Senate OKs Budget Hiking Driver Fees

With a deadline for approving a state budget fast approaching, Senate lawmakers approved a new spending plan Saturday that would more than double motorists’ vehicle license fees for one year to help close a $23.6-billion budget gap.

The Senate’s Democratic majority got the lone Republican vote it needed from Sen. Maurice Johannessen (R-Redding) to pass a budget on a vote of 27-13 and send it over to the Assembly.

Chances of the plan’s clearing the Assembly before the start of the new fiscal year Monday remained unclear, however, after leaders of the lower house canceled a Saturday session.

The Assembly is scheduled to meet today to consider the plan and a series of related bills for the first time. The package still faces several hurdles, including approval by the Assembly and Gov. Gray Davis.

Before casting his vote of support, Johannessen noted that the spending plan is leaner and relies on less in new tax revenues than previously proposed by Democrats. He also said it would earmark $75 million to fight fires and $50 million for rural law enforcement.

“The alternative to what we’re doing here is to decimate rural law enforcement and fire-suppression services” or to ignore school needs, Johannessen said. “This is the best budget we can put up.”

In addition to including money for rural law enforcement to garner Johannessen’s support, Democrats also helped pave the way for the establishment of a veterans home in Johannessen’s hometown of Redding.

Relying on New Revenue

The spending package approved by the Senate relies on $3.9 billion in new revenues and other tax changes, would spend $373 million more than the plan proposed by Davis and contains a $1-billion reserve, according to the state’s independent Legislative Analyst’s Office. The higher spending is largely the result of lawmakers’ desire to restore a variety of cuts sought by Davis, primarily in the areas of health and social services.

The plan would increase the vehicle license fees paid by motorists during the 2003 calendar year to raise nearly $1.3 billion in the new fiscal year, which starts July 1. Assembly Democrats had sought to increase the tax for two years, but that plan was dropped Saturday amid objections by the Davis administration.

California is home to 29.6 million cars, motorcycles, trucks and trailers that would be subject to the higher fees. The registration fee has been reduced by slightly more than two-thirds since 1998 in a series of rebates approved by the Legislature, part of which would be suspended.

Under the plan, the license fee for a 2002 Volvo wagon purchased for $33,000 would jump from $215 to $497, while someone who paid $18,000 for a 2000 Ford Explorer would go from paying a fee of $82 to $190.

The plan also relies on higher state excise taxes levied on cigarettes than originally sought by Davis. Davis wanted an increase of 50 cents, while this plan calls for an increase of 63 cents in August.

Tom Ryan, spokesman for Philip Morris U.S.A., said unintended consequences of raising state excise taxes on a pack of cigarettes from 87 cents to $1.50 could include more cigarette smuggling and counterfeiting.

“Already, more than half the cost of a pack of cigarettes in California goes to the state or federal governments,” Ryan said. “This type of proposal ironically puts the state in a position of greater dependence on cigarette excise taxes.”

Helping Business

In a nod to California’s business community, a Davis proposal to suspend for two years businesses’ ability to deduct so-called “net operating losses” was modified to let companies claim 80% of the losses when the suspension ends, as opposed to a scheduled 65%.

Jean Ross, executive director of the California Budget Project, a group that weighs the effect of budget decisions on low- and middle-income Californians, estimated the change will translate into a permanent, $300-million-a-year corporate tax cut.

The spending plan would also delay about $475 million in funding for schools to the following budget year, which begins July 1, 2003.

During a floor debate on the plan, Senate Budget Committee Chairman Steve Peace (D-El Cajon) said the spending plan closes the state’s $23.6-billion budget shortfall with $8 billion in loans and transfers, $13 billion in cuts and the rest in tax increases.

“It’s a long way from where we came,” Peace said.

Republicans disagreed.

“This is not a budget,” Sen. Tom McClintock (R-Thousand Oaks) said. “This is a tragedy.”

McClintock suggested that much of what Peace had described as spending reductions were actually “Andersen-type” bookkeeping gimmicks being used by Davis to hide the budget hole.

“Should this pass tonight,” added Senate Republican Leader Jim Brulte of Rancho Cucamonga, “I hope the Assembly will stop it.”

In addition to new taxes, Assembly Democrats and Republicans remain at odds over several budget-related proposals that touch on education funding. But the Senate took action to end the standoff Saturday by approving a pair of measures that diminish the need for Republican support for a key education funding measure.

Davis is seeking to transfer $1.7 billion in education funding between the current fiscal year and the upcoming one to help balance the budget. Assembly Republicans have withheld their support on the proposal in a bid to garner Democratic support for a plan to earmark $400 million in the 2003-04 fiscal year to equalize funding among schools.

More Money for Schools

But the Senate on Saturday approved a pair of measures that reappropriates $1.7 billion to the California State University system and allows the money to be spent on community colleges and public schools.

The measures require only a majority vote, which means no Republican support is required to approve them.

“They knew their plan had no Republican support, so they changed the rules,” said Peter DeMarco, a spokesman for Assembly Republican Leader Dave Cox (R-Fair Oaks).

“The question now is whether the maneuver is legal.”