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Proposal for oil severance tax rises anew

From the Legislature, to an unsuccessful effort toward a ballot measure, and to the Legislature again: The oil-severance tax is back.

State Sen. Noreen Evans, D-Santa Rosa, rolled out her SB 1017 on Wednesday with a rally at California State University, Sacramento. Flanked by student leaders and California Tax Reform Association executive director Lenny Goldberg, Evans said the tax is estimated to raise about $2 billion per year.

“California is realizing an economic recovery but as both the State Auditor and California Budget Project have concluded, without new revenues the state remains on unstable financial footing,” Evans said. “California remains the only oil-producing state in the nation that does not impose an oil extraction tax. Meanwhile, our debts grow, our population increases, and our services are strained while new revenues from our own natural resources earn $331 million a day for big oil companies. Not taxing oil extraction is simply fiscally unsound.”

SB 1017 would impose a 9.5 percent severance tax on the extraction of oil from ground or water within California’s jurisdiction. Half the revenue would be distributed into an endowment and split three ways among the University of California, California State University and California Community College systems, while health and human services would get 25 percent and state parks would get 25 percent.

The idea has been kicking around here for many years, and this isn’t even Evans’ first bite at the apple: She carried SB 241 just last year, but it never made it out of the Senate Appropriations Committee.

A UC-Berkeley-based student group called Californians for Responsible Economic Development began circulating petitions for an oil-extraction-tax ballot measure last April; when they missed their signature-gathering deadline in September, they started anew with a revised measure. But in November, the group changed its name to Students’ Voice Now and announced it would partner with lawmakers to push for a bill instead.

“Tuition levels are vulnerable to a fluctuating economy,” said Harrison “Jack” Tibbetts, a UC Berkeley senior and author of the California Modernization and Economic Development Act. “The endowment avoids this reality by growing during a booming economy and protecting students and their families during the bust. Many other states who tax oil extraction use this same model and have a flourishing education system.”

But Gov. Jerry Brown has pledged not to raise or create any taxes without voter approval, and so isn’t likely to break his promise and embrace this bill, especially as he seeks re-election this year. Anti-tax groups quickly noted this amid their own opposition.

“Governor Brown has been very clear: now is the time for fiscal restraint and government efficiency,” said Beth Miller, spokeswoman for Californians Against Higher Taxes. “But Senator Evans clearly isn’t listening. Instead she is focused on raising taxes on hard-working Californians and creating a huge new, unaccountable government bureaucracy.

SB 1017 promotes a tax Brown already said he doesn’t support, and for which voters have no appetite, Miller said. “Just two years ago, voters approved more than $6 billion in higher taxes and earlier this year the governor announced the state had a $4 billion budget surplus. Voters want Sacramento politicians to hold the line on taxes and work to make government work better and smarter – not create more government and taxes.”

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More from local lawmakers on Brown’s budget

I spent the day speaking with Bay Area lawmakers about Gov. Jerry Brown’s budget proposal, and as always, there was a lot more than could fit into the story filed for the print editions.

Fiona Ma“Democrats elected Jerry Brown and part of why we elected him is because of his leadership, the fact that he’s been there and done that and now has the courage to tell the voters the real deal and make those cuts, even in the face of opposition from our traditional allies and friends,” said Assemblywoman Fiona Ma, D-San Francisco, predicting that while some details might be dickered over, Brown’s overall plan won’t see much opposition from legislative Democrats.

As for legislative Republicans, she said, they’ve never presented a full budget plan of their own: “They have not been part of the solution… They’ve just been saying ‘no, no, no.’”

Voters will have to see past ideology and idealism this year, she said. “We just explain the reality: We have 33 cents in our pocket yet we want to go buy the toy that costs a dollar and we’ve maxed out all our credit cards – well, that’s not going to work anymore.”

Assemblywoman Joan Buchanan, D-Alamo, said she already has been telling her constituents they can’t both expect lowered taxes and full, quality state services, and has found “people are very receptive in terms of knowing someone understands the problem and is honest with them.”

Buchanan said everyone has certain programs they’d like to protect, but the reality is that California must decide how to get the most bang for the bucks it already has. Brown’s plan acknowledges this, she said: “I can’t say it’s perfect or that I’ll necessarily agree with every single part of it … but when I look at how he’s put the whole package together, I think overall he’s done an excellent job.”

