Rejection of Fire Levy Plan Urged

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SACRAMENTO, CA — State Insurance Commissioner Steve Poizner on Friday urged lawmakers not to approve a fee proposed by Gov. Arnold Schwarzenegger to raise $125 million for fire protection, calling the surcharge unconstitutional, unfair to many property owners and bad public policy.

A top aide to Poizner, the only statewide elected Republican besides Schwarzenegger, said in a letter Friday to leaders of the Assembly and Senate budget committees that the state Constitution does not permit any taxes aside from the existing 2.35% tax on insurance premiums.

In his Jan. 10 budget proposal, Schwarzenegger asked for a 1.25% surcharge, which state finance officials said would cost the average property owner an extra $10 or $12 a year.

"In past years, the Department has incurred significant legal costs defending legislation that the courts have found to be unconstitutional," Deputy Insurance Commissioner David Link wrote. "The Department hopes to avoid another such lawsuit."

Critics have said insurance premiums should not be assessed on all homeowners to protect those who choose to live in remote areas that are outside the reach of local fire departments. Link echoed those concerns, writing that it would be unfair to force "every homeowner and every business to pay for an additional risk that is not associated with their own properties."

The increase, one of only a few that Schwarzenegger included in his proposed budget to help close a projected $14.5-billion gap, would fund what the governor calls the "Wildland Firefighting Initiative." It would pay for the purchase and maintenance of fire engines and other equipment, staffing increases during peak seasons and improved firefighting technology. About $45 million of the projected $125 million that would be raised by the fee would prevent budget cuts to existing fire services, including small fire stations and conservation camps.

Bill Maile, a spokesman for Schwarzenegger, said the fee "is constitutional and will save taxpayers because the cost of wildfires is absorbed by all Californians regardless of location," amounting to hundreds of millions of dollars. "This same equipment will be used in urban areas to respond to earthquakes, floods or any other disaster," Maile said.

The dispute between the state’s two top Republicans comes as they have squared off over Proposition 93, a proposal backed by Democratic lawmakers to change the state’s term limits law. The governor recently endorsed the initiative, which is on the Feb. 5 ballot; Poizner has led the charge against it, contributing more than $2.5 million to the opposition effort.

Consumer advocates praised Poizner for providing legal ammunition that could help counter the governor’s surcharge.

"The governor should not be foisting off an illegal tax on a subset of California homeowners and insurance customers," said Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Ken Gibson of the American Insurance Assn., a trade group for insurers, said the state insurance department’s objections raise a number of valid questions. "We’ve known from the beginning that this is a very complex issue, and the department’s letter is illustrative of that," he said.

Lawmakers are split over the proposed surcharge. Most Republicans denounce it as an attempt to pass a back-door tax hike without securing the constitutionally required approval of two-thirds of the Legislature. "Special assessments," as the governor refers to his proposed new levy, need only win endorsement from a simple majority of legislators.

Senate Insurance Committee Chairman Michael Machado (D-Linden) opposes the fee, while Steve Maviglio, a spokesman for Assembly Speaker Fabian Nunez (D-Los Angeles), blasted Poizner for his letter.

"It’s not surprising that Steve Poizner is more concerned about insurance companies than families affected by wildfires," Maviglio said.

Maviglio said the letter came in response to a request for Poizner’s position on the fee from Assemblyman John Laird (D-Santa Cruz) and Sen. Denise Ducheny (D-San Diego), who each head a budget committee.

The fee could be difficult to implement, Link said, requiring "a tremendous expenditure of time and resources" by insurance companies and his agency, which would have to ensure it is done accurately. Insurance companies might have to pay the fees up front and collect them later, costing them interest income, which would ultimately pass on a greater cost to consumers.
Contact the authors at: [email protected] and [email protected]

Consumer Watchdog
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