuses. His article is entitled Budget Blindsides Blight Barons. Check it out.
http://www.ocregister.com/articles/redevelopment-agencies-tax-2515286-local-new
Update. Hold everything! According to the Los Angeles Times of August 10, 2009 (Evan Halper, Lawsuits Are the Latest Roadblock for California Budget) the redevelopment agencies are fighting back. They have hired lawyers and are about to sue to recover the money tranfered from them to the state general fund. We are not into that stuff, but the mavens to whom the Times spoke, feel that the redevelopment agencies may win. If they do, we will be treated to the spectacle of a State committing an act of self-strangulation. We can’t wait.