As the Sacramento budget stalemate over extending temporary taxes continues, will lawmakers turn to fees instead as a way to raise money for the cash-short state?
Previously the answer might have been an emphatic yes. But this year, thanks to new restrictions imposed by voters in November, legislators will find it harder to use fees as a substitute for taxes.
Fees added on to consumer bills already bring in billions of dollars to the treasury.
Californians pay extra fees on top of the normal price when they register their cars, go duck hunting, buy a big-screen television, pay the phone bill or even when they break the law, among dozens of other activities.
It may be just nickel-and-diming the consumer in many cases. But the charges add up, translating into real money for the state to keep many vital services rolling, from the CHP to the disposal of hazardous waste.
The fees either directly or indirectly help reload the state’s depleted general fund in two ways. Some of the add-ons can go directly into the general fund. Other fees are dedicated to selected programs and placed in what’s called “special fund” accounts. Gov. Jerry Brown proposes to borrow $5 billion from those special funds to balance his budget in 2011-2012.
Brown and lawmakers are locked in negotiations just days before a June 15 constitutional deadline to pass a budget for the fiscal year, which begins July 1. As it now stands, the state must close a nearly $10 billion gap over the next 13 months out of an $88.5 billion general fund.
For some time, the philosophy in the Capitol revolved around the thinking that fees were more palatable to voters than taxes. Fees adhere to a user-pays approach — those that receive a service or something else in return pay the bill. More importantly, fees could be imposed on a simple majority vote.
But Californians dramatically rewrote budgeting rules when they approved Proposition 26 in November. The initiative requires most new fees to be approved by a supermajority of lawmakers. That’s the same high two-thirds bar set for general taxes. The result: a slowdown in new fee proposals and a headache for those
programs that may be underfunded because the state is out of money.
That suits critics like Assemblyman Jim Nielsen, R-Gerber, just fine. Nielsen, the Assembly GOP’s point person on the budget, said fee revenues have escalated.
“Agencies desperate for more money found ways to get the money. The other way to get the money: fees,” Nielsen said.
Surpluses in some accounts disturb him. That money is being scooped up by lawmakers who borrow it to prevent deeper cuts in services.
“We’re collecting obscene amounts of money. That means we’re over-assessing, overtaxing. That tempts us to borrow more,” Nielsen said.
Sen. Alan Lowenthal, D-Long Beach, said fees have been the only politically palatable way to advance many environmental goals given the aversion to general taxes.
“We would not be able to promote recycling or provide incentives to manufacturers,” Lowenthal said. “A lot of these programs are partnerships with the private sector.”
The most well-known — and used — is the beverage container deposit, which relies on companies to take back bottles and cans for recycling. Another is the $10 e-waste fee collected upfront when new computer monitors and televisions are sold.
Without fees, future green initiatives could come to a standstill, Lowenthal warned. For example, he is crafting legislation designed to encourage the safe disposal of mercury-tainted compact fluorescent lights. But with Proposition 26 on the books, he doubts he can secure a two-thirds vote for a fee that would help secure industry buy-in to run the program.
Mark Murray, executive director of Californians Against Waste, said burying environmental costs as part of the broader general fund is never a good idea.
“The public doesn’t always agree on what’s the best fees or taxes, but there seems to be more agreement when they know where it’s going,” Murray said.
So where is the money going?
DMV is a good starting point. Several surcharges are on the vehicle registration bill, some of which go to local programs. But one is hidden. It’s a $22 flat fee that goes for CHP programs. But it is included in the basic $54 registration fee. That $22 million raises about $600 million a year for the CHP,
Another $20 is levied on cars six years old or newer that allows motorists to skip the smog check. That fee covers about 6.5 million cars each year, and raises $130 million annually for various smog fighting programs.
Even routine car maintenance bills are not exempt, That set of new tires will cost $7 more when the $1.75 per-tire disposal fee is added on. It raised about $43 million this fiscal year to recycle or safely dispose of tires, although an estimated 11 million are still sent to landfills or dumped illegally every year.
Oil changes usually reflect the cost of recycling the used oil, although some service centers levy a separate “environmental fee” to cover handling costs. Do-it-yourselfers can get some money back — 40 cents per gallon — if they return the used oil to a certified collection center and request payment.
At the cash register, consumers are charged $6 to $10 for computer monitors and television screens to fund the safe disposal of dangerous electronic waste.
Phone and utility bills also contain surcharges. Some are flat fees, others based on usage.
For example, the California Public Utilities Commission collects six mandatory fees to pay for various initiatives. Among those: the “lifeline” program subsidizing landline bills for the poor and a separate initiative to ensure the visually-impaired have access to phones. Another program provides phone services to high-cost, far-flung areas that would otherwise not be served by the industry because of the costs.
The California Energy Commission also taps power bills for many of its programs.
Individual ratepayer amounts depend on use and whether the provider is publicly owned or investor-owned.
The surcharges collectively amount to nearly $500 million for a range of programs, from conservation to research to helping the poor pay their bills.
Another $100 million flows to the Energy Commission out of its share of DMV fees.
The state collects more than add-on fees, of course. And many are for services, such as paying for state reviews of projects and state licenses.
Many motorists are undoubtedly surprised, and irritated, by the penalties layered on top of traffic tickets.
That base $100 fine can quickly grow to nearly $500 after various local and state penalties are imposed. The state fees include an additional $100 “penalty assessment” and a $20 “state surcharge.”
When the bounty is divided among cities and counties, it helps to fund the courts, emergency medical services, emergency medical air transportation and DNA testing. Each ticket also produces $20 for the state’s general fund.
1978: Voters pass the landmark property tax protection measure Proposition 13 that also made general taxes harder to increase by imposing a two-thirds majority requirement.
1997: The state Supreme Court court ruled that fees dedicated for certain purposes only needed a simple majority vote.
2010: Voters approved Proposition 26, which requires many types of fees to be approved by a two-thirds majority of the Legislature and the governor’s signature.
SOME EXAMPLES OF COMMON STATE-CHARGED CONSUMER FEES:
$22 for the CHP. Unseen because it is folded into the larger vehicle registration fee.
$20 smog fee for motorists with cars six years old or newer who pay the fee to avoid getting a smog check.
$10 charged at the time of purchase to cover the costs of the electronic waste collection program, mostly targeted at televisions and computer screens.
A nickel or a time, depending on the size of the container, for deposits paid at the cash register to run the beverage container recycling program.
A normal license is $43.46, but to take waterfowl a special “duck stamp” costs another $18.93.