County Leaders Fear Plan to End ‘Car Tax’

The abolition of California’s vehicle registration fee, which Gov. Pete Wilson is expected to propose this week, could cost precariously solvent Los Angeles County as much as $815 million next year, terrified local officials said Monday.

The county is legally required to spend more than $500 million of the threatened funds on health, mental health and social services in order to obtain an additional $600 million or so in critically needed state sales tax revenues. The rest goes to pay for county-originated services such as law enforcement, courts, parks and libraries.

And although a cut in the so-called car tax would make motorists happy, the loss of that money would be catastrophic for a county government that is still fighting its way back from the brink of insolvency.

“I think the proposal could put L.A. County into receivership,” said Assembly Speaker Antonio Villaraigosa (D-Los Angeles). “Ask them what they think $800 million [in cuts] would do to their budget.”

To make his proposal more politically palatable, Wilson is said to be considering making up any immediate loss of revenue with funds from the state’s huge surplus, at least for the fiscal year starting July 1.

Currently, local governments are entitled by the California Constitution to the $4-billion chunk of state revenue, no matter the whims of state lawmakers or the economy’s condition.

“It would make us dependent on the state budget process, and that is just not a position we want to be in in the long term,” said Los Angeles County Chief Administrative Officer David Janssen. “We are extraordinarily worried.”

Currently, motorists are charged 2% of what the Department of Motor Vehicles says their car is worth--averaging about $185 a year. The vehicle registration fee is sent to the state, which sends a portion of it back to the counties in a guaranteed “revenue stream.”

The fee was raised during the recent recession to close a huge budget gap. At the time, Wilson said the money was needed to pay for health programs run by local government, with the bulk of it going for the counties’ costs of caring for the severely mentally ill.

Now, Wilson is said to be interested in giving motorists a break to make up for the increase.

It is possible, according to Janssen and other county officials, that Wilson could even propose what some are calling a “tax grab” without restoring all the funds, choosing to spend the surplus elsewhere instead.

If that happens when Wilson issues his revised 1998-99 spending plan this week, “we’re going to get real hysterical,” Janssen said. “If he does propose a backfill [from the surplus], we will only get somewhat hysterical.”

Of particular concern, Janssen and others say, is that the state won’t always have such a huge surplus--now estimated at as much as $4 billion--at which time state legislators could solve their own budget problems on the backs of the counties and cities.

“We’re an easy target, we counties,” said Janssen, citing the state’s controversial move six years ago to take billions of dollars in property tax revenues from the counties and put it into the state’s then-dwindling coffers.

Already, Villaraigosa and other local Democrats, the California State Assn. of Counties and the League of California Cities are coalescing against Wilson and Republican Assemblyman Tom McClintock of Northridge, who is carrying legislation to kill the car tax.

As of late Monday, the opponents were gearing up to hold a “call to arms” news conference this morning on the issue in Sacramento.

“I am certainly doing everything I can to slow down the freight train,” Villaraigosa said. His main concern, he added, was that he too doesn’t trust his legislators to ensure a continued source of funding for the county, even with a pending constitutional amendment that could guarantee that sales tax revenues replace the car tax.

“When faced with another crisis one, two or three years down the line,” he said, “the subsequent Legislatures are not bound by today’s commitments.”

Villaraigosa said most of Los Angeles’ Democratic delegation in Sacramento also will oppose any proposal put forth by Wilson. But so many conservatives support it, he said, it could become one of the more divisive issues in the upcoming state budget deliberations.

As those battle lines are being drawn, county officials are laying out a course of action that will include personal lobbying trips to Sacramento and phone calls and meetings with potential allies in neighboring cities within the county.

Los Angeles Mayor Richard Riordan and Chief Legislative Analyst Ron Deaton, for instance, are expected to join the coalition by week’s end, as are representatives of other cities, county officials said.

Whether that is enough remains to be seen, and many officials privately worry that the movement to repeal the tax is gathering steam in the Legislature and elsewhere. “We’re very concerned about the momentum building up to repeal the tax,” Janssen said.

Already it has become a campaign issue, with Atty. Gen. Dan Lungren--the GOP’s presumptive gubernatorial nominee--calling for repeal last week.

At the county Hall of Administration earlier this year, conservative Supervisor Mike Antonovich asked his colleagues to support the McClintock bill on the grounds that the economy is doing so well that motorists should be able to enjoy a tax cut.

“The automobile was never meant to be the taxing vehicle for health and welfare programs,” Antonovich said, adding that the tax would be replaced “with existing sales tax revenues” while at the same time saving as much as $400 a year in taxes for drivers of new cars.

But all four of Antonovich’s colleagues refused to put the matter to a vote, even fellow conservative Don Knabe.

His Democratic colleagues were more adamant.

Supervisor Zev Yaroslavsky said any reduction in the vehicle registration fee would jeopardize a broad array of other important services that the county pays for. But he said he was especially concerned about the mental health program that gets a big chunk of the money.