(The Center Square) – California cities are doing better than expected, according to a new report from the California Auditor’s Office, thanks to receiving $8.2 billion from the American Rescue Plan Act of 2021. But Other reports show that California is in dire straits and that federal aid is only masking serious budget problems.
“Tax drought?“says the audit report. “In fact, city revenue is flowing in. … Our analysis shows that the vast majority of California cities will receive more stimulus money than they lost during the pandemic.”
Los Angeles was facing a $750 million deficit and potentially had to cut nearly 2,000 jobs last year; his budget problems existed long before the state shutdown began. Anaheim was willing to borrow more than $200 million to cover its debts; Riverside sold bonds to pay its retirement debts, and other towns followed suit.
But the financial losses these cities and many others anticipated were offset by an influx of federal funds, higher property taxes and more sales tax revenue than expected, the auditor’s report said.
Taxpayer debt-fueled ARPA funds pumped nearly $1.3 billion into Los Angeles coffers, far more than expected. Anaheim received $106 million; Riverside, $73.5 million. A similar trend exists across the state.
Last year, Californians receiving federal stimulus checks and additional federal unemployment benefits and not having to pay rent due to a moratorium on evictions caused many online expenses. The increase in sales tax revenue exceeded the projected losses.
Based on state tax collection data United States Census Bureau, alcohol sales tax collections increased by 15.5% in 2020 compared to 2019, with gambling tax revenue increasing by 14% over the same period. Overall, sales taxes increased by 3.9% and property taxes increased by 2.9%.
By the end of the 2021-22 fiscal year, the auditor’s office projects that “five cities will have received revenue increases equal to at least one year of pre-pandemic revenue,” including San Joaquin, Parlier, Orange Cove, Maricopa and Mendota.
However, 18 cities did not receive enough stimulus funds to cover COVID-19-related losses, according to the report. They include Avalon, Beverly Hills, Brisbane, Burlingame, Calistoga, Carmel-By-Th-Sea, El Segundo, Emeryville, Indian Wells, Laguna Beach, Mammoth Lakes, Menlo Park, Monterey, San Francisco, Santa Monica, Solvang, West Hollywood and Yountville.
Indian Wells is expected to have more than $850,000 in losses, even with an influx of $1.3 million in stimulus funds over the period analyzed in the report.
Indian Wells, a popular vacation spot, lost half of its hotel tax revenue due to the state shutdown, with hotels unable to open and vacationers unable to travel.
While some cities, like Torrance, received more money through ARPA and did not make the 18 list, their long-term financial losses are even greater. Torrance raised its sales tax so as not to cut services after reporting $15 million in lost revenue. He was also preparing to cut 46 full-time positions and issued a $349 million bond to pay off unfunded debt despite receiving $24 million in federal funds.
Other cities dependent on tourism continue to experience low hotel occupancy rates, fewer travelers and lower incomes, and anticipate several years of lost overall economic growth.
Although raising property taxes can help fill short-term budget shortfalls, high taxes are among the top reasons Californians give for leaving the state.
California currently has the second-worst business tax climate in the United States, according to the Tax foundationand among the highest sales and income taxes in the country.
The report also obscures the reality that California was in poor fiscal health before the shutdowns. According to the audited financial report of the 2018 financial year by the non-profit association truth in accountingevery Californian owes $21,100 to pay off California’s debt.
“California’s elected officials have made repeated fiscal decisions that have left the state with $275 billion in debt,” TIA says.
California’s financial problems stem primarily from unfunded pension liabilities that have accumulated over the years, including $502.8 billion in unfunded pension benefits, $109.5 billion in unfunded pension payments and $111.8 billion in unfunded health care benefits for retirees.
California did not have enough money set aside to deal with the economic losses caused by the state shutdown for a year, TIA claims. And according to his rough estimates, California stands to lose $16 billion in revenue due to coronavirus-related costs.
“The uncertainty surrounding this crisis makes it impossible to determine how much will be needed to maintain government services and benefits, but California’s overall debt will most likely increase,” he says.