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Accord elusive on emergency surcharge for property owners

A budget stalemate threatens to derail an attempt by Gov. Schwarzenegger to impose a surcharge on property owners and use the money to fight fires.

The governor’s Emergency Response Initiative, or ERI, calls for a 4.8 percent hike on the monthly insurance premiums of commercial and residential property owners. It would generate about $119 million a year, according to the Department of Finance.

Schwarzenegger proposed the surcharge in January 2008, but it has failed to receive sufficient bipartisan support.

The ERI fee goes hand-in-hand with insurance rates that vary according to individual property conditions, which range from location and roofing to the number of pets and computers.  

State Farm Insurance, for example, calculates that a relatively new $650,000 house in Sacramento might have a $141.17 monthly premium for homeowner’s coverage. Adding the ERI charge would increase that amount by less than seven dollars.

“The only major impact is that the language of the ERI says that if the policy owner chooses not to pay that [additional fee] that would cancel the entire policy,” said Janine Gibford, assistant vice president of American Insurance Association.

The ERI, which would apply statewide, is receiving renewed scrutiny as California heads back into the summer fire season. A record 1.6 million acres burned throughout the state last year, and 1.5 million in 2007, said Daniel Berlant, a spokesman for the California Department of Forestry and Fire Protection, or CAL FIRE.  About $460 million was spent fighting fires in the 08-09 fiscal year and $525 million the year before.  

The same potential exists this year, Berlant said.

“We’re going in with a couple of the driest months on record in the third year of a drought. The stage has already been set,” he said.  

Absent the ERI, CAL FIRE taps into the state emergency fund and works closely with the Department of Finance to reallocate sufficient funds to suppress the fires. The 2009-10 budget sets up another option.

“For the next fiscal year [CAL FIRE] would take a $76 million dollar reduction from the general fund which would be backfilled by the ERI,” said Berlant. In subsequent years the proposed ERI funding for CAL FIRE would go down to $71.4 million annually.

The funds would allow for full staffing, an additional 1,100 seasonal firefighters and a fourth firefighter on every fire engine, as well as GPS tracking on all emergency vehicles

Proposed ERI funding also allocates money to the California Emergency Management Agency, responsible for coordinating local government responses, and the Military.

CalEMA communications director Jay Alan said that it is important for first responders to have a stable funding source to avoid relying solely on the general fund.

“It’s not that it’s inadequate. When it comes to fighting fires, it will be done. It’s just that tight budget times means that that money will be used to fight fires when its also needed in other areas,” said Alan.

“At this point the final determinations haven’t been made, its part of the bill that’s been left intentionally vague,” said Alan. But even without the ERI, “We are confident that we can do it on the numbers that we do have.”

The primary contention surrounding the ERI intially had to do with whether the 4.8 percent charge was a fee or tax. This was resolved by a revision specifying it as a surcharge.

The Department of Insurance, who initially opposed the ERI, withdrew their argument when the change was made, said department spokesman Darrel Ng.

The problem now is that it is a surcharge.

The plan, okayed by the assembly,  fell short of a two-thirds majority by four votes on June 26 in the Senate. Since then, it has been folded into the budget conference committee report, which means that, at least for now, it is part of a proposed budget compromise.
In spite of being Republican Gov. Schwarzenegger’s proposal, the ERI received no Republican votes.

“Public safety should be funded within the existing resources,” said Senator Tony Strickland, (R-Moorpark). “We’ve been crystal clear as a caucus…We believe like the governor believes that now is not the time to be raising taxes.”  

Another argument, however, comes from urban constituencies away from the wildfires who would potentially be paying for a service that does not affect them.

CAL FIRE is best known for wildfire response, but the department is trained to respond to all natural disasters.

“We’ve responded to floods in northern California, helping build sand bags and helping restore levies. Earthquake resources and these resources would all be funded through the ERI,” said Berlant.  

 “It’s not the best policy. I think we should probably be paying…out of regular funds, but under the circumstances…If we are sincere in trying to fund in different ways, without using a big onerous sales tax, I’m willing to do it,” said Sen. Denise Ducheny, D-San Diego,  the chair of the Senate Budget and Fiscal Review Committee. “Ask the republicans,” she added. “We already voted for it.”

The bill has been in the budget since January and was reasserted in the May revise by Gov. Schwarzenegger. It was in a regular conference committee budget and then in a separate trailer bill. It was revised and put into the budget that is currently being disputed and remains lost in the toss up.

“We just don’t know,” said Gibford. “This hasn’t been a focus and whether it will or won’t happen will be worked out with all of the other budget negotiations.”

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