News

Battle over

Financing the costs of fighting California’s ferocious wildfires and other disasters through a new property levy is back before the Legislature – the third time in as many years that lawmakers have considered, and rejected, the controversial proposal.

Long sought by Gov. Schwarzenegger and supported by rank-and-file firefighters, the 4.8 percent surcharge on property insurance policies that the administration says ultimately would raise more than $400 million annually, and use the money to help defray the costs of putting out blazes, such as the mammoth wildfires that ravaged Southern California over the past few years. It would also apply to floods, mudslides, train derailments, earthquakes and any other catastrophe, man made or otherwise.

“It’s for additional resources and staffing that are well above what a local area can expend. It’s for those catastrophic events for which we don’t have funding,” said Julie Hutchison a battalion chief of the California Department of Forestry and Fire Protection, also known as CalFire. “The emergencies are happening, and there’s got to be funding available so there are all hands on deck,” she said.

In 2008, wildfires statewide caused an estimated $721 million worth of insured losses and destroyed 859 homes. The year before, there was some $2.6 billion in insured losses and 2,180 homes destroyed, according to the Insurance Information Network of California.

During the period July 1, 2007 through June 30, 2008, the state spent about $525 million suppressing fires – it’s costliest price tag ever. The cost was higher than the 2009 level, when the huge Station Fire struck in the Angeles National Forest. The fight against that fire, which burned more than 160,000 acres, much of it in the Angeles National Forest, was financed largely by federal money.

The scale of the state’s disasters prompted the administration to seek the extra funding.

California has “a huge amount of fires. California is always known for — you know, we do everything big. And so even our disasters are big and our fires are big and our mudslides are big. When our water pipes break they’re big and, when we have earthquakes, many times they are big,” Schwarzenegger said last fall at a meeting of fire officials at which he pushed the proposed, known as the Emergency Response Initiative, or ERI.

Schwarzenegger and his top state emergency response official, Matthew Bettenhausen, estimated that the levy would amount to less than $50 annually for the average residence, and initially raise about $200 million, and bring in more than twice that amount when it was fully implemented.

At $4 a month, Bettenhausen said, the levy was the equivalent of “a couple of coffees.”

But three issues threaten to derail the governor’s plan.

The first is whether the 4.8 percent charge is a “fee,” as the governor contends, or a “tax,” as described Legislature’s legal office, the Legislative Counsel.
The Legislature’s nonpartisan fiscal adviser, the Legislative Analyst, also has characterized the fee as a tax, based on its discussions with the counsel’s office. The distinction is important: A fee can be approved with a simple majority of both houses, while a tax requires a two-thirds majority. Democrats control both houses but lack two-thirds majorities, which means Republican votes would be needed to approve a tax.

As a tax, the state’s responsibilities under voter-approved education guarantees would be increased. “It would increase the state’s funding obligations under Proposition 98 … the governor’s budget proposal does not reflect this increase under Proposition 98.”

The second issue is equity. Should homeowners and business property owners pay extra money for services they already receive? And should city homeowners pay extra to support fire suppression in forests, and suburban and rural areas?

An earlier attempt to limit the fee or tax to property owners in so-called State Responsibility Areas was rejected earlier in the Legislature.

Insurers have not taken a position on the proposal. But the requirement for a new billing system to collect and transfer the property owners’ funds – among other issues — has raised questions.

“If it were to pass, we need to make sure that we are allowed to implement it in a timely and effective manner. We would need time for insurers…perhaps 90 days or more,” said Dan Edwards, a spokesman for the Personal Insurance Federation of California. Insurers also are concerned at the possibility of retaliatory taxation, in which an outside company doing business in California is required to collect the fee, and that company’s home state levies a similar charge on California firms in that state.

That the state needs the money, there is little doubt. Facing a $20 billion shortage, the state is looking for money wherever it can get it.

Five bills, three of them special session bills and all of them virtually identical, awaited legislative action. The measures, authored by Democrats or the budget committees, contain the governor’s proposal.

Having five identical bills on the same subject is unusual but not unprecedented, and the shotgun approach appeared to be paying off: The deadline to act on the special session bills passed Monday with no action, leaving only the two regular session bills, which are expected to be considered after mid-May, when the administration is expected to release a rewritten budget as part of the May Revise.


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