Buried in Arnold’s budget ideas spreadsheet as “Idea #10,” Arnold shows that for a “post-partisan” like him, no idea is really sacrosanct. He clearly wasn’t wedded to the no new revenue idea before May 19, but he claims to be a born-again revenue hater. What is “Idea # 10”? Well, it’s a fee on home insurance policies:
Fund CAL FIRE/CAL EMA with Emergency Response Initiative Fee.
Average cost per insurance policy holder would be $48 per year. BY would backfill a portion of CAL FIRE’s base budget. In out years, backfill E Fund costs and disaster assistance costs.
All in all, this is a fairly reasonable idea. CalFIRE desperately needs more resources as we head toward a future with increasing fire danger. Even with these additional revenues, Arnold is still proposing to let CalFire’s equipment get another year’s worth of rust as they are gutting equipment replacement for this budget year.
This is a great idea, yet completely ideologically discordant and intellectually dishonest. Only a few weeks ago, he said everything was on the table…except new revenues. Heck, even the Democratic legislative leaders have said there will not be any revenues. And I’m sure if you asked the Governor right now, he’d say no new revenue measures. So, what’s different here? Why is it ok to put a $48 fee here?
At any rate, the Legislative Analyst LAO thinks that this fee will actually be considered a tax anyway, and thus be subject to the limitations of Proposition 98 requiring some of the money to go to K-14 education. Leg Analyst Mac Taylor suggests a more targeted fee for property owners that live in areas with high fire risk.
But the real question that this raises is not whether this is a good idea, which it probably is. The real question is if we can add revenue for CalFIRE, why can’t we add revenue for transit by adding a gas fee? Why can’t we add revenue for CalWORKS (and the 3 times of federal dollars pulled down) by adding a sales tax on services?
When Finance Director Mike Genest suggests that only poor people get services from the state, perhaps he should consider CalFire, the one service that he and his boss think should get additional revenue. Certainly CalFire supports all Californians, but all those pricey homes built in fire-prone canyons require much of the assistance from CalFire. Why this fee? Why just for this purpose, as worthy as it might be?
The structure of this tax is such that it taxes liberal coastal California to pay for wildland fire services in inland districts held primarily by Republicans.
Not only is it a tax, it’s a cynical tax.
The LAO gets it right here, that a fee like this, if it’s to meet the nexus test, should be borne by the people in those areas.
I know this isn’t your focus, but it’s worth noting that this proposal should be structured differently so as to not treat similar taxpayers differently.
The average fee may be $48, but the proposal — at least last I checked — charges a percentage of your insurance premium. If you buy property insurance, you know that different companies charge different premiums for the same coverage. So if you buy a policy from a more expensive company than your neighbor you have to bear a larger share of this fire tax than them.
And (leaving aside fire prone areas) because insurers still discriminate against homeowners in lower income communities, the tax essentially adopts redlining as government policy. Urban bungalow-dwellers still face old-style redlining that often forces people in low-income communities to pay the same insurer higher premiums than other homeowners. A quick check on the Dep’t of Insurance website shows that a Farmers policyholder in Richmond pays about 26% more for the exact same coverage sold by Farmers to a Walnut Creek homeowner. That premium disparity will carry over to this Fire Tax. It shouldn’t.
To remedy this, they could set one across-the board fee. They could do it based on lot size, home square footage, or, heck, number of bathrooms (Ok, maybe not that one). Point is, taxes and fees should be equitable and standardized in a way that doesn’t exist when the tax is based on the premium you happen to pay to your insurance company. (Note: I wouldn’t mind there being some alternate calculation for homes in designated wildfire regions, as long as it was, again, standardized.)
Lastly, but not insignificantly, the insurance industry is not asked to shoulder any of this. It’s all a pass-through to consumers. Whatever happened to all sharing in the pain?
Here’s a link to a blog on this issue when it first surfaced in 08: http://www.consumerwatchdog.or…