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RS-5. State Administrative Costs (B) (cont'd) <br />f7largely benefit other units of local government. The League believes <br />it is wholly inappropriate and unfair to almost exclusively tap city <br />funds for programs which relate to all units of local government. <br />In order to promote a cohesive and coordinated state tax policy and <br />provide for adequate review of proposed state agency costs, it is <br />recommended that no state agency's administrative costs be deducted <br />from property tax relief funds. This will allow the tax committees to <br />fully determine the level of property tax relief to be provided. <br />RS-6. stability of State Revenues <br />The reserve should be built up during years of economic prosperity and <br />used only to protect the state budget from unexpected economic <br />downturns, not for tax reductions or expenditure increases. Such a <br />budget reserve is necessary, given the relatively volatile tax bases <br />on which the state currently relies (particularly the income tax and <br />sales tax), and the potential for error in revenue and economic <br />forecasting. <br />In recent years the uncertainty of the state -local fiscal relationship <br />has made short and long term financial planning almost impossible at <br />the local level. During the earlier part of this decads, local <br />jurisdictions were left with severe revenue shortfalls and cash flow <br />problems because of the sharp and unexpected decline in state revenue. <br />State aids to local jurisdictions were cut substantially and aid <br />payments were delayed, often in the middle of the budget year, when <br />compensating action was nearly impossible. In addition, cities have <br />been unable to plan their budgets with any degree of confidence given <br />the major year-to-year changes that have occurred in the overall <br />funding le,.-1 for local government aid in the formula used to <br />distribute local government aid, in levy limit laws, and in state <br />property tax relief programs. Citie need to be able to rely on <br />predictable revenue sources that will be adequate to maintain the <br />level of services required by their citizens. <br />Should problems with budget shortfalls persist even after <br />establishment of a budget reserve, the legislature should consider <br />additional policy options to stabilize state revenues, including: <br />-57- <br />