Joining other municipal governments through the League of California Cities, the town council passed an emergency resolution Jan. 17 to put pressure on the California Legislature to reject this shift in VLF revenue and to restore VLF to its former level.

Mayor Sandy Decker said Los Gatos should join other cities and take an aggressive stance to make the state aware that the town cannot absorb the impact of the VLF takeaway. "Cities and towns are finally up against the wall. There's nothing to give, and we're simply going to have to fight."

The VLF comprises an average 15 to 25 percent of city and county general purpose revenues, making it the third largest source of such revenue to local government, just behind property and sales taxes. In general, more than half of city and county general funds go toward safety and health care programs.

The 1986 voter-approved Proposition 47 provided for VLF revenues to be used by local governments. During a much healthier economic climate in 1998, VLF payments by vehicle owners were reduced, and the state dipped into its own growing general fund to pay the difference in the fee. The amount the state paid was termed the "VLF backfill." The state also promised in 1998 that the VLF payment made by individuals would be restored to its original amount if the state could no longer afford to pay the backfill.

Gov. Davis' recent recommendation to shift $4.2 billion in VLF backfill funds away from local government over the next 11/2 years to fund other state programs is a "raid" that "is neither equitable nor fair. No state program or department has been asked to shoulder such a disproportionate share of the budget pain," states a general letter signed by government leaders in Los Gatos, Saratoga and other cities that has been forwarded to the state Legislature.

An analysis conducted by town staff indicates that as of Jan. 13, the governor's proposed budget would result in the town of Los Gatos losing $542,508 this fiscal year and more than $1.1 million in the 2003-04 fiscal year. The total proposed reduction from both years would result in a 7 percent loss to the town's general fund. Hypothetically speaking, this 7 percent reduction would mean a loss of up to 16 police officers, or half the town's police department.

The town has a $3.6 million economic uncertainty reserve, as well as other onetime reserves it could draw upon for now, said Town Manager Debra Figone. However, she said, the town will only turn to those reserves after exploring all other options.

"It's fine to use a short-term budgetary technique and onetime money, but you don't rely on those strategies for the long term," she said, adding that the town is more interested in reexamining its budget and looking at areas where reductions can be made.

"We're not going to stop providing services, but we need to evaluate how to prioritize those services," Figone said.

According to Steve Conway, the town's finance and administrative services director, the town is not as interested in using up reserve funds not only because they are "wells that will run dry" but also because they generate interest money for the town.

Mayor Decker said that VLF revenues should not be taken away despite the town's ability to turn to its emergency fund:

"Los Gatos is in a position, due to some very sound management, of being able to weather the storm for a while, but why are we being penalized for our foresight of budgeting and for being responsible administrators when the state hasn't been?"

A midyear budget report will be before the town council at its Feb. 18 meeting. Meanwhile, the fate of other revenues for local government also faces uncertainty. Up to now, the town has received approximately $85,000 from the state each year to transfer prisoners to the county jail, but this booking fee reimbursement and library and redevelopment funds may also be slashed.

Citizens who support VLF revenues for local governments should write to their representatives in the state Legislature. For Los Gatos, those representatives are Bruce McPherson, Byron Sher, Rebecca Cohn and Joe Simitian. Contact information is available at www.ca.gov under the "Government" link.