Assemblyman Jerry Hill, D-San Mateo, says specificity will be the key in convincing Californians to support extending the taxes already in effect for another five years, as Brown proposes. The message has to be that if those taxes aren’t extended, “then your school district will look like this, and your public safety system in California will look like this,” he said. “We need to show everyone, and I need to see it too – I have an understanding and a perception of how it would be, but I need to know how painful it would be – how many fewer teachers would we have?

Assemblywoman Nancy Skinner, D-Berkeley, said she’s “pleased that our schools are at least being maintained, our K-12 schools, at the level they were this year – we can’t throw away a generation of children. The other cuts, we’re going to have start engaging in great detail.”

Assemblywoman Mary Hayashi, D-Castro Valley, said “we just have to be realistic about what we can do, where we’re going, and focus on creating some real structural reform,” adding that while she may not agree with every element of Brown’s plan, his personal engagement with lawmakers is refreshing. “It’s great, but at the same time, this is going to be really tough.”

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What they’re saying about Brown’s budget plan

I’ll be adding to this as the day goes on.

From Service Employees International Union California Executive Director David Kieffer:

“It’s time to stop playing games in California and get serious about a balanced approach to solving our budget crisis.

“Our state will not survive and recover if we do not come together to solve our problems. We cannot afford another year of gridlock and partisanship like we’ve seen in recent years. Instead, we need a cooperative effort on both sides of the aisle to restore the greatness of our state.

“Our top priority should be to restart job growth, but that will require that we get our state budget mess fixed. Doing so will be painful, and the sacrifices should be shared by all.

“Governor Brown’s budget proposal is a good start. It is balanced, and he even proposes to cut his own office. Every branch of government should follow his example.

“While we support the Governor’s balanced approach, it’s far from perfect. We will advocate for improvements to this budget so that it better reflects California’s values. We must pass a budget that ensures that frail seniors and people with disabilities aren’t put in harm’s way; that struggling families get the help they need to eat and pay the rent; and that our schools, colleges and universities stay strong.

“Moving control of services from Sacramento to the communities where they are used makes tremendous sense, but only if the services are funded and maintained. Realigning services will also give us the opportunity to find ways to improve public services to deliver more value to California.

“We look forward to working with the governor and the legislature to move California forward through this difficult time, help position California for recovery and job creation, and rebuild the things that have made California’s economy and communities thrive: our schools, colleges, healthcare, and infrastructure.”

From Republican activist Stephen Frank, publisher of California Political News & Views:

“His ‘budget’ is $84 billion–that is ONLY if we agree to keep high taxes. In an Arnold special election the people said NO to higher taxes. In November, 2010 the voters said NO to higher taxes. Now he is trying to use blackmail to get us to keep high taxes. When that fails, he creates a $10 billion addition to the deficit. Also, note his budget does not include money to pay for the approximate $10 billion in lawsuits the State has lost and the lawsuits it will lose this year, in this budget. In fact, he has built in at least $20 billion in ADDITIONAL deficits.

“Maybe the most immoral part of his ‘budget’ is his desire to cut employees pay by up to 10%; but, only those who do not pay bribes to unions to work. Non union people get cut; workers who pay bribes are allowed to keep their pay in tact. Punishing people for being honest and rewarding those forced to pay bribes. Then, again, we all knew he is owned by the unions.

“Jerry Brown can not be seen today due to all the smoke and mirrors around him. Dishonest budgeting is the proper term for his effort to punish Californians for the out of control government left behind by Arnold and the Sacramento Democrats. As Nancy Reagan would say, this time about the taxes, ‘Just Say NO.’”

From California Partnership Executive Director Nancy Berlin:

“These are indeed tough times, but if we’re going to get serious about California’s recovery, then we need to get serious about raising revenues, and that means putting all revenue options on the table.”

“We applaud Governor Brown’s first step to propose extending last year’s temporary revenue sources – including the Vehicle License Fee, income tax and sales tax increases, as well as the proposed elimination of the highly discredited and ineffective ‘enterprise zone tax credit. But now we need the Legislature to push harder, and bring in the revenues California so desperately needs.”

From Californians Against Higher Taxes:

“Californians Against Higher Taxes will analyze all proposals for revenue enhancements to determine if they have an adverse impact on California’s economic recovery and the creation of jobs. The Coalition looks forward to working with the legislature and the administration to ensure that any budget solutions that increase state revenues are not detrimental to private sector job creation.

