Los Angeles Times
January 9, 2008
by Marc Lifsher & Evan Halper, Times Staff Writers
Gov. plans to seek fire levy;
The 1.25% fee, added to property insurance bills, would boost firefighting and aid overall budget. Critics call it a tax.
SACRAMENTO, CA — Gov. Arnold Schwarzenegger will propose hiking the
cost of insurance for millions of California homes and businesses in
the budget he unveils Thursday, with the money to be used for
The proposal, a copy of which was obtained by The Times, calls
for new charges to be tacked onto the insurance bill for every
residential and commercial property in the state. Administration
officials call the charges fees and defend them as consistent with the
governor’s pledge, repeated in his State of the State address Tuesday,
to not raise taxes.
Anti-tax groups and consumer advocates say the assessments are a tax.
The plan, which the insurance industry has agreed to support,
would cost California property owners and renters $12.50 for every
$1,000 in insurance premiums, for a projected $125 million.
It would most benefit Californians who live in areas vulnerable to wildfires.
Administration spokesman Adam Mendelsohn said the proposal
ultimately would save Californians money by limiting the devastation
caused by wildfires and other disasters that have cost state government
and policyholders billions of dollars.
"The economics of this makes sense," he said, asserting that
the cost would be $10 a year for the average California homeowner.
"Consumers and the state will end up saving money."
The governor is calling for consumers statewide to pay for
larger state firefighting crews, helicopters, fire engines and
satellite tracking equipment a few years after voters in San Diego, hit
hard by wildfires, rejected two proposals to fund increased fire
protection with higher local hotel taxes.
"I don’t know how you avoid calling it a tax," Lew Uhler,
president of the National Tax Limitation Committee, said of the
assessment. "The ability of government officials to figure out new ways
to tax us is limitless, no matter what their nomenclature."
A fee can pass the Legislature on a simple majority. A tax
requires a two-thirds vote, which would have to include Republican
support — something GOP lawmakers have traditionally withheld on new
The levy is the latest to be championed by the governor. Last
fall, Schwarzenegger signed a bill that raised California drivers’
registration payments by as much as $11 to pay for research on
alternative fuels. And his healthcare plan relies on new taxes on
tobacco users, hospitals and employers.
Others said the plan would not necessarily lead to enhanced fire protection.
As the money came in, the governor could cut existing funds from
firefighting agencies and use it to help close a budget gap that his
office projects at $14 billion, said one consumer advocate, who asked
why the burden would fall on property owners instead of insurance
"If the governor wants to fill the budget gap, he should find
an honest way to do it," said Doug Heller, executive director of the
Foundation for Taxpayer and Consumer Rights. "He’s wrong to target
insurance customers, whose premiums are already too high."
Administration officials acknowledged that some of the money
raised could be used to balance the budget. They declined to be precise
about how much.
"Overall, [firefighting] resources will grow," said Dan Dunmoyer, the governor’s deputy chief of staff.
He said the improvements in the state’s emergency response
capabilities would help all California communities, not only those
prone to wildfires.
Some would benefit from the loan of 100 new fire engines to local governments, he said.
Others would be able to call on the expanded state firefighting force to respond to floods and other disasters.
Insurance industry representatives said they were not involved in drafting the plan for the 1.25% surcharge.
They said they learned about it at a meeting of insurance
company executives in the governor’s office in mid-December. Under the
governor’s plan, insurers would collect the surcharge from consumers
and distribute it to the state.
"The report I got was that the governor made a compelling case
for the need for revenue," said Bill Sirola, a spokesman for State Farm
Mutual, California’s largest insurer, which covers 1.4 million
Many insurers have decided "to cooperate with and support the
governor," said Ken Gibson of the American Insurance Assn., a
Sacramento-based trade group.
The charge would be added to an existing 2.35% premium tax on
property insurance policies. That tax, which is not earmarked for any
particular program, generated $216 million for the state budget in
2006, according to the Department of Insurance.
State regulators were briefed on the governor’s plan Monday.
"We don’t have enough detail to make a complete assessment, one
way or the other," said Byron Tucker, a spokesman for Insurance
Commissioner Steve Poizner.
The plan’s prospects with lawmakers are uncertain. Republicans are vowing to block any new taxes.
And although the Democrats who control the Legislature are eager
to bring in new revenue, some are skeptical of the governor’s approach.
Sen. Michael Machado (D-Linden), chairman of the Banking,
Finance and Insurance Committee, said he saw no reason that
policyholders in downtown San Francisco, who already pay taxes to
support their fire department, should pay for firefighters to protect
homes built in fire-prone areas such as the Sierra Nevada, Lake
Arrowhead and inland San Diego County.