Time to talk details on California oil profit penalty
Today, four months after Gov. Gavin Newsom called upon the Legislature to tax the excess profits of oil producers in California, we may finally get some details about the proposal.
Or we might not.
A Senate committee is slated to hold its first hearing on the “windfall profits penalty” proposed by the governor and introduced by Oakland Democratic Sen. Nancy Skinner. The hearing is only meant to be “informational” — an opportunity for lawmakers to hear from experts about what drives the state’s gas prices and what the Legislature can do about it. But the back-and-forth could give us a hint about how much appetite there is for this still very hypothetical tax.
The bill was introduced in early December with vague placeholder language that refers to imposing a “penalty” on an unspecified “maximum gross gasoline refining” profit. Proceeds from the penalty would be refunded to Californians.
- What’s in a word? Not labeling the tax a “tax” is no accident; California law requires two thirds of the Legislature to pass a tax, but only a majority to impose some fees.
The language of the bill hasn’t changed since Dec. 5, and some Capitol watchers are growing impatient. Newsom’s promises of sticking it to Big Oil is “just talk,” scolded L.A. columnist George Skelton earlier this month. “It’s past decision time,” columnist Tom Elias wrote two weeks ago.
What’s the hold-up? Newsom said it’s no surprise it’s taken time to work out the details when asked last week by my colleague Alexei Koseff, blaming the delay on the oil producers themselves and on the sheer magnitude of the task.
- Newsom: “The fact that oil companies aren’t even showing up to hearings…the fact that this is novel, no other state in history has done it.”
Whatever the proposal turns out to be, California’s big business interests are already against it. Last week, the California Chamber of Commerce blacklisted the bill by branding it as its first “job killer” of the 2023 session.
California Republicans are worried about the price of gas, too. In a Tuesday letter signed by all 26 GOP legislators, they urged Newsom to act now ahead of higher prices at the pump as the summer holiday travel season approaches. But in contrast to Newsom’s profit penalty, they put forward a very different prescription:
- Halting an automatic increase in the gas tax to keep up with inflation;
- Prolonging a pause on state diesel sales tax that Newsom put forward last year;
- Delaying a state mandate for refiners to start producing “summer blend” gasoline later this year, which burns cleaner but is more expensive to produce.
Newsom wasn’t having it: “Republicans are avoiding the core problem: an industry that operates with zero accountability and too much power over prices of a commodity essential to most California families.”
According to AAA, the average price in California on Tuesday for regular unleaded was $4.74 a gallon, $1.07 more than the national average.
As UC Berkeley energy economist Severin Borenstein has written, a number of factors explain that difference:
- About 70 cents can be explained by higher taxes and the state’s cap-and-trade program, which funds transportation infrastructure and many of the state’s climate-oriented programs
- Another 10 cents comes from the rule that only certain smog-cutting blends of gasoline can be sold in the state
- The remaining difference, which soared to as much as $1 last year, is explained by neither taxes nor regulations.
What’s the cause of that “mystery” surcharge? Expect to hear plenty of theories at today’s hearing.
Electric vehicles: CalMatters is writing a series of stories on California’s road to more electric cars and trucks. Starting in 2035, no gas-powered vehicles will be sold in the state. Do you have questions about this transformation? Submit them here.
Also, if you live in one of these zip codes (94022, 94027, 94301, 94028, 94024, 90402, 92657) and would be willing to talk to a CalMatters reporter about your experience, email nadia@calmatters.org.
Other Stories You Should Know
1 An abortion rights pact
Newsom, who insists he isn’t running for president, nevertheless shored up his reputation as “leader of liberal America” Tuesday in announcing the formation of a 20-state coalition to protect and expand abortion rights.
The “Reproductive Freedom Alliance,” spearheaded by California’s governor and funded by two California philanthropic foundations, is technically nonpartisan, though all 20 of the governors who’ve signed on so far are Democrats. The Democratic governors of purply-red Arizona, Kansas, Kentucky and Louisiana have yet to join the club.
- Newsom: “California has long been a leader in reproductive rights, but we can’t do it alone.“
The coalition doesn’t yet have any concrete proposals, but is meant to be a regular forum for the governors and their staffs to share ideas and discuss policy and legal strategy.
