Furloughs, funding shortages and bigger class sizes have impacted students, faculty and staff throughout the California higher education system this year. With a $564 million shortfall for the year, legislators, faculty and students are all scrambling for ideas on how to keep the quality of education in California’s school system at its current level while battling the deficit.
One of those ideas is Assembly Bill 656, introduced by state Assemblyman Alberto Torrico (D-Newark). The bill is a 9.9 percent severance tax on oil and natural gas, which could result in a projected $1 billion revenue to California’s higher education system, said Richard Saenz, the president of Cal Poly’s branch of the California Faculty Association (CFA).
Sixty percent of the money would go to the CSU system, 30 percent to the UC system and 10 percent to California’s community colleges. For the CSU system, that equals roughly $600 million; Cal Poly would receive between $25 and 30 million.
Saenz said an alternative to income funding will be crucial for maintaining Cal Poly’s academic standards.
“To keep access available to students and to keep student fees reasonable, we need a fund other than the state fund,” he said. “No one votes to raise taxes on themselves.”
The bill hasn’t gained support from the CSU Chancellor’s Office. Chancellor Charles Reed argues that the money wouldn’t cover the entire deficit. Erik Fallis, media relations specialist for the CSU, said that the system doesn’t generally weigh in on legislation.
“The legislation is well-intentioned but does not solve higher education’s funding needs,” Fallis said in an e-mail. “With oil production in steady decline within California’s borders, it is not a stable funding source going into the future.”
A severance tax would tax natural gas and oil 9.9 percent at the wellhead. Opponents of the bill said this would put California far ahead of other states in terms of gas and oil taxation.
Still, Saenz said he doesn’t understand why none of these offices will take a stance on something that could help alleviate Cal Poly’s budget woes, even if it’s not a complete fix.
“The CSU is neutral; to me, it doesn’t make sense,” Saenz said. “If you can solve half the problems, people would take that.”
Cal Poly President Warren Baker and Provost Robert Koob are neutral on the subject as well. Saenz said he was unsure of their motives.
“This is one where we’re fighting for this and they aren’t,” Saenz said. “Whether it’s a statement on principles or political tactics, I don’t know.”
Koob said that there are just too many unknowns.
“I’ve heard speculations, but I don’t have a firm understanding of what it would bring to Cal Poly,” he said. “The only (bills) that matter are the ones that the governor’s signed.”
AB 656 is a two-year bill and will require many conditions to be met, according to the Chancellor’s Office. This is one of the factors that stopped them from speculating on the potential for the bill.
Taylor Lobdell, a social sciences junior, said he was disappointed with Cal Poly and CSU leadership.
“I think it’s kind of a lame move by not totally supporting,” he said. “They make enough money to pay the extra cents at the gas pump. I think we should get money any way we can.”
In a speech, Reed said that there just “isn’t any money in Sacramento.” Alice Sunshine, media relations for the CFA, said that this excuse is just not acceptable for the people who are responsible for maintaining California’s quality of education.
“(Reed’s) been saying that there’s no money,” Sunshine said. “This is an economic crisis, but there is money out there. It’s just not acceptable from a leader, that’s why he gets the big bucks.”
Opponents of the bill, such as the California Independent Petroleum Association and the California Taxpayers Association (Cal-Tax), say that proponents are not seeing the whole picture. Looking in new places for funding may seem like a good idea, but an oil and gas tax is not the right solution, said David Kline, communications director of Cal-Tax.
“It’s very misleading when we say there’s no severance tax,” Kline said. “We have taxes on oil; there’s just no severance tax.”
Kline said that California is “neck and neck” with other states in terms of oil and gas taxes, even if the tax is not termed a severance tax. Property taxes, sales tax on equipment and regulatory fees on each barrel of oil are already in place, he said. Previous bills similar to the severance tax have been proposed in the past, and according to Kline, the existing taxes are the reason they didn’t pass.
Cal-Tax’s main argument against AB 656 is that it would hurt an already damaged economy.
According to a study done by Law and Economics Consulting Group (LECG), if California did impose an oil severance tax at 9.9 percent, an estimated 9,850 jobs in California would be lost because it would cost oil companies too much money to produce at current levels. Also, some of the tax price would be transferred to the consumers at the pump, Kline said. The higher the operating taxes, the more the oil companies would charge.
Kline also said that the flux of income taxes is already a major factor in the state’s economic problems and that the tax on oil and gas would be no different.
“Oil severance tax is very volatile. The cost of a barrel of oil goes through huge swings,” he said. “The tax would go up and down like a roller coaster. If you budget off this, it creates some uncertainty.”
The state legislature votes on AB 656 in spring. Until then, students, faculty and staff in California’s higher education system will have to survive the current deficient climate.