Man’s Crusade Proves Costly to State

Baron Ramos was still a law student in San Diego when his wife called from the DMV office complaining about a $300 “smog impact fee” that she was required to pay to bring her clunky Mazda from Washington into California.

The fee, which the young couple could hardly afford, seemed to contradict what Ramos had learned in constitutional law class. So after consulting with his boss at the law firm where he worked as a clerk, he sued to get their money back. That was in 1994.

Six years later, Ramos’ humble crusade for his wife’s money could result in refunds for more than a million Californians--eating up as much as $767 million from the state’s budget and causing headaches for Gov. Gray Davis and the Legislature. A high-powered law firm took over the mushrooming case and convinced a judge last year that the fee was, indeed, illegal, a violation of the U.S. Constitution’s interstate commerce clause.

“They apparently forgot that law students and their wives were going to be paying this fee too,” joked Ramos, 37, who wound up getting hired at the firm where he had clerked. “I had no idea it would require an act of the governor and the Legislature to get this money back.”

Just how much the ruling will cost the state will become clearer today when Davis unveils his budget plan. State officials are predicting a $550-million hit. But that number could easily rise, depending on how aggressively the state attempts to repay people.

Though the court said that California was bound to make the refund only to motorists who registered out-of-state vehicles dating to 1996, three years before the case was heard on appeal, some Republicans demanded that everyone who paid the fee, which began in 1990, get it back--with interest. The owners of more than 1.6 million vehicles paid the fee, which raised roughly $455 million for the state during the 1990s.

With public pressure mounting, Davis agreed, saying last year that he would support a full refund with interest for all those unfairly taxed. Democrats and Republicans now concur that the fee had nothing to do with combating smog, but actually was a blatant money grab by a recession-strapped government at the expense of politically disenfranchised newcomers to California.

So now Davis must find a way to cover the refund’s cost with this year’s estimated $3-billion budget surplus while still funding his ambitious proposals to improve education and transportation. And legislators, who unlike Davis actually have the power to order the refunds, have to choose from among competing proposals on how to hand them out.

In an election year, who gets the credit for the refund might be as important to Democrats and Republicans as the details of the refund itself.

The most sweeping proposal comes from Assemblyman Tom McClintock (R-Northridge), a fiery anti-tax crusader prone to quoting King John and the Magna Carta when describing the fee’s illegality.

McClintock, who is facing a tough primary election this spring as he attempts to move to the state Senate, is quickly pushing legislation to set aside $767 million for across-the-board refunds along with roughly the same interest rate the state would charge delinquent taxpayers.

More important, his proposal would place the burden squarely on the state to locate the motorists and automatically send them the money. That is a significant--and costly--departure from the state’s current policy, which is to eventually refund those who file a request with the Department of Motor Vehicles.

McClintock last week asked for, and obtained, a waiver so that his bill could be heard faster in hopes of having the refund checks in the mail by month’s end--a highly optimistic goal.

On the Democratic side, state Sen. Betty Karnette of Long Beach, chairwoman of the Senate Transportation Committee, is also pushing legislation to refund the fee plus interest.

But Karnette is advocating a lower interest rate than McClintock--the extra amount the state pays those it has overcharged--and is only asking the state to notify those eligible for refunds, not mail them the money. To receive a refund, motorists would have to file claims within one year, stating where and when they paid the fee.

It has been somewhat lost in the hubbub over refunds, but motorists will not be the only beneficiaries of the state’s decision to relent in the smog fee case: The lawyers stand to make a pretty penny.

The four firms involved in the case, spearheaded by the powerful San Diego firm of Milberg, Weiss, Bershad, Hynes & Lerach, a generous campaign donor to Davis and others, asked for $18 million and a lower court ruled in their favor. But state attorneys balked at that request, and that portion of the case is still being heard on appeal.

The plaintiffs’ attorneys have not ruled out asking for more if the Legislature makes refunds to everyone.

“I know $18 million sounds like a lot of money, but we have been at this for five years,” said attorney Bill Dato, who argued the appeal. “I think most people would say this is a great bargain for the taxpayer.”

Attorneys in the smog fee case have set up a Web site, https://www.smog fee.com, for information and refund claim forms.

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Forms also are available on the DMV’s Web site, https://www.dmv. ca.gov.

McClintock’s bill (AB 1702) and Karnette’s bill (SB 1325) can be read on the Legislature’s Web sites, https://www.sen.ca.gov and https://www.assembly.ca.gov.