Increase in Utility Taxes Approved by State Senate

In a test of the Legislature’s willingness to raise taxes, the Senate on Monday struggled with and barely passed legislation raising utility taxes by $1.27 billion a year.

The hastily drafted legislation was sent to the Assembly on a 27-7 vote, just enough to satisfy the requirement that it be approved by two-thirds of the Senate’s 40 members.

Meanwhile, the Assembly, in a separate move to help close the $14.3-billion projected deficit, gave final legislative approval and sent to Gov. Pete Wilson a sweeping trial court funding bill designed to save the state $295 million by imposing higher court fees and enacting administrative reforms.

Under the Senate-approved utility tax legislation, levies on water, cable television, telecommunications and other services would go up 2.75%. Increases on a similar scale would be imposed on gas and electricity services.

Consumers would see the higher taxes on their regular utility billings. Under the legislation, low-income and elderly people who already qualify for reduced rates would be exempt.

Lawmakers came up with the idea of an across-the-board utility tax as an alternative to Wilson’s proposed 6% tax on telephone services. Legislators who have talked with Wilson say the Republican governor has agreed to go along with a utility tax of about 2%, but that he has not given his approval to the higher tax passed by the Senate.

Because the tax increases would not take effect until Oct. 1, the legislation would generate only $610 million during the 1991-92 budget year that will begin July 1. Thereafter, the state would realize about $927 million a year. The rest of the $1.27 billion would go to cities and counties--$274 million annually for counties and $75 million for cities.

Along with the tax increases, the bill would repeal controversial legislation passed during last year’s budget crisis that allowed counties to impose fees on school districts, cities and special districts for collecting property taxes or for booking prisoners into county jails.

School districts would benefit from that provision by being relieved of about $100 million in fees they must now pay counties for processing property tax collections.

The bill bypassed the normal committee process and was amended on the floor of the Senate just hours before the vote. The author of the bill, Sen. Daniel E. Boatwright (D-Concord), said during the floor debate that the rush was because of Saturday’s approaching deadline for passage of budget legislation and acknowledged that there probably would be subsequent amendments to the bill, particularly if Wilson balks at the expanded scope of the legislation.

“There is a lot of work to be done on this bill,” said Boatwright, who struggled to find 27 votes in support of the bill. The bill passed after repeated roll calls--and then only when three lawmakers switched their votes.

Senate Republican Leader Ken Maddy of Fresno called the vote “the first test in a series of tests we face the rest of the week.” Maddy said the struggle to find the 27 votes is a sign that other tax bills likely will face “tough sledding.”

Seeming to agree, Assembly Speaker Willie Brown (D-San Francisco) said earlier in the day that he had given up getting enough votes in the Assembly to pass an income tax increase that Democrats have been pushing. Brown said he believes the best Democrats can hope for is the $7-billion tax package initially put forward by Wilson. It consists of a 1 1/4% sales tax increase and a variety of fees.

The Assembly, after spending much of the weekend engaged in partisan infighting, gave final legislative approval to the court bill on a 57-8 vote. Wilson, who supported the legislation as part of an overall plan to eliminate the budget deficit, is expected to sign the bill.

In still another budget development, school interests announced plans to press the Legislature for legal authority to ask voters for an additional increase of one-quarter of 1% in the sales tax. The tax would be temporary and the money it raised would be earmarked for education programs. It would be in addition to Wilson’s proposed 1 1/4% increase in the basic 6% state sales tax.

State Supt. of Public Instruction Bill Honig is among those pushing for the extra sales tax. Honig complained that schools will be faced with sharp budget cuts even if the governor and Legislature fully comply with the voter-approved mandates of Proposition 98. Although Proposition 98 was drafted to protect school funding, it provides for decreased levels of state financial aid during recessions.

Honig, during an interview, said: “It is important to have some way of raising local money right now. . . . Just for this short period, when we are getting cut like crazy, we want to have the ability to go to the local people to help us.”

It was not immediately clear whether the education sales tax plan would win the support of Wilson or a majority a lawmakers.

After the vote on the trial court funding measure, Assembly Speaker Brown, pleased that lawmakers in his house were able to put aside partisan differences and pass a budget bill, quipped, “Maybe we should recess and drink some champagne.”

The trial court funding bill, drafted by a Senate-Assembly conference committee, would end the current system in which the state gives counties block grants to operate the courts. The bill also would provide the state more direct control over the courts. As a trade-off for dropping the block grants to counties, the state would agree to pick up 50% of trial court costs next year. Within five years, the legislation would require the state to pay 70% of court costs. Counties hope the state ultimately will assume 100% of the costs of operating the courts.

Assemblyman Phillip Isenberg (D-Sacramento), who directed the conference committee, told Assembly members Monday that the bill will require courts to produce 3% budget savings during the 1992-93 fiscal year, another 2% in savings the next year and another 2% the year after.

Overall, the state would realize $525 million in new revenues under the legislation. The bill anticipates that the state would collect $100 million in past-due fines through imposition of tough new collection procedures, another $285 million by assuming a share of the fines and penalties now collected by cities and counties, $88 million through a new fee on motor vehicle violators who attend traffic schools and an additional $52 million through an increase in penalty assessments.

With the increased revenues would come $230 million in increased costs, providing a net gain to the state treasury of $295 million, according to budget analysts.

The trial court bill would increase the penalty assessments the state attaches to each court fine by $3, taking it from $7 to $10 for each $10 in base fine.

The bill would also require that drivers who break the vehicle code pay a fee equal to the vehicle code fine for a given infraction. Currently, violators who attend traffic school do not have to pay a fine, although they do have to pay a penalty assessment and a fee for attending the school.

The reforms are in keeping with Wilson’s insistence that any budget deal include a number of long-term savings for the state. Among the administrative efficiencies anticipated in the bill are the cross-assignment of Superior and Municipal Court clerks and staff; central assignment of cases for both courts, and provisions that would allow Municipal Court judges to hear felony cases from start to finish.

Isenberg said that in future years he believes efficiencies required by the bill would provide enough money to pay for 88 additional judges.

Assemblyman Tom McClintock (R-Thousand Oaks), who cast one of the votes in opposition, called the bill “a short-term fix.” While it would save $300 million this year, he said it eventually would cost the state more than $500 million yearly.

The legislation is part of a broad effort by the governor and Legislature to draft a budget by the July 1 start of the 1991-92 fiscal year that effectively erases a $14.3-billion deficit. The projected deficit is the result of a sharp drop in tax collections caused by the recession, the need to pay off a deficit of more than $3 billion in the current year’s budget, and legal and legislative requirements that the state provide financial support to keep up with the soaring costs of schools, prisons and other services.