Senate Rejects Granting State Air Board
Broad Authority to Raise Fees/Taxes
Posted June 11, 2009
June 5, 2009
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A bipartisan vote of the Senate this week stopped California Chamber of Commerce-opposed legislation that would have increased costs and discouraged job growth by granting the California Air Resources Board (ARB) broad authority to implement unlimited fees and taxes with little or no oversight.
Defeated on a vote of 16-19 was SB 31 (Pavley; D-Agoura Hills). The broad purposes in SB 31 are far beyond ARB’s current limited fee authority under the climate change law, AB 32 (Núñez; D-Los Angeles; Chapter 488).
SB 31 would have granted ARB vast new revenue-raising authority and would have imposed additional costs on the state that go beyond AB 32 implementation.
Significant Costs
Implementing SB 31 would have resulted in significant costs for California. The bill required the ARB to distribute the funds collected under AB 32 for uses such as renewable energy and energy efficiency programs; investments in technologies reducing greenhouse gas emissions, including research, development and deployment; and green jobs development.
New ARB fees under SB 31 could have reached billions of dollars, but the bill provided no guidance, no limits and no controls over the amount ARB could raise, or from whom.
Questionable Authority
As a majority vote bill, the fee-raising authority granted to the ARB must pass the tests set forth in the “Sinclair Paint” line of cases—showing a relationship between the social harms or benefits described in the purposes outlined in SB 31 and a payer’s responsibility to pay a fee of a certain amount. Absent such a relationship (a likely result), the fee must be declared invalid as an illegal tax. Fees imposed under SB 31 therefore would have been subject to litigation, regulatory uncertainty, delay and damage to AB 32 implementation schedules.
Large new fees would be another burden on a fragile economy already absorbing the impact of tax increases to solve the budget crisis. SB 31 fees will make companies less competitive in California and/or raise costs for consumers.
Cap-and-Trade System
Supporters of SB 31 asserted that the ARB has authority to raise billions of dollars in a cap-and-trade program and that SB 31 simply directs how the money can be spent.
When AB 32 passed, however, its author, Assembly Speaker Fabian Núñez, stated in a letter submitted to the Assembly Journal: “It is my intent that any funds provided by Health and Safety Code Section 38597 are to be used solely for the direct costs incurred in administering this division.”
Thus, legislation that provides the ARB greater authority to implement an auction and to use the funds in addition to fees raised for other purposes than administering costs goes well beyond the intent of AB 32.
AB 32 allows the ARB to include “market-based compliance mechanisms” in its plan to achieve the 1990 target greenhouse gas levels in the state. A market-based compliance mechanism could include cap-and-trade systems or other mechanisms that involve recognizing or distributing greenhouse gas emission allowances, but AB 32 does not expressly sanction, or mention, distribution of greenhouse gas allowances by an auction mechanism.
An auction mechanism would be complex and affect all or most of the California economy and could raise and redistribute billions of dollars of auction revenues.
The CalChamber believes that the Legislature should keep firm control of the ability to impose, or relax, new fees and/or taxes to fund important government services and encourage the creation of new jobs. It should not provide the ARB with vast new revenue-raising authority.
Key Vote
The June 3 vote on SB 31 was:
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Ayes: Alquist (D-Santa Clara), Corbett (D-San Leandro), DeSaulnier (D-Concord), Ducheny (D-San Diego), Florez (D-Shafter), Hancock (D-Berkeley), Kehoe (D-San Diego), Leno (D-San Francisco), Lowenthal (D-Long Beach), Oropeza (D-Long Beach), Pavley (D-Agoura Hills), Romero (D-East Los Angeles), Simitian (D-Palo Alto), Steinberg (D-Sacramento), Wiggins (D-Santa Rosa), Wolk (D-Davis).
Noes: Aanestad (R-Grass Valley), Ashburn (R-Bakersfield), Benoit (R-Bermuda Dunes) Calderon (D-Montebello), Cedillo (D-Los Angeles), Cogdill (R-Modesto), Correa (D-Santa Ana), Cox (R-Fair Oaks), Denham (R-Merced), Dutton (R-Rancho Cucamonga), Harman (R-Huntington Beach), Hollingsworth (R-Murrieta), Huff (R-Diamond Bar), Maldonado (R-Santa Maria), Strickland (R-Moorpark), Walters (R-Laguna Niguel), Wright (D-Inglewood), Wyland (R-Del Mar), Yee (D-San Francisco).
Absent/abstaining/not voting: Liu (D-La Cañada Flintridge), Negrete McLeod (D-Chino), Padilla (D-Pacoima), Runner (R-Lancaster).
Staff Contact: Amisha Patel
