‘Polluter Pays’ Principle May Be Ramped Up

As California legislators return this week to the task of balancing the state’s budgets for this year and next, some lawmakers are moving to hike fees on certain industries in order to make them pay a bigger share of the cost of environmental oversight.

Those legislators, mostly Democrats, want to ratchet up the “polluter pays” principle, which forces industries that affect the environment -- or at least profit from California’s natural resources -- to help pay for the regulators who police them. Representatives of those industries, which include farmers and timber companies, respond that their businesses and the workers they employ will be hurt if they are forced to pay more.

Without fee increases or other help, a broad range of environmental watchdog programs face major reductions if budget cuts proposed by Gov. Gray Davis win approval. There would be less money for monitoring logging activities in ecological hotspots, for directing toxic cleanups, and for conducting surveillance of companies that discharge chemical waste into the water and air.

For example, as many as 30 unfilled Department of Fish and Game warden positions would be permanently eliminated; they are front-line jobs created two years ago to address the state’s inability to fully enforce environmental laws.

A coalition of environmental activists has launched a lobbying campaign to get legislators to reject the cuts and to hike fees instead, suggesting that such a move could even boost the state’s ailing coffers by nearly $1 billion a year.

Legislators have approved a hike in permit fees for water and air polluters, and other polluter-pays programs are the next logical target, some say.

“The concept ought to be looked at where appropriate,” said Sen. Byron Sher (D-Stanford). “These fees should be equivalent to what is necessary to run oversight and review.”

Yet others in the Legislature say there is good reason not to engage. Most Republicans, and some rural Democrats, join industry in contending that the polluter fees are an unfair burden on resource-oriented businesses such as farms and small logging operations. Such businesses, they say, operate close to the margins, thanks in part to costs associated with California’s tough environmental regulations.

“We shouldn’t be taking our budget problems out on people that didn’t cause them,” said Assemblyman Greg Aghazarian (R-Stockton). “These fees are job killers.”

The polluter-pays principle is not new: Taxes on gasoline finance programs that mitigate smog, and development fees are used to create wildlife corridors when new housing disturbs habitat. Environmentalists have pushed for substantial increases in the fees for years, both to keep a steady source of funds for environmental protection and to serve as a disincentive for industries to pollute.

In the context of the state’s projected $26-billion to $35-billion shortfall over the next 17 months, Davis’ less than $300 million in general fund cuts to resource protection seem relatively small.

But last week, the legislative analyst said that when the cuts are added to the scheduled depletion of $1.4 billion in park and water bond money, overall state environmental spending next year will be down by 21%.

A report prepared by state Senate policy and fiscal consultants warns that the governor’s proposal could leave natural resources vulnerable to damage from which they might never recover.

“I’m wary of making cuts to programs that are understaffed, underfunded and underutilized,” said Assemblywoman Hannah-Beth Jackson (D-Santa Barbara) at a recent hearing where Democrats voted against cutting oversight of Sierra logging.

The battle over fees in that area has been going on since before the state’s budget went deep into the red, and the latest Senate report says an increased rate of clear-cutting threatens the health of an entire ecosystem.

The governor’s proposal to cut $425,000 by laying off five state employees who review timber-harvesting plans would reduce the state’s ability to review such plans by 20%, according to the Senate report. Currently, less than one of every five plans is reviewed anyway. State wildlife officials say, however, that even with the cuts, the most critical plans will continue to receive oversight.

Groups such as the Sierra Club have been joined by the nonpartisan legislative analyst’s office in advocating that industry pay enough polluter fees to compensate for the $22-million program. The analyst’s office suggests that having industry pay is only fair, since timber companies make money off the land. Davis administration officials counter that the companies are already struggling in the face of cheap wood imported from Canada and are subject to environmental rules that make the cost of doing business in California far higher than in other states. So Davis, who has received more than $450,000 in donations from timber interests since taking office in January 1999, has resisted such a move.

Even some environmentalists have expressed concern that putting too much of a burden on certain logging operations could force companies to give up and sell their land for development.

In response, Senate Natural Resources Committee Chairwoman Sheila Kuehl (D-Santa Monica) is tweaking the proposal to lift some of the burden off California companies. Her idea: a sales tax that would apply to all wood sold in the state, imported or local.

Timber companies are wary. David Bischel, president of the California Forestry Assn., says California spends $10 regulating logging for every $1 spent in Oregon, where residents are just as concerned about forest management. “We need to figure out how to do these things in a more cost-effective manner,” he said.

Davis spokeswoman Hilary McLean said that although the governor is not going along with the fee on timber harvesters, he is proposing more than $30 million in other polluter fee hikes to help pay for resource protection.

“We are walking a balance between increasing costs for industries and not overburdening them in a year in which the economy is challenged,” she said.

Current law prevents the state from charging more than a total of $3 million in polluter fees. The legislative analyst pointed out in 2001 that as a result, the fees cover only 11% of the budget for air quality monitoring, enforcement and research. Davis wants to raise the cap by an additional $10 million and remove exemptions for some businesses.

Republicans have objected to that, as well as to a Davis proposal to increase water pollution fees, which would affect a wide array of businesses and institutions -- from farms to local governments -- that discharge waste into the state’s waters.

Davis wants to raise the maximum permit fee from its current level of $20,000 by at least several thousand dollars, so that the program is self-sustaining. But the program would also be scaled back with cuts in water quality cleanup and investigation.

Some legislative Democrats, meanwhile, want to push the governor further. They question why Davis has proposed a plan that could result in the elimination of as many as eight mine inspector jobs when he could stop the cuts by charging for valuable mineral classification maps the Department of Conservation now provides industry for free. Absent that, they say, it’s the classification program that should be cut.

“Mapping where the resources are is not inappropriate,” said Sher. “But we need to ask which functions are most essential. In my view, we shouldn’t be cutting enforcement.”

Administration officials warn that changing the way the classification program is funded would only cause further damage to the economy.

“In order to keep the infrastructure of California developing and industry in good shape, we need to keep identifying classifications,” said Stanley Young, spokesman for the state Resources Agency.

The administration is also trying to strike a balance on regulating pesticides amid the budget crunch. Its plan would increase taxes on the products by about $7.5 million, which would add less than a penny to every dollar of pesticide sales. It is not enough to help save programs that study the impacts of pesticides on migrant farm workers and other people who live near agricultural areas, and to provide education and outreach activities on the hazards.

Republicans warn even that amount will hurt farmers. But others say the programs offer a perfect opportunity to take the polluter-pays principle further. A substantial increase in fees, they argue, would not only raise money for the programs, but also reduce pesticide use.

“This is the lifeblood of protecting the public health,” said environmental lobbyist V. John White. “The answer is going to be to shift funding entirely to fees.”