By Robert T. Garrett

The Press-Enterprise

October 26, 2001

BUDGETS: The state deficit could affect the dispersal of vehicle fees to local governments.

Car owners could be pitted against police and firefighter unions and other local government workers as the state scrambles to cope with a budget shortfall that could reach $14 billion.

That's because a mainstay of local government funding in California is -- or was -- money from the car tax, or license fee, the state collects each time a vehicle is registered. Virtually all of that cash is funneled to cities and counties.

Riverside County gets $92 million a year in vehicle license fees, its second-largest revenue source behind property taxes.

San Bernardino County spokesman David Wert said that county's share of vehicle license fees represents a "pretty significant" chunk of the Board of Supervisors' discretionary money, amounting to about $100 million out of a $2.2 billion budget.

City officials also are worried. Riverside gets $13.3 million annually in vehicle license fees, according to city management and budget director Jim Smith. San Bernardino expects to get $9.7 million this year, finance director Barbara Pachon said.

The fee amounts to 0.67 percent of the market value of a vehicle. The state steadily depreciates the vehicle's value for 11 years, after which the tax is levied against 15 percent of the car's original worth.

While the state has slashed the fee by two-thirds in recent years, former Gov. Pete Wilson and lawmakers promised to dip into other funds to make sure cities and counties lost no money.

The state "backfills" $3.7 billion a year from its general fund to local governments to make up for the money they no longer receive from the car tax.

Assemblyman Rod Pacheco, R-Riverside, said "it will be very tempting to the governor" to cancel the payment to local governments as he wrestles with the budget deficit.

Gov. Davis said Wednesday that the state budget shortfall could range from $8 billion to $14 billion in the fiscal year beginning next July.

The 1998 law cutting the car tax over time says the tax will go up again if the state fails to reimburse local governments for lost revenue.

Many local government officials worry that the Legislature next year will simply suspend that provision of the 1998 law -- leaving car taxes at current rates and blowing a $3.7 billion hole in city and county budgets.

"Are they going to, in an election year, increase taxes to keep us whole?" asked David Jones, a California League of Cities lobbyist. "Or are they just going to take our money?"

Said Riverside County finance director Ed Corser: "We lost a direct stream of revenue and had it replaced by a lick and a promise. That's a bothersome issue."

Senate President Pro Tem John Burton, D-San Francisco, said Wednesday that Republicans should consider suspending recent car-tax cuts to avoid hurting law enforcement and education. But Senate Republican Leader Jim Brulte of Rancho Cucamonga called tax increases "unacceptable."

Cities' lobbyist Jones said possible loss of the car-tax backfill money is "at the top of the list of things we're concerned about. . . . The only other thing that would be obvious would be another property-tax transfer."

During the recession of the early 1990s, the state transferred $3 billion in annual property-tax revenues from cities, counties and special districts to education.

Local governments are busy lobbying state lawmakers and trying to sway public opinion to their cause.

"They can make sure they're mobilizing the cops and the firemen," Brulte said. "There's all kinds of things they can do."

Staff writers David Seaton, Imran Ghori and Joanna Banks contributed to this report. Robert T. Garrett can be reached at (916) 445-9973 or by e-mail at rtgarrett@pe.com

Money From Fees

Cities and counties are reimbursed a portion of vehicle license fees from the state. In the Inland area:

$92 million a year is Riverside County's share.

About $100 million a year is San Bernardino County's share.