Governor Turns Attention to Making Up for Car Tax Cut

Having done the easy part -- rolling back a threefold increase in the vehicle license fee on his first day in office -- Gov. Arnold Schwarzenegger this week is turning his attention to a thornier political task: compensating cities and counties for the resulting billions in lost revenue.

Though final plans are not firm, the governor is considering mounting something of a mini-campaign to urge the Legislature to repay local governments for the approximately $4 billion they would have received under the old tax rate. Schwarzenegger has offered repeated assurances that this will happen, but he is ultimately reliant on the Legislature to set aside the money. And money is scarce.

Schwarzenegger is scheduled to meet with Senate President Pro Tem John L. Burton (D-San Francisco) today, partly to talk about bills languishing in the Legislature that would provide the money. Depending on how that meeting goes, according to a Schwarzenegger aide speaking on condition of anonymity, the governor may then take to the road, possibly holding news conferences on the subject in three cities: San Diego, San Francisco and Long Beach.

San Diego Mayor Dick Murphy said Monday that he was planning to attend a news conference in his city with the governor later in the week.

“The governor’s visit to San Diego is very welcome,” said Murphy, whose city stands to lose $50 million in annual revenue from the reduction in the car tax. “It reinforces his commitment to reimbursing the cities for the lost revenues. The revenue is absolutely critical to our city. It pays for police, fire, parks, libraries and trash pickup. If the state fails to reimburse San Diego, we are going to be forced to make draconian cuts in at least libraries, parks and street maintenance.”

Car tax revenue goes directly to municipalities, which use it to pay for a range of services. By cutting the tax through an executive order, Schwarzenegger pushed the projected state shortfall up to $14 billion for the fiscal year that begins in July. Before he took that step, some legislative leaders had warned that there was no money available to guarantee that local governments would not suffer.

Now, Democrats who control the Legislature say they will not bring to a vote bills that would repay cities and counties until Schwarzenegger discloses where he will find the money.

Part of the Democratic strategy is to demonstrate that, absent a tax increase, Schwarzenegger cannot replace the car tax money without making unacceptably deep cuts in state services. The governor has long said he would not support a tax increase unless it were to address some unforeseen disaster.

“I have no idea where he expects to find the replacement money,” said state Sen. Dede Alpert (D-San Diego). “All of us have the same goal of wanting to help with local police and fire protection. But he cut local governments’ revenue source and I have no idea where he’s going to find the money to replace it .... I would be happy to work with him to find another source of revenue, but I think it’s going to have to be a new source.”

Underscoring the deep partisan divisions at play, Republicans are angry that the legislation remains stalled.

Assembly Republican Leader Dave Cox of Fair Oaks sent a letter to big-city mayors on Monday that read, in part: “I know you share my disappointment at the duplicitous tone of my colleagues on the other side of the aisle who despite calling for an end to partisan politics, continue to hold cities and counties hostage for their political benefit.”

Watching the debate unfold from a distance, mayors and county supervisors have grown increasingly nervous about whether the money will ever be restored.

“In my mind, the governor and the Legislature have to work this out together,” Los Angeles Mayor James Hahn said in an interview. “The governor told me that ... repealing the [car tax] increase was not going to harm local government. And I took him at his word.... Cities and counties want to put pressure on everyone in Sacramento to not forget us -- not forget the pledges that have been made.”

The governor’s last road show left Democrats in the Legislature embittered. Schwarzenegger made appearances in their districts in hopes of pressuring them to support his financial package -- ultimately approved by the Legislature on Friday.

This time, Schwarzenegger has received invitations. Many of the big-city mayors invited him to their cities when lobbying him in Sacramento last month. The governor is not planning large public rallies this time around, but smaller news conferences.

Within the Capitol, some legislative leaders voiced skepticism that the governor could square his campaign assurances with the state’s troubled financial standing.

“When you’re out making political promises, you have to look down the road two or three feet,” Burton said in an interview Monday.

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Times staff writer Evan Halper contributed to this report.