Assembly Votes 5-Cent Increase in Gasoline Tax

The Assembly passed a bill raising the gasoline tax by 5 cents per gallon Thursday as legislative leaders reported that they are nearing final agreement on a 10-year financing plan for upgrading California’s transportation system.

However, transportation funding is linked tightly with school financing and proposed alterations in the state spending limit in intense high-level negotiations now centered in the governor’s office.

And funding guarantees for public schools emerged as a major stumbling block in the three-part negotiations between Gov. George Deukmejian and legislative leaders as they dickered over how to spend an estimated $2.5-billion tax windfall.

Deukmejian and Senate Republican Leader Ken Maddy of Fresno both contended Thursday that state Supt. of Schools Bill Honig is demanding too high a price in exchange for alterations demanded by other negotiators in Proposition 98, the voter-approved school financing initiative.

In the Assembly, the Democratic-sponsored gas tax bill easily won approval on a 56-10 vote after Republican leaders made a strong plea to their members to vote for the measure so that negotiations over a transportation plan could continue. On Monday, a Republican rebellion against the bill had stopped it from getting the two-thirds vote needed to pass the Assembly and forced its sponsor, Assemblyman Richard Katz (D-Sylmar), to ask for reconsideration on Thursday.

“People who are caught up in traffic jams are not Democrats or Republicans, they are Californians, and Californians are demanding solutions to those transportation problems,” Assembly Republican Leader Ross Johnson of La Habra admonished his colleagues.

Katz’ bill was sent to the Senate. Its passage, coupled with earlier Senate approval of similar legislation by Sen. Quentin L. Kopp (I-San Francisco), indicated that there is substantial sentiment in both houses for a gasoline tax increase.

Afterward, Katz and Assemblyman William P. Baker (R-Danville), who are both part of an Assembly-Senate negotiating team on transportation financing, said the discussions in the governor’s office have been going so well that they expect to reach a final agreement within a few days.

Although the version approved in the Assembly on Thursday calls for an initial 5-cent gas tax hike to be followed by subsequent increases tied to inflation, Katz said the negotiators have agreed to limit the ultimate tax hike to 9 cents per gallon.

Negotiators have also concluded, Katz said, that the gasoline tax increase will not go into effect until voters--in some form or another--authorize hiking the tax.

Most of the unresolved issues, Katz said, center around proposals for dividing up the $20 billion in new revenue that would be raised over the next decade by the gasoline tax increase and a 30% to 40% boost in truck weight fees. So far, negotiators have not determined a formula for distributing additional funds for local road projects or settled on the amount of money that should be devoted to mass transit, he said.

“But we’re very close,” Baker said.

The disagreement over school financing, however, threatens the entire package, including the transportation plan.

The problem over school financing stems from voter-approved guarantees in Proposition 98 that give public schools and community colleges 40% of all state general fund revenues and roughly the first $600 million of any surplus money that cannot be spent because of the state expenditure limit.

The Department of Finance estimates that of the $2.5 billion in windfall revenues the state expects to receive this year and next, about $1.9 billion will go to schools unless the current law is changed.

Lawmakers are desperately seeking a compromise with Honig to alter provisions of Proposition 98 because if schools get the windfall promised by the initiative it would require deep cuts in many health and welfare programs.

Honig, who led the drive to pass Proposition 98, is willing to give up some of the financial gains schools made when voters approved the measure last November, but not enough to satisfy Maddy and other Republicans.

Maddy, the Senate’s Republican leader, angrily left a meeting in the governor’s office Thursday morning saying that Honig was too unyielding. Legislative sources said that Deukmejian felt the same way.

“Honig wants a recession-proof, inflation-proof, legislative-proof budget every year,” he said.

Maddy warned that if lawmakers cannot reach a compromise and Proposition 98 takes full effect, the resulting mess will be so great that voters could revolt and repeal the entire ballot initiative.

Honig, who from the beginning has been willing to compromise, worked out an agreement with Senate Democrats that would allow schools to keep their Proposition 98 guarantee of 40% of the state general fund budget, annual increases in funding for various programs, and roughly half of any future tax surpluses.

The schools chief said that under the proposed compromise schools would ultimately get about a 42% to 43% share of the budget, compared to around 47% of the budget if an agreement is not worked out and Proposition 98 takes full effect.

“We have tried to meet them more than halfway,” Honig said, responding to Maddy. “We will protect Proposition 98. We are not about ready to give it away or have it emasculated or have it watered down.”

Honig has acknowledged that teachers, administrators and others who backed Proposition 98 do not want to appear greedy and possibly touch off a taxpayer revolt, but he added that he does not think voters would be in a mood to repeal the measure so soon after they approved it.