GOP Files Challenge to Tripling of Car Tax

SACRAMENTO -- As California entered the new fiscal year without a budget or any plan to climb out of its multibillion-dollar budget hole, Republican legislators went to court Tuesday to dismantle the tripling of the car tax ordered by the Davis administration and set to take effect in October.

State employees, meanwhile, balked at the governor’s plea for 180,000 of them to give back raises of up to 7% that were negotiated last year and take effect today. The workers have been warned that if they do not accept salary freezes of a year or longer, as many as 10,000 will be laid off.

The latest budget developments, which came the day after the deadlock caused the state to stop sending payments to nursing homes, community colleges and local schools, have political as well as practical consequences.

The lawsuit challenging the higher car registration fee ensures that Gov. Gray Davis will be forced to defend an unpopular tax increase throughout the summer, even as groups seeking to oust him from office gather signatures in support of a recall election. And the negotiations with state employees put the governor in the position of seeking concessions from unions that have been among his major supporters in past campaigns.

“This tax is illegal,” Jon Coupal, president of the Howard Jarvis Taxpayers Assn., said of the car tax increase, while speaking at a news conference in front of the Superior Court building in Sacramento, where he filed the lawsuit. “The power to raise a tax rests squarely in the legislative branch.”

Four dozen GOP legislators joined Coupal in alleging that the administration had no authority to raise the tax by an average of $158 per car. The vehicle license fee increase would be a major patch on the state’s budget hole -- providing about $4.2 billion per year, half the new taxes Democrats seek.

Republicans want to close the $38-billion budget hole without any new taxes.

Administration officials say blame for the car tax increase lies with a provision in the 1998 law that reduced the tax to its current rate. According to that law, they say, the tax goes back up to its original rate of 2% of the value of a vehicle when the state does not have enough money to pay the rebates drivers have been getting as a result of the tax cut.

“The law that Gov. [Pete] Wilson signed five years ago included a provision for an automatic trigger of the vehicle license fee back to its previous level,” said Hilary McLean, spokeswoman for Davis.

Under that interpretation, the Davis administration’s act in restoring the fee is merely ministerial. But Republicans say that is a distorted reading of the law by administration officials.

And Republicans and Democrats agree that frustrated drivers may see the governor’s fingerprints on the tax increase.

“One of the problems Davis has is he hasn’t adequately explained -- and I’m not sure that he can adequately explain -- that this is written into law,” said Sherry Bebitch Jeffe, a senior scholar in the School of Policy, Planning and Development at USC. “I don’t believe voters trust Davis. They blamed him for the energy crisis, they blame him for the budget and they will blame him for the tripling of the [car fee], rightly or wrongly.”

GOP consultant Wayne Johnson said campaign workers for the recall frequently hear complaints about the car tax from voters while seeking their signatures at shopping malls and supermarkets to get the measure on the ballot.

“It is top on the mind of a lot of people,” he said. “It was nice when it went away [in 1998], but is absolutely devastating coming back. That money is spent. It went to buy shoes, for school, or whatever.”

Coupal said the state Constitution prevents the courts from blocking the collection of a tax until the appeals process has been fully exhausted in the case against it. But he said it is possible the courts could order the state to issue refunds to drivers if it is determined the tax is illegal.

Such a scenario could prove disastrous for the state, as the billions of dollars collected would already have been spent. But McLean said the administration has no plans to set the money aside while the case it litigated.

“If the state of California declined to take action anytime someone threatened a legal action, nothing would ever get done,” she said.

With debate over the car tax continuing, the Davis administration also is juggling the complex and politically fraught task of asking state workers to give back raises they were promised or risk layoffs.

On Tuesday, Davis signed orders to extend a hiring freeze, eliminate money earmarked for 10,000 to 15,000 vacant positions, and send notices that could result in as many as 20,000 layoffs -- even though administration officials were quick to say they do not anticipate such an extreme step.

Those steps were aimed in part at convincing unions to agree to salary cuts.

“I believe the actions we are taking today will not only save us $250 million, it will hasten and accelerate negotiations,” Davis said.

The move to eliminate vacant positions is aimed at limiting the options of any state employee who may end up getting laid off. As it is, a worker cut from one department would have the right to seek similar work in another department.

But by cutting vacant positions, the administration would limit the ability of workers who are laid off from getting other state jobs.

“It would be a disaster,” Marty Morgenstern, director of the Department of Personnel Administration, said of the prospect of laying off 20,000 workers. “We oversee adoptions, children in foster care. We maintain freeways. We keep felons in jail. We arrest drunk drivers. We put out fires. We could not accomplish our task if we did that.”

But unless unions representing state workers agree to defer raises, Morgenstern and others said there will be layoffs, generally aimed at workers hired within the last 30 months.

Labor representatives said Tuesday that they are willing to talk but that convincing their members to give up raises that already have been granted would not be easy.

“If they come to us with something that is reasonable, we’ll take a look at it and may take it to our members,” said Lance Corcoran, executive vice president of the California Correctional Peace Officers Assn.

State prison officers represented by the union expect to receive raises of up to 7% as of today.

Alan Barcelona, head of the 7,300-member California Union of Safety Employees, noted that “everything is negotiable.”

“It is going to very hard for our officers to forgo a raise and take a pay cut for a significant length of time,” Barcelona said. “Everybody has got mortgages.”

Even as the administration presses unions to accept pay cuts, some of the unions have been donating to the Democratic governor’s campaign committee and to a committee established to fend off the Davis recall.

The California State Employees Assn., for example, gave Davis $10,000 last month. The organization, which represents about 100,000 state workers, has donated $450,000 to Davis since he took office in 1999.

“We helped him get elected twice -- and we stand behind him,” said Perry Kenny, president of the union.

Even so, Kenny said he and his negotiators are unwilling to defer the pay hikes. “There is no incentive to give away the 5% pay.”

Times staff writer Gregg Jones contributed to this report.