Calif. Democrats propose oil tax to offset expected school cuts

 

SACRAMENTO (AP) – Democrats in the state Assembly on Wednesday proposed additional taxes on oil companies as a way to raise $1.2 billion a year for education, which faces billions in cuts as California struggles with a deep budget deficit.

Assembly Speaker Fabian Nunez scheduled a vote later in the day on the plan to tax petroleum companies 6 percent on the oil they extract in the state. He also is seeking a 2 percent tax on windfall oil profits.

The additional revenue would partially offset $4.8 billion in education cuts proposed by Gov. Arnold Schwarzenegger. The governor is considering a variety of options to close a multibillion-dollar budget deficit.

 

“This is about responsibility. This is about protecting education over and above these oil companies that, by my standards, have been doing quite well,” Nunez said during a news conference at the playground of a Sacramento elementary school.

The proposal is not expected to succeed, in large part because tax increases require a two-thirds vote in the Legislature. That means at least six Republicans in the Assembly would need to support Nunez’s plan.

GOP caucus spokeswoman Jennifer McDaniel said no Republicans are expected to back the proposal when it comes to a scheduled vote later Wednesday. Schwarzenegger also opposes the tax, his spokesman said.

 

“The governor doesn’t believe raising taxes is the solution to getting out of our chronic budget problems,” Schwarzenegger spokesman Aaron McLear said. “That’s why we need budget reform.”

The tax proposal passed a committee on a party-line vote and was sent to the full Assembly, which scheduled a late-afternoon debate.

California is the third-largest oil producing state and the only one that does not collect an oil-extraction fee.

Oil companies operating in 21 other states pay billions of dollars in drilling fees.

They owe severance taxes of between 2 percent and 15 percent in Alaska, Louisiana, Oklahoma and Texas, according to a 2002 report by the Interstate Oil and Gas Compact Commission.

 

In California, oil producers pay regulatory fees, income or corporation tax, as well as property taxes on the value of oil-extraction equipment and oil reserves in the ground.

Voters rejected a similar tax in 2006 that would have raised $4 billion from oil companies. Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell PLC pumped nearly $93 million into a campaign against Proposition 87.

Money generated by the initiative would have been invested in research into alternative fuels and energy-efficient vehicles.

Nunez said his proposal was more attractive because the oil tax would keep teachers in classrooms.

 

Christine Boatman, a first-grade teacher at Land Park Elementary School in Sacramento, is among those worried about their job prospects in the next school year.

“Because of these cuts, I’m left searching for employment and my students will be left in an overcrowded classroom,” she said during the news conference.

“It makes me wonder where our priorities lie in making these cuts and taking highly qualified teachers out of the classroom.”

Nunez’s bill would impose a 6 percent tax on all oil extracted from the state to generate an estimated $970 million a year.

Oil companies that earn more than $10 million would be taxed an additional 2 percent.

Assemblyman Chuck DeVore, R-Irvine, said a severance tax would put small oil companies out of business and reduce the state’s oil production, which has been declining since 1986.

“This added tax would accelerate the decline of the California oil industry,” he said.