State Formula on Tax Funds Now Pays Off for San Diego : Finance: The system that once hurt San Diego County now cushions the blow as it suffers less than Los Angeles County from the slashed budget.

While Los Angeles County has been in the throes of cost-cutting, the likes of which it has never seen, San Diego County is quietly counting its blessings, thanks to a 13-year-old spending formula that many believe has finally begun to right some financial wrongs.

Property tax reductions to San Diego County totaled only $17.1 million, a serious but manageable cutback that local government officials believe can be resolved with minimum budget juggling.

But in Los Angeles County, the decrease was $260 million, and officials are weighing a 10% across-the-board reduction in county spending and the possible loss of 8,000 to 12,000 county jobs.

The disparity in cutbacks is directly linked to a 1979 bailout by the state Legislature, the year after voters approved Proposition 13.

Faced with an outcry by panic-stricken counties, cities and special districts following the voter-approved rollbacks to 1975 property assessment levels, legislators chose to use a $4.4-billion surplus to make up some of the difference.

In selecting how much everyone should receive, legislators relied on the total amount of property taxes collected from 1976 to 1979 and provided a near reimbursement of money that each government entity had lost. The money came out of a property tax allocation reserved for schools.

Los Angeles County got $159.3 million in property taxes, or 53% of all the taxes handed out at the time. San Diego County got $6.7 million, or 2.2% of the total. Orange County, which got no school property tax allocation, wound up giving the schools $67,000 rather than receiving any property taxes.

In San Diego County, the bailout couldn’t have worked out worse. The Board of Supervisors had already cut property tax rates in the years before Proposition 13, and the county wound up near the basement of the payout list.

“Here property values were going up 20% to 30%, and our board was listening to the voters complaining about the growth in assessed property values,” said John Sweeten, the county’s intergovernmental affairs liaison. “So we reduced property tax rates to a fairly uniform level and look what happened.”

While Californians were paying an average of $130 per year in property taxes following Proposition 13, San Diego County residents were paying an average of $96 per year. Overall general revenue per capita, which also include sales taxes, fines, and vehicle license fees, placed San Diego County 57th on a list of 58.

The resentment against Sacramento grew until the Board of Supervisors sued the state in 1986. In the decade between 1979 and 1989 alone, the county argued, it lost between $720 million and $1 billion.

During that time, county officials said, the county’s mental health system and health care programs for the poor had deteriorated sharply. The county jails are still so full that those who commit minor crimes are asked to sign promises to appear in court and then are released.

In a landmark ruling last February, San Diego Superior Court Judge Michael I. Greer declared the distribution formula unconstitutional, and ordered the Legislature to revise the tax allocation rules by July 1, 1993.

The allocation “has brought (San Diego) County government to the brink of fiscal ruin and has brought the county criminal justice system to its knees,” Greer wrote.

The distribution, he said, “violates not only the equal protection clauses of both the state and federal constitutions but . . . violates the very purpose and intent of taxpayer reform in California under Proposition 13.”

Budget cuts this week, however, brought the 1979 distribution formula back into play--this time in reverse order. Those given the most over the past decade would be losing the most.

San Francisco County, for example, which had benefited from the bailout, is losing about $53 million. Alameda County, which also did well in 1979, is suffering a $27 million reduction in property taxes. Orange County, which had gotten no property tax money following Proposition 13, is being cut only $9 million.

Although there is finally some relief for those counties that suffered, not everyone is completely satisfied with the reversal of fortune.

“Los Angeles County has had all that revenue in the past 14 years that we haven’t,” said David Janssen, the chief administrative officer. “There is no satisfaction that they are taking away $17 million, but at least they are not taking away more and are now trying to re-balance the playing field.”

Part of Los Angeles County’s budget dilemma comes from the fact that it operates six county hospitals and a county fire department. San Diego County does neither, relying on special districts to provide fire protection and contracting out for most of its hospital services.

In recent days, Los Angeles County supervisors began raising dozens of fees to offset a total budget deficit of $586 million. From hospital helicopter rides to parking fees at county wildlife areas, fees shot up throughout the county and more are expected.

Already, some $178 million has been raised to plug the shortfall.

For its part, Los Angeles County officials decline to address those who believe their government is getting its due.

“Rather than make any disparaging comments, let me just say it is unfortunate that any counties are suffering during times of need that must be met,” said Mary Jung, one of the county’s assistant chief administrative officers. “Counties are taking a double hit: property taxes that hurt the county, cities and districts, and then the cut in health and welfare funds. The impact is to the people we serve.”

Jung said the board of supervisors will consider having all 85,000 employees take two unpaid days that would be deferred to future years but labor unions are strongly opposed.

“That would be a softer landing than massive layoffs,” Jung said.

San Diego County Supervisor Leon Williams said he takes little comfort in the latest round of cuts here, given the county’s dire financial situation. Even a $17-million loss of property fees out of a total $44.4 million shortfall is devastating, he said.

“It could have been a lot worse if they hadn’t gone with this equity formula, but we have been down for so long that any diminution is a grave problem for us. The only salvation is that the Legislature did recognize our below-equality situation.”

Other counties, such as Los Angeles, he said, “are experiencing so much pain that they are getting to be where we are now.”

The loss of property taxes is only part of the budget crunch. But that money goes directly into a county’s general revenue fund, which is used for library operations, public safety, parks and recreation and animal control. It also is used to pay for the tax collector and auditors office, county attorneys and health and social services.

But most of the money for health care comes directly from the state and only is administered by the county. San Diego County is looking at a $2-million cut for indigent health care, a $500,000 reduction in alcohol and drug rehabilitation programs, a $5.3-million decrease in mental health and a $7.5-million cut for day care service.

Lawmakers made across-the-board reductions in welfare, day care and state supplemental payments to people in all counties.

While officials in San Diego County were careful not to gloat about the problems of larger governments to the north, there was a private sense of relief that legislators had adopted a compromise that seemed to amend for past sins.

“They provided a justification for distributing the pain,” said Sweeten of the county’s intergovernmental affairs office. “When it comes to this kind of discussion, there is always a lot of debate and dialogue, but this time they came up with a balance.”