Davis Seeks to Refund $300 Smog Fees

Gov. Gray Davis said Wednesday that he will push to refund the $300 smog fee imposed on perhaps a million people who registered out-of-state cars and trucks in California in the 1990s.

A state Court of Appeal recently ruled illegal the smog impact charge assessed on a total of about 1.5 million vehicles. Those who paid it should be able to get back the fee plus interest, Davis said.

“Everyone who paid the fee is entitled to a refund,” said Davis, who announced Wednesday that he will not appeal the court ruling. “It is sound decision,” Davis said.

At least 84,000 Californians already have applied to the Board of Equalization and Department of Motor Vehicles for refunds, said board spokesman Horacio Paras. The board will wait for orders before responding the requests, Paras said.

The refunds could cost the state as much as $724 million, although state Department of Finance officials say that the amount could be less. The state raised $455 million from the fee during the 1990s, finance spokesman Sandy Harrison said.

With California’s economy expanding, and more people paying taxes, state budget experts say revenue will be at least $500 million above forecasts next year. However, the cost of the refunds will eat some or all of the windfall.

“We’re reaping the benefits of a strong economy,” Davis said. “We’re also reaping the whirlwind of decisions made in the 1990s when there was a great deal of fiscal gimmickry to make it appear as if the books were balanced.”

Davis has no direct authority to order the refunds; the Legislature must decide whether to give them to all individuals who paid the fee, or to limit it to those who paid in the past three years, the general statute of limitations on tax matters.

The state may send letters to people who paid the fee, or it could wait for the people to contact the state. One legislator already has announced plans to offer a bill authorizing the refunds.

“The governor could not have been more clear,” said Assemblyman Tom McClintock (R-Northridge). “I salute him.”

The 1995 suit challenging the fee was pressed by Alan Mansfield, a partner in the San Diego firm Milberg, Weiss, Bershad, Hynes & Lerach--among the largest donors to Davis.

The firm and its lead attorney, William Lerach, donated $221,000 to Davis’ election campaign last year. Mansfield discounted any connection between Davis’ decision and the firm’s contributions to his election, saying that he learned of the state’s decision when Davis made the announcement at a news conference Wednesday.

“Everyone who has looked at this fee has declared it unconstitutional,” Mansfield said. “The fact that the governor’s office found it unconstitutional is not surprising.”

Milberg, Weiss will be entitled to attorneys fees worth millions, to be determined by the courts. The state will pay the fees.

Davis spokesman Michael Bustamante said the governor’s decision had nothing to do with campaign donations. Citing the court decision declaring the fee illegal, Bustamante said: “The governor did what was right.”