Blueprint Calls for Fee Increases; Critics Call Them Tax Hikes

Gov. Arnold Schwarzenegger repeated his pledge Friday that he would reject all tax increases, saying he “despises” tax hikes. He specifically dismissed higher taxes on people with incomes of $250,000 or more a year, estimating it would raise at most $1.5 billion.

“I am a strong believer that increasing taxes will hurt our economy. Otherwise, I would go and increase taxes,” the governor said. “The reason why I despise increased taxes is because it will hurt our economy.”

Although Schwarzenegger’s budget proposal does not include new taxes, several hundred thousand Californians would pay the state government more money because the budget includes almost $239 million in fee hikes. Budget documents released Friday do not go into great detail about some of the new charges. The budget would impose new co-payment requirements on some health-care programs, but does not disclose the size of the payments being contemplated or how much money the state expects to collect overall. Legislative and federal approval would be needed to pass along at least some of the costs.

But in one small state program called the Genetically Handicapped Persons Program, Schwarzenegger is proposing to require co-payments -- an average of $343 for each of the 1,679 affected participants, if the Legislature agrees. The co-payment would raise $576,000.

The bulk of the fees would fall on individuals, either students at public universities or people who use state parks, who would pay an additional $18 million annually.

Schwarzenegger has opted to keep in place $639 million in fee increases imposed by Gov. Gray Davis as part of his final budget, which was signed into law last year. Most of those fees were imposed on businesses.

“All the fees we are proposing, which are very modest, are user fees for service that accrue to the users,” Finance Director Donna Arduin said Friday. “That is very different from a general tax increase.”

Larry McCarthy, president of the California Taxpayers Assn., a group that opposes most taxes, lauded Schwarzenegger for rejecting tax hikes in his initial budget proposal.

But many Democrats objected that Schwarzenegger’s choice of fees amount to tax hikes -- aimed at people, many of them low-income and middle class, who are voters most heavily courted by Democrats.

“This budget is riddled with, whatever the governor chooses to call them, burdens for working Californians,” said state Treasurer Phil Angelides, a Democrat gearing up for a gubernatorial candidacy. “Their theory is that these are optional. I don’t believe in a California where whether someone goes to college or not is optional.”

Budget experts define taxes as general levies. They include taxes on income, sales, corporate profits and property. People have little choice but to pay them. Fees, by contrast, are charged on voluntary actions. No one forces a camper to use a state park, for example. Under state law, the Legislature must approve tax increases by a two-thirds vote. Lawmakers can raise fees by simple majorities in both houses.

The largest dollar amount of fee increases would fall on people paying to attend the University of California and California State University -- accounting for $187.4 million of the $238.8 million in fee increases. There are 540,000 students attending the two university systems.

Under the governor’s plan, undergraduates at the two public university systems would pay 10% more annually starting in the fall. Fees would rise to $5,482 at UC campuses and $2,251 at Cal State campuses. Graduate students would pay 40% more, and undergraduate students who are not residents of California would pay an extra 20%. Community college students would face an $8 per unit increase, to $26 per unit. People with bachelor’s degrees returning to take classes at junior colleges would pay $50 per unit.

“Raising fees is a tax,” said Assemblywoman Jackie Goldberg (D-Los Angeles). “He’s not going to raise fees on anybody but the young. You can’t run around and say no new taxes, except on some poor people and those least able to pay.”