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Creative Approaches at All Levels of Government Can Cut Costs

By former Governor Gray Davis, Of Counsel in the Los Angeles office of Loeb & Loeb and a Senior Fellow at the UCLA School of Public Affairs.

For related commentaries and content, please visit the Untangling the State-Local Fiscal Relationship page.

Before 1978 California had good public schools and people were satisfied with the local services provided by the counties. All that changed with the passage of Proposition 13 in the June primary. Proposition 13 reduced property taxes by roughly two-thirds and shifted the allocation of the remaining third from the counties to the state. In one fell swoop, the counties lost their primary revenue source. More importantly, revenues to the schools were diminished and they have never been the same.

To be sure there were legitimate reasons Proposition 13 passed. Retired homeowners were seeing their property taxes rise by 200 to 300 percent a year with no way to pay those bills. Property tax bills were not sent until 60 days before the due date, essentially blindsiding homeowners and giving them no chance to anticipate the unexpected increase to their annual budgets. In short, local government had become so consumed with providing more and better services that it lost the "consent of the governed."

In the ensuing 33 years, the tensions between local and state government over the allocation of diminished resources worsened. In some cases the state tried to help by passing, for example, the vehicle license fee in order to provide $6 billion for local fire and police-and it should have been called the public safety fee. I was pleased to work on the state trial funding bill with then-Chief Justice Ron George that assumed the financial burden of funding local courts. In other cases, the state raided both local revenues and transportation funds to balance its budgets, leading in turn to counter-initiatives from the raided entities that successfully prevented future state raids.

After all this time we find ourselves at a standoff. Where do we go from here? In these difficult times with unemployment north of 12 percent, the economy is not going to generate anywhere near the resources necessary to allow the counties to function as they once did before Proposition 13.

The challenge today is to think creatively and do more with less. Let me cite a few examples. Los Angeles County spends approximately $300 million annually on worker compensation costs. There is a way to lower the cost. As governor I was pleased to sign legislation that allows companies and their employees to agree on an alternative dispute resolution system that is voluntary and requires both sides to agree to that alternative process. The alternative dispute resolution system aligns interests by first providing a nurse to a worker within five days of a reported injury and an ombudsman within the next 10 days to insure that all medical services are provided in a timely fashion. The process then moves to mediation and, if necessary, arbitration. Over the last several years injured workers have returned to work in an average of four months, compared to more than 20 months under the traditional workers compensation system. Moreover, the savings average between 35 and 40 percent. This means that over a three-year contract, L.A. County could save $300 million, which could be used to the benefit of the workers and other unmet county needs. The city of Los Angeles spends $140 million for worker compensation costs. San Francisco spends $80 million. So statewide, the savings would be considerable. This system had worked successfully for years in the construction industry, and I was honored to work with the legislature to extend it to all segments of the economy. One reason the recent threatened grocery strike in Southern California did not materialize is because management and labor agreed to convert to an alternative dispute resolution system. In the end, both sides succeeded.

Another source of savings is the increased use of regional services. As Californians all of us have witnessed numerous cases where antiquated crime labs led to the acquittal of seemingly guilty defendants. As governor I was pleased to work with then-Speaker Bob Hertzberg and the legislature to fund a world-class regional crime lab that now serves the city of Los Angeles, the county, and all 88 other cities within the county. Moreover, the lab is located on the campus of California State University, Los Angeles, and is used by students studying to be the next generation of criminologists. Similarly cities, counties, and schools can join together to form large purchasing pools, which would drive down the cost of everything from athletic equipment to science labs.

In these difficult times, our focus should not be on how counties can get more money from the taxpayers, but instead on how government at all levels can creatively find savings that allow us to better serve one another.