Davis Faculty Association

Oil Severance Tax Article

An article in the California Aggie about proposed legislation to begin taxing oil extraction to create funds for public higher education quotes DFA member Joe Kiskis. The full article is at http://theaggie.org/article/2009/11/16/oil-severance-tax-aims-to-support-higher-education and here is an excerpt:

AB 656 proposes a 9.9 percent oil severance tax for California oil drilling and natural gas companies. It is estimated that the tax would allocate $1 billion for UCs, CSUs and community colleges. The Council of UC Faculty Associations expressed its support for this bill in April… “The new funds would replace some of the lost state support and would therefore reduce the pressure for further fee increases and cuts to educational quality. However, this bill would fall short of generating enough additional money to restore a healthy level of university funding,” Kiskis said in an e-mail interview.

Hope for a financially stable higher education system in California may seem implausible, but AB 656 by Assembly Majority Leader Alberto Torrico (D-Fremont) rekindles some faith that the University of California, California State Universities and community colleges will have some help.

AB 656 proposes a 9.9 percent oil severance tax for California oil drilling and natural gas companies. It is estimated that the tax would allocate $1 billion for UCs, CSUs and community colleges.

The Council of UC Faculty Associations expressed its support for this bill in April.

AB 656 can provide additional financial support for UC Davis and the higher education system of California, said Joseph Kiskis, UC Davis physics professor and CUCFA Vice President for external relations.

In April, Kiskis authored a letter that represented the views of the CUCFA and included suggestions for the bill.

CUCFA suggested that the 11 member board of the California Higher Education Endowment Corporation create a public website that shows annual reports on how UCs, CSUs and community colleges have utilized the funds.

Funding allotment is projected to allocate funds so that CSUs receive 60 percent, UCs receive 30 percent and community colleges receive 10 percent.

UC spokesperson Steve Montiel told the Daily Californian that the university was concerned about the distribution of the money.

“We believe any legislation that proposes to provide additional support for higher education needs to treat the UCs and CSUs the same,” Montiel said in the Daily Californian on Nov. 6.

Montiel also said the university needed to know whether the revenues from the tax would replace existing funding and whether it would be made available exclusively to colleges and universities.

A representative from Torrico’s office said these distributions were decided based on the amount of money UCs, CSUs and community colleges already receive. UCs and community colleges receive funding from outside sources in addition to student fees. CSUs also obtain funding through student fees but rely heavily on money from the California General Fund, which is severely affected by the economic crisis.

The distribution is subject to change, the representative said. Community colleges may require more funding than the current 10 percent because more students may attend community colleges in the future, due to the rise in tuition cost for UCs and CSUs.

The CUCFA also recommended a different distribution of the funds – 45 percent for UCs and CSUs and 10 percent for community colleges.

“The new funds would replace some of the lost state support and would therefore reduce the pressure for further fee increases and cuts to educational quality. However, this bill would fall short of generating enough additional money to restore a healthy level of university funding,” Kiskis said in an e-mail interview.

With this bill, institutions of higher education will not have to rely on funds from the California General Fund. The California higher education fund would be established and divide the severance tax money among the institutions.

“California’s higher education system, which for decades has served our state so well, will continue to decline without a renewed commitment to invest in our public universities,” Torrico said in a press release.

Opponents of the oil severance tax believe the bill will not contribute positively to the current economic situation.

Scott Macdonald, a spokesperson for Californians Against Higher Taxes, believes that the oil severance tax will not contribute toward rebuilding our economy.

Macdonald said although California is the only state that does not have an oil severance tax for oil producing companies, California oil companies already pay the highest taxes.

“It will make oil production decrease, thousands of jobs [will be lost] and oil production will be replaced with foreign imported oil,” Macdonald said.

He also believes the oil severance tax would increase the price of gas.

“Increasing taxes undercuts the ability for the economy to recover. It is the worst idea at the worst time.” Macdonald said. “Higher education is extremely valuable, but we must live with the means we have. It is the most effective way to get out of this economic situation.”

The Assembly Revenue and Taxation Committee will review AB 656 on Jan. 11, 2010.

This entry was posted on Monday, November 16th, 2009 at 11:55 pm and is filed under Financing Higher Ed, State Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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