Budget Measures’ Backers Pay Up To Avoid Added Taxes

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Alcohol, tobacco and oil firms, sports teams and studios could bear a larger fiscal burden if voters say no on May 19.

SACRAMENTO, CA — The uphill fight for a slate of budget measures on the May 19 ballot is being financed largely by alcohol and tobacco firms, oil companies, sports teams and Hollywood studios that could be hit by higher taxes if voters reject the $23-billion special election proposals.

Oil and energy companies have given more than $1.1 million to promote
the propositions, which are intended to help balance California’s
books. The alcohol and tobacco industries have donated $875,000. Sports
teams, including the Los Angeles Lakers, have pitched in $275,000. Walt
Disney Co., Universal Studios and other entertainment titans have
tossed in more than $600,000.

Each of those industries narrowly escaped more taxes during the last
round of budget negotiations, which ended in February with a deal
signed by Gov. Arnold Schwarzenegger that temporarily bridged a
$42-billion gap. That package included the six budget-related

If the measures don’t pass, the state could head into its new fiscal
year in July with another big budget deficit and potentially hefty
deficits for years to come, state leaders say. Defeat of the
propositions could cost the state nearly $6 billion in potential new
revenue in 2009-10 and an additional $17 billion by 2014, according to
financial officials.

Without that money, state lawmakers say, they will be boxed into a
fiscal corner. Budget analysts say a potential result is a renewed push
to tap many of the industries now giving big money to the ballot
measures campaign.

Gasoline taxes could rise, as could a nearly 10% special tax on oil
pumped from California soils. A "nickel a drink" tax on alcohol,
proposed in the past but never enacted, could be imposed. Sports teams
and the movie industry could have sales taxes extended to the tickets
they sell.

The corporate campaign giving "amounts to protection money," said Doug Heller, executive director of Consumer Watchdog.

Heller said the corporations "already won yesterday’s battles" to keep
the state from hitting them up for revenue. The campaign contributions,
he said, "give them a leg up in tomorrow’s battle" over taxes.

Tapping the various corporations that are contributing heavily this
campaign season could be tough. Nearly all the taxes proposed in the
past would need a two-thirds vote in both houses of the Legislature.

But at least some tax boosts might come into play because of the
state’s fiscal straits. With income and sales taxes flagging because of
the bad economy, California is staring at a possible deficit this
summer that state budget analysts have pegged at $14 billion or more.

Among the biggest corporate contributors to the ballot measures has
been the oil and gas industry. Chevron has given $500,000, while
Occidental Petroleum has contributed $250,000 and Aera Energy has
donated $200,000.

In a statement, Chevron said it is committed to helping restore the
fiscal health of a state where it has operated for 130 years. The
propositions "will help us get through these difficult economic times
and address the deficits that have hindered important programs as well
as the state’s economic growth and job creation," the company said.

During budget negotiations last year, Chevron and other oil and gas
firms faced the possibility of a 9.9% tax on oil pumped in the state.
Officials estimated that such a tax, which is imposed in Texas and many
other oil-producing states, could produce more than $850 million in
annual revenue for California.

Under heavy pressure from the industry, lawmakers yanked the tax from
the budget proposal. Oil producers remain concerned, however, that it
could be resurrected.

"Putting a nearly 10% penalty on California oil will only serve to
discourage development of our own energy sources" as concern grows
about oil imported from unstable foreign regimes, said Tupper Hull, a
spokesman for the Western States Petroleum Assn.

Wine, beer and liquor firms also persuaded lawmakers to forgo higher
taxes on alcohol products earlier this year but fear the idea could be
revived this summer.

Under one plan last year, California’s excise tax on alcohol would have
soared 640%, rising from the current 20 cents a gallon to $1.48,
according to the San Francisco-based Wine Institute. The governor’s
finance experts said the levy would amount to about 5 cents a drink.

"We believe in a broad-based solution as opposed to taxes targeting a
particular industry," said Nancy Light, a Wine Institute spokeswoman.
"We… already pay significant taxes."

Tobacco giant Phillip Morris — facing a Democrat-backed legislative
push to boost cigarette taxes up to $2.10 a pack — has given $350,000.

The movie industry and sports teams have also contributed big.
Universal and Disney have given $250,000 each. Anschutz Entertainment
Group, which owns a stake in several California teams as well as in
Staples Center, gave $125,000.

The Lakers, the Clippers, the San Jose Sharks, the Golden State
Warriors, San Francisco Giants and the Oakland Athletics pitched in
$25,000 apiece.

During the recent budget negotiations, entertainment industry lobbyists
turned back an effort to broaden the state’s sales tax to tickets at
theaters, sports stadiums and other entertainment venues.

In a statement, AEG said its concern is that without the ballot
measures California would be forced to make cuts in "critical services"
and that "business in our state will come to a grinding halt for a much
greater period of time."

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Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
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