Peninsula cities, already dealing with deep budget cuts and freezes to new programs, may now have to contend with state officials raiding local funds to solve California’s financial crisis.

State officials deciding how to offset a $15.2 billion deficit have proposed borrowing billions from cities and transportation agencies throughout the state. San Carlos, despite its relatively small size, may be hardest hit on the Peninsula should they take that step.

Under Proposition 1A, passed by voters in 2004, if the state borrows funds from municipalities, the money must be paid back with interest within three years.

San Carlos tried declaring a fiscal emergency this week and may place a sales-tax increase on the ballot to help offset $3 million in cuts during the last three years.

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The state could take up to 8 percent of cities’ property taxes, which in San Carlos would be $500,000 next year, said City Manager Mark Weiss. Essentially, every city department would be on the chopping block, including police, parks and recreation, and special-needs services, he said.

“We don’t have the luxury, and we don’t have reserves in tow, that allow us to sustain these kinds of cuts over the long haul,” he said.

San Carlos was one of many local cities passing resolutions this week opposing the state’s plans.

San Bruno, which is already dealing with a $500,000 deficit, anticipates as much as $480,000 more would be taken from next year’s budget should the state decide to borrow local funds, said Finance Director Jim O’Leary.

In Millbrae, City Manager Ralph Jaeck said the plan would cause local leaders’ prudent decisions during the last few years to fall by the wayside.

“It’s frustrating because you try to get your city stabilized and finances squared away, and then they start pulling the rug out from under you,” Jaeck said.

The process has been frustrating for state officials. California lawmakers are still trying to balance a budget that needs two-thirds approval from the Senate and Assembly. Officials have already missed a July 1 deadline to pass a spending plan for next year. A state Senate vote scheduled for Tuesday was cancelled Monday.

In addition to local governments, transit agencies fear state officials will take money from the Proposition 42 gas tax passed in 2002. The Bay Area would lose $75 million intended for transit agencies and another $200 million designated for transportation improvements, according to the Metropolitan Transportation Commission.

mrosenberg@sfexaminer.com

Bye-bye, bucks

Local cities and agencies would suffer large losses next year if the state borrowed transit- and property-tax funds:

BART: $14 million

Bay Area transit: $75 million

Bay Area transportation: $200 million

San Carlos: $500,000

San Bruno: $480,000

Sources: BART, MTC, San Carlos, San Bruno