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San Jose
Mercury News OFFICIALS WANT TO TAP TOBACCO SETTLEMENT NON-PROFIT GROUPS FACE S.J. FUND SHIFT By Mike Zapler and Janice Rombeck Desperate for cash to fix an enormous budget shortfall, senior San Jose officials are proposing to snatch millions of dollars from a special fund for education, anti-smoking programs and services for senior citizens. The proposed shift in funding into the city's operating budget already has non-profit groups scrambling to deal with possible program cuts as they await final word, and at least one city council member questioning whether the money should be moved. The decision, which needs council approval,
would mark a stark
departure in how the city spends money from a landmark legal
settlement with tobacco companies in the late 1990s. The money,
an estimated $250 million over 25 years, has so far been used to
help uninsured children get health coverage, dissuade teens from To non-profit organizations, the threat of losing the sizable grants means cutting programs that serve the neediest in the community. And it comes at a time when they're facing cuts from state and county funding. "Devastating" "It's going to be devastating,'' said Esther Medina, executive director of the Mexican American Community Services Agency, which serves the San Jose Latino community. MACSA had applied for about $200,000 in grant money from the pool of tobacco settlement money, known as the Heathy Neighborhood Venture Fund, and the San Jose BEST (Bring Everyone's Strengths Together) program, which has also been frozen. But with the city facing a deficit of at least $73 million in the next fiscal year, officials say they may instead use the tobacco money for basic services, such as police protection and street paving. The shift would only be for this fiscal year, but critics, including Councilwoman Linda LeZotte, say the city will have a difficult time weaning itself from the money. The amount of tobacco settlement money the city receives varies from year to year. Last year San Jose doled out $13 million, and this year it's expecting about $10 million. Deficit shifts priorities City Manager Del Borgsdorf said the city "absolutely'' needs that cash to balance the next fiscal year budget starting in July. He said he'll soon recommend that the council shift the money into the general operating budget, although he added that programs to which the city has made a "multi-year commitment,'' such as the children's health insurance program, would continue to receive funding. The health care initiative received $2 million
last year, and San
Jose has pledged $1 million for next year. Leona Butler, who
heads the program, known as the Santa Clara Family Health
Plan, was hoping for $3 million from San Jose in the coming More than 100 applicants vying for money this year received word from the city last week that hearings on how to distribute the settlement money had been postponed. Officials have delayed dozens of spending decisions, including several other grant programs, until they have a clearer idea of how big the budget shortfall will be. They have asked employees to take smaller raises to save money, and say layoffs, although a last resort, may be needed. San Jose did get some good fiscal news last week when state officials said that a vehicle license fee that brings $4 billion to cities and counties each year would probably be increased. If the state follows through, San Jose's projected deficit next year would instantly shrink from about $110 million to $73 million. Even so, the city still needs the tobacco money for "vital core services,'' Borgsdorf said. Joe Guerra, the mayor's budget and policy director, said that pulling the tobacco settlement money into the general operating budget is part of a difficult process of setting spending priorities in hard times. "I think we're going to need all the money everywhere to balance the budget,'' he said. "We're going to have to look at what services are most important and disregard the funding source.'' Councilwoman balks LeZotte was disturbed, however, that the city council was not notified that the tobacco grant program had been frozen. "Never in my wildest imagination did I think that'' would happen, LeZotte said. "We spent hours deciding how we wanted that money to be used. As far as I'm concerned, it is not general fund money unless and until we have a serious debate that this is what we want to do.'' The city council is scheduled to debate the
issue as part of its
budget deliberations in the coming months, but LeZotte is
concerned that important decisions are being shaped or made
by the mayor and city manager before council members have Led by Mayor Ron Gonzales, the city council in 1999 set up guidelines on how to spend the tobacco windfall: 50 percent would go to education programs, 25 percent to anti-smoking initiatives and 25 percent to programs for senior citizens. MACSA had planned to use a grant this year to fund a rehabilitation for frail elderly, homework centers in Alviso and at Pala and Mathson middle schools, anti-smoking programs in elementary schools, and MACSA Youth Center's anti-gang program. "It takes kids that are getting involved in
gangs and re-directs
them through a whole series of activities'' that improve family
relationships and fight drug abuse, Medina said. "It really has
reduced gang involvement.'' CONTACTS Mike Zapler can be reached at
mzapler@mercurynews.com
or (408) 275-0140.
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