Evans Introduces Bill to Raise Billions for Higher Ed and State Parks

Tuesday, February 12, 2013

California Education & Resources Reinvestment Act Funded Via Oil Severance Revenues

Santa Rosa, CA – Senator Noreen Evans today announced the introduction of SB 241, a bill that would fund California’s higher education systems and State Parks through a severance tax imposed on oil producers in California.  The bill, the California Education and Resources Reinvestment Act (CERRA), would potentially secure billions of dollars during the estimated course of oil production in California. The legislation is supported by student, education, tax and environmental groups, as well as California economists. The bill is also co-authored by Senator Mark Leno (D-San Francisco), Chair of the Senate Budget Committee.

“California is the largest –and only—oil producing state in the nation that does not tax its vast oil resources,” said Evans.  “Those are unrealized revenues we can, and should, use to endow our core services of government by fulfilling our commitment to higher education and similarly, preserve our natural resources in State Parks by funding them.”

The California Education and Resources Reinvestment Act would impose a 9.9 percent severance tax on the extraction of oil from the earth or water within California’s jurisdiction.   Previous Board of Equalization estimates on similar proposals show this bill could generate approximately $2 billion a year in revenues.  Revenues would be reinvested with 93 percent going to equally fund California’s three higher education systems (University of California, California State University and California Community Colleges) and the remaining 7 percent to the California Department of Parks and Recreation.

In 2011, public colleges and universities received 13 percent less state funding than they did in 1980 (when adjusted for inflation). In 1980, 15 percent of the state budget went to higher education, but by 2011, the number dropped to a mere 9 percent. Between the 2010-11 and 2011-12 state budget, another $1.5 billion in funding was cut, the largest reduction of any high-population state in the country. In 2010, California ranked 49th in the nation for the number of students who go straight from high school to college.   Senate Bill 241 would provide a dedicated revenue stream outside of the general fund that would directly benefit California’s higher education systems and their present and future students without further impacts to taxpayers.

According to a recent report by the Campaign for the Future of Higher Education, in order to return the quality and fees (of higher education) to 2000-01 funding levels, it would cost taxpayers $6.405 billion.

"UC students have long called for new revenue dedicated specifically to funding higher education,” said Raquel Morales, UC Student Association President and UC San Diego student.  “We can't have an affordable, accessible and quality public university system without a strong ongoing public funding commitment.  This bill is a critical opportunity to provide the funding necessary to ensure the greatness of higher education in California." 

Last year, 70 parks in California were targeted for closure while most others are lacking staff and suffering from more than $1.6 billion in deferred maintenance.  Parks are public commons gifted to the people of California and maintained by taxpayer dollars with the intent that they are preserved for future generations.

“It is time for California to join all of the country's largest oil producing states in enacting an oil severance tax on big oil companies to mitigate the impact of extraction, protect our environment and public health, and strengthen our economy,” said Bruce Reznik, Executive Director Planning and Conservation League.  “Oil extraction can release tremendous amounts of toxins into our air and waters, and pose serious threats to humans and wildlife.”

Opponents of an oil severance tax have claimed for years that the oil companies will pass any taxes on to consumers, research proves otherwise. According to a study by the Rand Corporation, which investigated the impacts of a 6 percent oil severance tax, the tax cannot be passed onto consumers and it will not affect production.

Although that study was done when oil prices were far lower, most economists agree that the world market sets the price of oil, and that underlying taxes whether from Texas, Kuwait or California, are not passed through at the pump.  Just as gasoline prices in California followed the world oil price upward during spikes in 2007 and 2008, and not local production costs, there is every reason to expect that local gasoline prices will continue to be set by global market forces, and not local crude production.

"Gasoline prices in California are driven by world oil prices and the availability of refinery capacity within the state, not by the cost of locally produced crude oil,” said James Bushnell, Associate Professor in the Department of Economics at the University of California, Davis, and Research Associate of the National Bureau of Economic Research.  “California currently imports more than 60 percent of the petroleum it uses, and these imports determine the value of all oil produced and consumed in the state.  A severance tax on local oil production would impact the profitability of oil producers but should have little to no impact on the price of gasoline."

“Senator Evans’ bill merely does what every other state and country does:  tax crude oil modestly as it is produced,” said Lenny Goldberg, Executive Director of the California Tax Reform Association.   “We owe our citizens no less.”
“California’s oil resources have made trillions-of-dollars in profits for the oil industry,” continued Evans.  “Imagine what mere billions could do for Californians.”

State Senator Noreen Evans represents the Second Senatorial District, including all or portions of the Counties of Humboldt, Lake, Mendocino, Marin, Napa, Solano and Sonoma. Senator Evans Chairs the Senate Committee on Judiciary and is the outgoing Chair of the Legislative Women’s Caucus.

What Other Supporters Are Saying About SB 241:

Lillian Taiz, President, California Faculty Association, and professor of history at Cal State Los Angeles:

“The California Faculty Association (CFA) appreciates Senator Evans’ recognition of the dramatic cuts that have greatly impacted our institutions of public higher education, students, and faculty. CFA has supported an oil severance tax in the past and applauds Senator Evans’ effort to reinvest in the California State University system (CSU). Together with Governor Brown’s latest budget proposal to increase funding for the CSU, this is another positive step towards enabling our universities to develop and expand California’s human and economic capabilities as intended.”

Garrett P. Ashley, California State University Vice Chancellor for University Relations and Advancement:

“We are appreciative of Senator Evans’ interest in making sure the state reinvests in its future through our higher education system.  CSU looks forward to working with her, the legislature and Governor to achieve our common goal of providing access to a quality education for students today and tomorrow.”

Pedro Ramirez, Vice President of Legislative Affairs, California State Student Association:

"After years of budget cuts to the CSU and California’s higher education system, it’s time to reinvest and keep our universities affordable and accessible for current and future students. We look forward to what Senator Evans and other Members propose to support greater investment in our exceptional state universities.”

Jonathan Lightman, Executive Director, Faculty Association of California Community Colleges:

“California needs to invest in its community colleges. The ravages of the budget cutbacks have dramatically curtailed the ability of our institutions to serve the public, delaying, or in some case, destroying the hopes and dreams of those desiring a brighter future. FACCC commends Senator Evans for bringing back the proposal of an oil severance tax to subsidize public higher education. It is long overdue for California to join the other oil producing states in enacting a fee for pulling a natural resource from our grounds. The subsidy to community colleges will return many times over to the taxpayers in the form of higher wages and a more productive economy.”

Margaret Pennington, Economics Instructor, Social Sciences Dept., Santa Rosa Junior College:

"Oil trades on a competitive global market. California oil producers account for only about 1 percent of supply so they are price-takers not price-makers. This means they can't pass an oil severance tax on to consumers at the pump. Most oil producing states including Alaska and Texas already have oil severance taxes.  They recognize that oil is a finite natural resource that belongs to all their residents.  Taxing its extraction and investing it in a way that benefits everyone, such as supplementing funding to higher education, makes sense. California should join them."