UC students support oil tax to fund higher education

Students across the University of California are campaigning for a bill that would tax oil extracted from California and use the revenue for the state’s higher education systems, despite reluctance from Gov. Jerry Brown.

Senate Bill 1017, written by Noreen Evans (D-Santa Rosa) and better known as the Oil Severance Tax bill, would impose a 9.5 percent tax on any oil extracted from California and a 3.5 percent tax on any natural gas extracted from the state.

The University of California Student Association, a systemwide coalition of student governments that advocates for UC students, is focusing on the bill as one of its main platforms this year.

According to the bill, the tax would raise at least $1 billion in overall revenue. The revenue would go to a new endowment fund overseen by a new board called the California Higher Education Endowment Corporation. The board would then distribute half of the money equally between the state’s three systems of higher education – the UC, the California State University system and the California Community College system.

“California now needs a vision for its future,” Evans said in a press release last week. “(Fiscal prudence) means ending big oil’s free ride and securing revenues for students, vulnerable populations and our own natural resources.”

A quarter of the funding would go to the California Department of Parks and Recreation for the management of state parks, and the other quarter would go to the California Health and Human Services Agency for health and human services programs.

The bill specifies that the funds should first be used for reducing tuition and fees, and that funding can only be used for instructional and maintenance purposes.

The UC is willing to support the bill if the bill is amended to give the UC more autonomy in spending the money, UC spokeswoman Shelly Meron said in an email.

She said it is unnecessary to have the California Higher Education Endowment Corporation board oversee the distribution of funds and specify where the funds should be spent, since the UC is in the best condition to know how to allocate its own funding.

The UC is currently working with the bill’s author to amend it, Meron said.

The bill passed the California Senate Education Committee last week. About 70 supporters, including about 20 UC Berkeley students, attended the hearing.

The bill still faces several hurdles, the largest being opposition from the governor.

In a January press conference outlining his budget proposal, Brown said 2014 was not the year for a new tax.

“I just think we need everything we can to live within our means before going back again to try and get more taxes,” Brown said during the press conference.

UCSA President Kareem Aref still said he was hopeful the bill would receive the governor’s signature, and he thinks Brown is voicing reluctance for a new tax because he is running for re-election this year.

“It would lose him votes if (Brown) came out in support of the bill,” Aref said.

Similar bills, including one Evans proposed last year, have died in the legislature in the past. In 2009, then-Gov. Arnold Schwarzenegger vetoed Assembly Bill 2, which would have imposed a 9.9 percent tax on oil extracted from California.

But getting the bill to the governor’s desk may prove challenging.

Because the bill introduces a new tax, a two-thirds majority from both the Senate and the Assembly is required to pass it. Three Democratic state senators are currently suspended, so Democrats no longer hold a two-thirds majority in the Senate.

Bill Bird, a spokesman for Senate Minority Leader Bob Huff (R-Diamond Bar), said that Sen. Huff is skeptical of the bill.

“Oil companies will simply pass that cost onto consumers,” Bird said.

Critics say the bill penalizes California’s oil industry by charging a tax on top of the taxes the industry already pays.

“We should not penalize California companies and reward out-of-state competitors when we can produce oil safely and responsibly here,” said Sabrina Lockhart, a spokeswoman for Californians Against Higher Oil Taxes, which is against SB 1017.

Lockhart also said she thinks creating a new board that would oversee the fund is unnecessary.

“It’s a giant, new bureaucracy that has no accountability,” Lockhart said. “It can become a slush fund for unaccountable bureaucrats.”

Severin Borenstein, the director of the UC Energy Institute and a professor at the Haas School of Business at UC Berkeley, said it’s unlikely that consumers will see a significant rise in the price of oil if the tax passes. In other states such as Alaska, which charges up to 50 percent tax on any oil extracted from the state, the effect of an oil severance tax has been quite small, he said.

“(The) price of oil … is set on the world market,” Borenstein said. “California oil is well under 1 percent of the world’s oil supply.”

But Borenstein said the tax may discourage oil production in California, causing some drilling to go elsewhere.

He added that the estimated revenue may fluctuate depending on the expansion of fracking, a process of drilling and injecting fluid into the ground to extract oil and natural gas, in California.

“California’s oil production is about half a million barrels a day, but it can go way up if the fracking goes way up,” Borenstein said.

The Senate Governance and Finance Committee will review the bill on May 9.