The proposed State of Jefferson is either a giver or a taker, depending on the source you ask.
That's relevant to the most common questions surrounding the movement to separate northern counties from the rest of California and form a new state: Will Jefferson be a financially viable state? California provides the northern counties funding for a variety of services, including education, social services, health and human services, correctional programs and transportation.
The state provides about $66 million to Sutter County for various mandated programs and grants, said Sutter County spokesman Chuck Smith.
In Yuba County, it was hard to separate state and federal funds, but money from both sources amounted to about $83 million, which is 47 percent of the county's budget, said Russ Brown.
The Yuba City Unified School District received about $60 million from the state in 2012-13, compared to about $25 million in local property tax sources and $6.7 million from federal sources, according to the California Department of Education.
And there is a healthy amount of skepticism that the State of Jefferson, which with its present proposed boundaries would have a population of about 1.7 million, leaving behind the huge urban areas that supply the state with much of its income, will be able to maintain current service levels once it splits from the state.
Michael Coleman, the principal fiscal policy adviser to the California Society of Municipal Finance Officers and the League of California Cities, said it is unlikely that the State of Jefferson will have the ability to stand on its own.
"There's a lot of tax revenue in this state that comes from incomes and businesses and corporations in urban areas," Coleman said. "If those are no longer accessible, it could be very challenging for Jefferson to survive financially at the same level it is now."
Peter Laufer spent about a year researching his book, "The Elusive State of Jefferson." In a January editorial for the Los Angeles Times, he referenced a figure, which he attributes to the California Department of Finance, that the region takes in about $20 million more from the state each year than it contributes.
The state's Legislative Analyst's Office recently analyzed a proposal to split California into six states. And while the report didn't specifically address financial viability, it did have a fairly consistent theme — that most of the proposed states could face financial problems after separating from the wealth of Silicon Valley, said Jason Sisney, deputy legislative analyst for the office.
"Given the sovereign power of U.S. states to tax and craft public programs, any U.S. state likely could be financially viable under a typical definition. That being said, a state may have to raise taxes and/or reduce public expenses in order to be financially viable," Sisney wrote in an email.
"Given California's large share of wealth in the Bay Area, significant choices in the regard may face some or all of the other proposed states."
For those skeptical of Jefferson's financial viability, the new state's proponents' emphasis on lower tax rates compounds concerns.
One proposal for the new state's tax structure would eliminate the state income tax, cut the gas tax in half and reduce sales tax from 7.5 percent to 5 percent.
"If you look at the states that don't have income tax, they're usually the states that have a high tourist economy with a high sales tax or have a high industrial base like Texas, which has oil," said Jim Arkens, Sutter County administrative officer. "If they're going to lower the sales tax and have no income tax, I don't know where the money is going to come from."
Secession supporters show model surplus
For some State of Jefferson advocates, the question of whether the proposed state would be financially viable is answered with a resounding "yes."
A team of supporters that included economists, school board members, financial analysts and others put together a financial viability model that projects a total surplus of $6.4 billion for the proposed state under a model with no state income tax and a 5 percent sales tax.
One of the team members was Shasta County resident Robert Smith, who spearheaded the effort to gather property, sales and fuel tax data from various state sources.
"When we initially started it, we were looking at it from the standpoint of how much income we would have to make up," Smith said. "But as we looked at it more, we realized we could support ourselves from day one."
The projected surplus is heavily predicated on the amount of money the federal government provides that passes through the state — money that Smith said passes to counties only after the state has taken out anywhere from 14 to 40 percent in administrative fees.
Smith said that if the amount of federal dollars allocated to counties is taken out of the equation, State of Jefferson counties generate more tax revenue than the state provides them.
"Every penny that comes from the state of California comes from taxes generated in your county or from the federal government," Smith said. "The state of California has no money until they take it from you."
But a report analyzing a proposal to split California into six states concluded that, in regards to education, the state subsidizes education funding in counties with lower property tax revenues, including the State of Jefferson (which does not include Sutter and Yuba counties in the six state proposal).
In 2012-13, the state provided $4,415 per pupil in K-12 schools in Jefferson and $3,031 in Silicon Valley, with the difference stemming from a gap in the amount of local property tax that funds schools.
But State of Jefferson proponents say those disparities will be accounted for once the northern counties are free from California regulations that prevent them from harvesting their natural resources, especially timber.
"We're not poor up here, we've been impoverished," Smith said. "Most of our wealth is based on resources, and we've been regulated out of our industries."
But relying on increased timber revenues could be a slippery slope. About half of California's 20 million acres of timber land is owned by the federal government, and it is on that land where the steepest declines in timber harvests have been seen, said Paul Violett, vice-president and chief forester at Soper-Wheeler.
"I don't know if the State of Jefferson would cause more timber to flow from the federal land," Violett said.
But Violett did acknowledge that California had the most complex permitting process in the country — one that is particularly burdensome for smaller-scale timber operations that account for about a third of commercial operations on 6 million acres of timber land.
"A more stream-lined approach to permitting would help those private landowners," Violett said. "It's a complex and expensive (state) process."
CONTACT reporter Andrew Creasey at 749-4780 and on Twitter @AD_Creasey.
