Ruling Backs ‘Trigger’ of Car Tax Hike

California drivers can expect to see a jump in registration fees soon under a legal opinion released Monday by top state finance officials that interprets existing law to allow an increase without a vote of the Legislature.

The increase would cost the average driver about $136 a year in new fees. Many local officials have urged the hike because they stood to lose out if the state cut off money to cities and counties that once came from car registration fees, but that the state has been paying since the fees were reduced in 1998.

The law that reduced those fees provided that they would be restored if the state treasury lacked sufficient money to cover the cost. Monday’s opinion laid out the criteria for restoration of the higher fees, and though it did not specifically say the time had come to hike them, advocates of the increase said they were heartened.

Armed with it, Assembly Democrats passed $3.5 billion in cuts eagerly awaited by Gov. Gray Davis but hung up by the debate over the car tax. The Senate is expected to pass its version of the package Thursday, and a Davis spokeswoman said the governor is “inclined to sign these bills.”

“At the end of the day, this gets us the balanced approach we want,” said Assembly Speaker Herb Wesson.

He said the legal opinion signed jointly by attorneys for the controller and Department of Finance made him feel “comfortable” that the trigger of a car-tax increase would take effect as he and other leading Democrats had hoped. Until they were assured that the tax would go up, Assembly Democrats were holding up action on the proposed cuts.

Administration officials said the legal opinion released Monday is not a reversal by Davis, who earlier said he would veto budget cuts approved by the Legislature if they were linked to a car-tax hike. They said the opinion merely clarifies when, under existing law, the state’s fiscal problems reach the point that the car tax automatically goes up.

“There is no discretion,” said Department of Finance Director Steve Peace. “The numbers will speak for themselves if, or when, the [car tax] will be adjusted.”

Davis has opposed legislation to raise the car tax in part because the governor is counting on Republican support to pass more cuts and next year’s budget. Raising the tax now, he has argued to fellow Democrats, will make it harder to persuade Republicans to back the more than $8 billion in other new taxes he has proposed as part of his solution to closing a budget hole estimated to be as large as $35 billion over the next 16 months.

Although raising the car registration fee by order rather than legislation spares a showdown in the Legislature, Republicans, who oppose any new taxes, remain unhappy with the idea. They said that any attempt by Democrats to raise the car tax through administrative order would be illegal and challenged in court.

“Don’t count on the car tax being administratively triggered,” said Assemblyman Ray Haynes (R-Murrieta). “You can’t do it. The legal opinions that said you could are wrong.”

The agreement on $3.5 billion in current-year cuts comes more than three months after Davis called a special session of the Legislature to deal with California’s budget problems, prompting criticism by Republicans.

Davis said the cuts approved by the Assembly on Monday are a “good down payment” toward closing the budget gap. But Assembly Republican leader Dave Cox (R-Fair Oaks) called them “woefully short of what is necessary to keep California out of bankruptcy.”

He warned that legislative Democrats and Davis “worked out a secret backroom deal to triple the car tax without a legislative vote or public input. They want Californians to believe that the car tax will magically happen without their fingerprints on the trigger, and that they won’t be held responsible.”

According to a recent Los Angeles Times poll, 59% of Californians believe that tripling the car tax is a poor idea. Legislative Democrats called for the increase in response to a Davis proposal to cut funding to local governments by $2.9 billion a year.

The state has been reimbursing local governments for revenue they would have otherwise lost when the car tax was reduced by two-thirds in 1998. Davis has said that the state can no longer afford to do that.

Monday’s opinion, which lawmakers were eagerly awaiting for weeks, says the 1998 law specifies that if there is not enough money to cover that reimbursement, the car tax goes back to its original rate. The authors of the opinion focused on language in the law that says when there is insufficient money in the state budget “available” for the reimbursements to local governments, the tax goes back up.

They went so far as to include the definition of “available” in Webster’s unabridged dictionary.

Although Republicans argue that the state has to be completely out of cash to trigger a boost in vehicle license fees, the opinion finds differently. “It appears reasonably clear ... that the Legislature could not have intended the State to exhaust all cash in the General Fund prior to increasing” the car tax, the opinion says.

The bills approved by the Assembly on Monday would make spending cuts in a variety of programs over the next five months. Among the cuts approved Monday were more than $2 billion in education reductions. Nearly half that will come in the form of a deferral, in which the state delays funding a few weeks so the money comes out of next year’s budget, instead of the current budget.

The Senate has approved similar cuts, but will hold one more floor vote on the exact bills the Assembly just passed.