“Additionally, we appreciate the Administration’s proposals to seek either a two-thirds vote of the legislature–in keeping with the language of prop 25–or a vote of the people to increase revenue.”

Read more, after the jump…
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Gov. Jerry Brown’s budget plan is here

…straight from the horse’s mouth:

Sacramento – Governor Jerry Brown will release a balanced state budget today that slashes spending by $12.5 billion, including an eight to 10 percent cut in take-home pay for most state employees, and proposes a “vast and historic” restructuring of government operations.

“These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice,” Brown said. “For 10 years, we’ve had budget gimmicks and tricks that pushed us deep into debt. We must now return California to fiscal responsibility and get our state on the road to economic recovery and job growth.”

Brown’s budget also calls for temporary continuation of taxes while the state pays off debt, moves forward with his realignment plan and consolidates or eliminates functions.

“Since it will take some time to fully implement these changes, I propose to ask the voters for a five-year extension of several current taxes so that we can restructure in an orderly manner,” the Governor explained.

He said the proposed spending plan, which puts $1 billion into a “rainy day” reserve fund, closes California’s budget deficit “now and into the future.”

The Governor said his realignment plan, which he called “vast and historic,” will return decisions and authority to cities, counties and schools and “allow government at all levels to focus on core functions and become more efficient and less expensive” by reducing duplication of services and administrative costs.

The one area of state spending spared from cuts is kindergarten through 12th grade education.

“Schools have borne the brunt of spending reductions in recent years, so this budget maintains funding at the same level as the current year,” the Governor said.

Brown’s budget proposes total spending of $127.4 billion for the 2011-12 fiscal year. Of this amount, proposed General Fund spending is $84.6 billion.

The spending plan eliminates an 18-month budget gap estimated at $25.4 billion, comprised of a current year shortfall of $8.2 billion and a budget year shortfall of $17.2 billion. A combination of $26.4 billion in actions is needed in order to have a $1 billion reserve. In addition, the deficit will grow to $26.6 billion if the proposed sale of state office buildings, blocked by court order, does not proceed, requiring $27.6 billion in budget actions in order to have a reserve.

Brown’s budget proposes $12.5 billion in spending reductions, $12 billion in revenue extensions and modifications, $1.9 billion in other solutions to close the gap and provide for a $1 billion reserve.

Major spending reductions include $1.7 billion to Medi-Cal, $1.5 billion to California’s welfare-to-work program (CalWORKs), $750 million to the Department of Developmental Services, $500 million to the University of California, $500 million to California State University, and $308 million for a 10 percent reduction in take-home pay for state employees not currently covered under collective bargaining agreements. Brown also plans to trim state government operations by $200 million through a variety of actions, including reorganizations, consolidations and other efficiencies.

The Governor’s spending plan proposes additional reductions throughout state government, including corrections, the judiciary and resources.

The budget also proposes to change the role that state and local governments play in local development activities by eliminating state tax benefits for enterprise zones and phasing out the current funding mechanism for redevelopment agencies. This will return billions in property tax revenues to schools, cities and counties and help pay for public safety, education and other services.

The revenue component of the budget calls for an election this coming June where voters will be asked to continue current personal income and sales taxes, as well as the Vehicle License Fee rate, for five years. Brown said revenue from the sales tax and the vehicle license fee will be transferred directly to local governments to finance the first phase of his realignment plan.

Brown’s budget also requires all corporations to use a single sales factor when measuring income attributable to California and calls for an amnesty program for taxpayers who have avoided or underreported income owed to the state.

Brown called the spending plan “a tough budget for tough times” that will close the state’s structural deficit and provide a “strong and stable foundation” to meet future needs.

“Without decisive action, the state’s severe budget problems will persist, threatening economic recovery, job growth, public education and the quality of life in California,” he said. “The adoption of this budget will position the state to lead the country as it slowly recovers from the Great Recession.”

The Governor’s spending plan assumes that all statutory changes to implement budget actions will be adopted by the legislature in March, allowing the necessary ballot measures to be put before the people at a June special election.

The Governor’s news conference will be streamed live this morning at 11:00 a.m. at www.calchannel.com. The budget, in full, will be posted online shortly after the news conference begins at: www.ebudget.ca.gov.