Business Group Hits Tax Hike in Compromise Highway Plan

A coalition of business groups threatened to pull its support for a 9-cent-per-gallon gasoline tax increase Thursday as committees in both legislative houses endorsed a transportation compromise that included the tax hike.

The mammoth spending plan to upgrade and expand the state’s highway and mass transit systems had been hammered out during weeks of negotiations between Gov. George Deukmejian and the legislative leadership. It was approved overwhelmingly during a quick series of meetings of five Senate and Assembly transportation and fiscal committees.

It is scheduled to go to the floor of both houses today but cannot go into effect unless voters approve a proposal for modifying the state’s spending limit in June, 1990.

5-Cent Hike Urged

As the committees were voting on the transportation plan Thursday, a coalition of business, labor and medical groups known as Project 90 was continuing to press lawmakers to scale back the gasoline tax increase proposal to 5 cents per gallon.

“Our polling indicates that there is some doubt about a 9-cent gasoline tax increase,” said Duane Dauner, president of the California Assn. of Hospitals and Health Systems and a leader of Project 90.

Until the polling, Dauner said, the group had intended to endorse the legislative proposals.

Dauner said the organization may consider proposing a competing initiative if members decide after a meeting next week that the Legislature’s plan for modifying the spending limit and increasing the gasoline tax is not “salable” to the public.

Project 90 was organized to propose changes in the spending limit after passage last November of Proposition 98, a measure which dictates that 40% of the state budget and the lion’s share of any surplus revenue must be allocated to public schools.

An annoyed Richard Katz (D-Sylmar), chairman of the Assembly Transportation Committee and an author of the proposal, predicted that lawmakers would stick with the 9-cent proposal, anticipating that a statewide campaign will persuade voters of the need for the full tax increase.

“I just think that (Project 90 members) are wrong,” he said. “I think that they have no faith in the voters. I think that they have no backbone. I believe that if we make the case with the public about what’s happening in California, the needs of California, the fact that this is written so people will know what the benefits are, that people will vote for the program.”

The improvement plan pumps $18.5 billion into the state’s transportation system over the next decade to relieve congestion and improve deteriorating highways. It raises money for the program by a gasoline tax hike, a 54% increase in truck weight fees and a $3-billion bond issue to expand rail transit systems. Voters would be asked to approve $1 billion of the bond issue in June, 1990, another $1 billion in November, 1992, and the final $1 billion in November, 1994.

The plan calls for an initial 5-cent-per-gallon gasoline tax increase to go into effect in August, 1990. It is followed by 1-cent-per-gallon gasoline tax increases for each of the next four years. A separate measure tied to the compromise and approved by the committees would allow the Department of Transportation to authorize the construction of four private toll road projects in the state.

“This is a tender compromise and we’ve done it . . . because without this plan we’re going to have more pollution and more congestion,” Assemblyman William P. Baker (R-Danville) said.