When it's time to cut the budget, legislators had better treat housing-related benefits as sacred cows -- if they want to get reelected.

That message rang clear from hundreds of readers who participated in a daily newspaper's simulation designed to "balance the budget" of the nation's most populous state.

Silicon Valley's daily newspaper, the San Jose Mercury News, recently invited its readers to step into the shoes of California Gov. Gray Davis and balance the Golden State's budget by coming up with $34.6 billion -- the governor's initial forecast for a looming deficit based on revenues and planned spending from Jan. 1 to June 30 2004.

It wasn't enough, however, to simply cut costs and raise revenues. The players had to choose the right balance of spending slashes and revenue enhancers to ensure reelection.

Under a detailed set of rules players were allowed to choose from a list of preselected budget-cutting and revenue-raising alternatives derived from Gov. Davis's real proposed budget, from the state legislative analyst's office, from legislators' suggestions and from other sources. Each choice was assigned a political cost that could help or hinder reelection.

When the votes of 355 adult players were tallied, getting the least support in the taxes-and-fees-to-cut area was eliminating or limiting the mortgage interest deduction. Only 14 percent voted to eliminate the deduction, while only 15 percent voted to limit the write off.

Also, only 18 percent of the players sought to reduce a renter's credit and 27 percent suggested cutting senior citizens' property-tax assistance.

Why spare housing related benefits?

"It's along the lines of our basic shelter needs and with all the kind of news and media reporting in the last couple of years how housing is keeping everything going in the economy, they just don't want to touch it," said Mike Donohoe, president of the Santa Clara County Association of Realtors and broker-owner of Silver Creek Financial in San Jose, CA.

It also simply wouldn't be fair to snatch the tax benefits of home ownership.

"People make housing decisions based upon the tax laws. Changing the laws in a major way is changing the rules in the middle of the game which isn't fair," said Eric Tyson, an author of "Dummies" guides on home buying, home selling, mortgages, personal finance and investing.

"Imagine gutting the mortgage interest deduction, which is effectively like telling people, 'Although we know you factored those tax benefits into your purchase decision, that's too bad. We're taking them away now'," Tyson added.

Players looking to raise revenues more often sought to raise cigarette taxes (95 percent); to squeeze more from Indian casinos (90 percent); to double vehicle licensing fees (89 percent); to raise the income-tax rate for high income earners (81 percent) and to increase the state sales tax by one percentage point (80 percent.)

While budget simulation gamers indicated they wanted to protect their existing housing benefits, they revealed much less concern about new housing for others. When it came time to cut government funded programs, housing took a bit of a hit.

Seventy-five percent of the simulation's participants said they would slash redevelopment agencies' budgets, which have a housing component.

"Based on how the issue was framed in the survey, I think the vote may have reflected that the elimination of public funding for commercial revitalization projects is an acceptable hardship for cities. Most people aren't aware that redevelopment agencies are required to utilize 20 percent of their property taxes for affordable housing," said Gail Feldman, a senior administration analyst for the Housing Authority of Alameda County, in Hayward, CA.

In Silicon Valley, for example, the San Jose Redevelopment Agency's 20 percent for housing programs goes toward new home development subsidies for builders and low-interest loans, grants and other first-time home buyer programs.

Experts say budget game players may also have sought to ax redevelopment programs because most of the agency funds don't directly benefit housing. In San Jose, the remaining 80 percent is earmarked for a host of programs for specific neighborhoods or districts and taxpaying voters don't consider such spending a direct benefit to them.

Even when it comes to housing expenditures, the benefits aren't always clear. In some hotly debated programs, San Jose's redevelopment funds have gone toward developing housing that's more expensive than going market rates, especially in the rental housing market.

"It's kind of sad when free market rents are lower than "subsidized" below market rate rates," said Stephen J. Hanleigh, at Realty Center in San Jose.

Budget gamers most often sought cuts in the state's employee rolls (81 percent); cuts in major transportation projects (74 percent); cuts in cost-of-living increases for low-income seniors and blind and disabled people (71 percent) and cuts in state aid for local parks (68 percent).

Players less often chose closing all 266 state parks, beaches, opens spaces, trails and historic sites (6 percent); cuts in support for parents of developmentally disabled children (23 percent); cuts in exempting non-violent, non-drug dealers from parole (27 percent); reductions in grants for couples who receive Supplemental Social Security Income (28 percent) and cuts in state-funded reimbursements for prescription drugs (31 percent).

Published: May 23, 2003

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.