It could be lights out for some smaller California fairs under Gov. Jerry Brown’s proposal to cut their state funding.
The Legislative Analyst's Office recommended Feb. 10 that the Legislature adopt the cost-saving measure and stop spending $32 million each year to subsidize fairs.
The recommendation [PDF], which was presented to the Assembly Subcommittee on Resources and Transportation, said the Legislature should support ending the funding “given the dire fiscal condition of the state.”
The funding provided allocations ranging from about $25,000 to $250,000 to 71 California fairs in the 2010-11 fiscal year. Cutting the funding would not affect all fairs equally, since larger fairs in populated areas have a more diversified revenue stream and are less dependent on the state funding. Smaller fairs in rural areas would see a greater financial disruption.
Before 2009, county fairs received revenue from horse racing license fees, and not from the state's General Fund. Revenue from the license fees declined steadily over the past decade, from $90.6 million in the 1997-98 fiscal year to $35.9 million in 2007-08, according to the Western Fairs Association.
That changed in February 2009 when a measure by former Sen. Roy Ashburn, R-Bakersfield, passed during all-night state budget negotiations. The measure ended the licensing fees and called for the state to make up for the shortfall from the General Fund, to the tune of $32 million each year.
The San Francisco Chronicle reported in 2009:
In introducing the bill at dawn Thursday, Ashburn called the measure a 'win-win' because it would help the state's beleaguered horse racing industry while also helping to preserve tens of thousands of jobs when California's 58 counties, and the state, hold fairs throughout the year. … Perhaps the most telling quote came from Department of Finance Director Mike Genest, when I caught him in a Capitol hallway moments after the Legislature approved the budget package:
'Unfortunately, the budget process is like making sausage,' he said. 'You wouldn't want to know what's in it.'
Fair supporters argued at a hearing of an Assembly subcommittee Feb. 7 that cutting the funds would harm the state.
Stephen Chambers, a spokesperson for the California Fairs Alliance, said that the state’s funding was an investment in economic development.
“If you destroy this foundation, the whole network is disrupted. If the ‘fair return’ to the state in tax revenue is reduced by just 30 percent, this aspect of the Governor’s budget proposal will bleed red ink from the General Fund,” Chambers said in a statement.
The proposals could cause the state to lose $57.4 million in income from the fairs because of the loss of the economic activity and sales tax revenue they generate, the fairs alliance warned.
Russia Chavis, a fiscal and policy analyst with the Legislative Analyst’s Office, said the office recognized that the fairs generate sales tax revenue but said their analysis focused on potential savings to the state from Brown’s proposal.
The governor, working to close a $25 billion budget deficit, is negotiating with the Legislature to pass $12.5 billion in spending cuts and let the public vote in a June special election on whether to renew $9 billion in tax increases.
Fairs already have the funds they need to operate this summer, but fair-goers could see differences beginning in 2012 if lawmakers decide to cut the fairs’ funding.
Sean Earley, CEO of the Butte County Fair in Gridley, said his fair is looking at ways to offset the loss of 25 to 28 percent of their operating budget. His fair was not in danger of closing, but would probably have to hire fewer employees – typically, 60 seasonal employees work during fair season – and raise prices.
In preparation for funding reductions, the fair’s full-time staff of six has already reduced their pay by 16 percent and taken furloughs, Earley said.
Even though his fair may be relatively safe, fairs’ financial troubles affect the entire network of fairs, because many share the same services, like carnival operators and vendors, and workers' compensation, Earley said.
It was part of a larger snowball effect that budget cuts have had on public services, Earley said.
“Costs keep going up and we get less and less for our dollar,” Earley said.