As the State Legislature and Gov. Arnold Schwarzenegger continue to wrangle over solutions to the state’s budget crisis, California cities, like Lincoln, are feeling the pinch.

State lawmakers are working to close a $14.8-billion deficit for this fiscal year that is predicted to grow to more than $40 billion next year. If the state does not close this year’s budget gap soon, according to state finance officials including Controller John Chiang, it is expected to run out of money to pay its bills in February.

Because of this crisis, the state’s Pooled Money Investment Board voted in December to suspend a number of programs and projects, including the Highway 65 bypass project in Lincoln. The board said the decision was made because it cannot sell voter-approved bonds with the state unable to guarantee it will be able to meet its financial obligations.

This has led the city of Lincoln to suspend a number of programs, including its first-time homebuyers program and the Auburn Ravine pedestrian and bike trail project, according to the city’s Grant Coordinator Jenny Simpson.

“We had a meeting scheduled for people interested in our first-time homebuyers program on the same day we received the letter from the state saying the funding was put on hold,” Simpson said Tuesday. “We canceled the meeting. There was no point in having it because we had to suspend the program.”

City officials received the letter from the state on Dec. 18.

Steve Ambrose, administrative services director for the city of Lincoln, said Tuesday that the city cannot continue to fund projects if it is not guaranteed reimbursement by the state.

“We don’t have the luxury of running on a deficit as the state does,” said the city’s Public Information Officer Jill Thompson.

According to the League of California Cities, California’s cities receive approximately 10 percent of their revenue from the state.

While this is a small portion of their budgets, cities depend on it to run a number of programs, said Megan Taylor, the league’s spokeswoman.

One of the biggest problems for cities during tough economic times, Taylor said Monday, is when the state suspends or cuts funding for mandated programs but still expects cities to provide those services.

“This forces the city to make tough decisions on what services we continue to provide in this situation,” Thompson said. “We have to work within our budget.”

The three legislators representing the Lincoln area, Sen. Sam Aanestad, R-Nevada City, and Assembly members Ted Gaines, R-Roseville, and Dan Logue, R-Chico, said they oppose cities having to pay for unfunded mandates by the state.

“My strategy is to decentralize California government and move power back to local governments,” Logue said Tuesday. “This means cutting requirements on mandated programs and giving control back to cities and counties.”

Gaines said Tuesday he is working with Assembly member Roger Niello, R-Sacramento, on legislation that would protect cities and counties from unfunded mandates.

Although the state is not funding many programs while lawmakers work on finding a budget compromise, according to the city of Lincoln’s Simpson, the city is still submitting invoices to the state. Simpson said she hopes the city will receive some of the money for mandated programs once a budget deal is reached.

“We’re working under the assumption that our invoices will be paid, assuming that money gets cut loose,” Thompson said. “We aren’t continuing any work that we are uncertain of getting paid for at this current moment.”

Ambrose said the city is also waiting to see if the state will borrow money from “pots of money” reserved for cities and counties, like property taxes and transportation funds generated from taxes on gasoline, to staunch the budget crisis.

“The situation leads one to think that when the state does borrow, it will borrow significantly,” Ambrose said.

Taylor at the League of California Cities says this is unlikely. She said the state is limited on what it can borrow from these funds by Proposition 1A, passed by voters in November 2004.

Proposition 1A limits the amount of money the state can borrow at any given time and restricts borrowing to no more than twice in a 10-year period. Under the measure, the state can only borrow these funds if it has repaid money already borrowed.

There is a caveat in the measure that does allow the state to sidestep these regulations if the governor declares a “fiscal hardship,” according to the League of California Cities’ ‘A Primer on California City Finance” document.

In December, Gov. Schwarzenegger declared the state to be in “fiscal hardship.”

However, a League of California Cities analysis of Schwarzenegger’s proposed budget for the 2009-10 fiscal year, which the governor’s office released on Dec. 31, shows that the governor does not plan to borrow from local funds.

Schwarzenegger’s proposal also addresses the budget shortfall for the current fiscal year and revisions to the plan will be made if and when a compromise is reached to deal with the problem.

Some local residents place the blame for California’s budget crisis squarely at the feet of state lawmakers.

Lincoln resident Aaron Burke said he believes it is a case of serious mismanagement of the sate by lawmakers.

“I think it’s ridiculous. As much money as we pay in taxes, it seems mismanaged,” Burke said. “Maybe some of the state’s bid dogs need to make less money.”

Earl Mentze of Sheridan said that lawmakers are having problems running the state.

“Like in the business world, you can determine the wellness of any organization by the leadership of those at the top,” Mentze said. “The state of California is laboring under the leadership skills of these elected officials. If you want a different result, you need to employ a different decision-making process.”

Assembly member Logue agrees with Mentze’s assessment of the way the state is managed. He said that the government process at the Capitol has to be reformed in order to effectively manage the state.

“Can you imagine California being a business in the current world economy? We would be shut down and out of business within 24 hours,” Logue said.