Last year, after the U.S. Supreme Court rescinded the constitutional right to an abortion, California passed a bevy of laws that not only safeguard the procedure here, but limit the ability of other states to enforce their restrictions across state lines. Massachusetts Gov. Maura Healey, an alliance signatory, told the Washington Post that the 20 states could consider enacting such a policy coalition-wide or provide more resources to train abortion providers.
Sen. Skinner and Winters Assemblymember Cecilia Aguiar-Curry, leaders of the California Legislative Women’s Caucus, applauded the news.
- Skinner and Aguiar-Curry, in a statement: The alliance will “enable California to more effectively collaborate with other states on best practices regarding access to abortion and contraception, including legislation, legal protection and budgetary actions, and to respond in unison to future attacks on reproductive rights, including access to medication abortion.”
The debate around abortion pills is now front and center. Late last year, an anti-abortion group sued federal drug regulators, arguing that they should not have approved the drug mifepristone, which can be used to end a pregnancy during the first trimester and is commonly prescribed in California, including by telemedicine. Earlier this month, California Attorney General Rob Bonta co-signed a brief with 22 other state prosecutors urging the court to reject the challenge. A ruling is expected soon.
This isn’t the first time Newsom has made common cause with other blue state governors. At the beginning of the COVID pandemic, he helped form a “Western States Pact” with Oregon, Washington, Nevada and Colorado to help create a shared plan for when and how to ease up on public health restrictions.
2 And then there were three
Oakland Democrat Barbara Lee, a 13-term member of Congress and a reliable progressive, announced Tuesday she’s running for U.S. Senate, introducing race, age and the perennial NorCal-SoCal divide into the race to replace Sen. Dianne Feinstein.
Unlike Katie Porter of Irvine and Burbank’s Adam Schiff, the two other big name Dems in the 2024 field so far:
- Lee waited until Feinstein made her plans not to seek reelection official, though Lee’s intentions had been clear for more than a month;
- She’s a Black woman, a notable demographic fact given that Newsom pledged to fill Feinstein’s seat with a Black woman if the senator opted not to finish her term;
- Lee is from the Bay Area, which has historically punched above its weight in propelling locals to national representation.
Not that regional loyalties count for everything: Former House Speaker Nancy Pelosi, one of the Bay Area’s most influential Democrats, is backing Schiff.
In her inaugural campaign video, Lee pointed to her tumultuous, often traumatic personal history — marked by homelessness, domestic violence, racial discrimination and an illegal abortion — as the drivers of her reliably liberal point of view.
Lee has always sat to the left of most of her Democratic colleagues in Washington. She cast the lone vote against the authorization of war in Afghanistan, she opposed the expansion of government surveillance powers after the Sept. 11 terror attacks and she has long backed a federal single payer health insurance program.
That has always made her an obvious target for the right: Just hours after Lee’s announcement, Fox News ran an article highlighting her “history of defending convicted murderers.”
But as Democratic Party voters — especially in California — have come around to Lee’s views on many issues, she’s hoping to use her long history as a lefty stalwart as an advantage — even if some voters might see her age at 76 as a liability.
- Lee: “If Bernie Sanders can win a primary in California, then Barbara Lee certainly can win to be the next United States senator. Come on.”
3 Community college enrollment inches upward
From CalMatters higher education reporter Mikhail Zinshteyn:
Californians are increasingly returning to the state’s community colleges. After nearly three years of a sustained enrollment freefall, the 116 community colleges are educating roughly 2% more students in fall 2022 compared to the previous fall, when the schools enrolled about 1.3 million students, according to new preliminary headcounts the California Community Colleges Chancellor’s Office shared with CalMatters Tuesday. Two campuses have yet to finalize their latest numbers, so a final statewide total is unavailable.
Overall, the colleges are still roughly 250,000 students short of fall 2019 levels, but the enrollment collapse since the start of the COVID-19 pandemic appears to be plateauing.
Progress is uneven: While 69 colleges showed positive growth compared to fall 2021 — and 45 posted enrollment gains of 5% or more — 48 colleges or campus centers shed students, according to a CalMatters analysis of community college system data. A small cadre of campuses have actually exceeded their 2019 enrollment levels — seven in total. And even when students enroll, historically about a third leave after a term.
- Interim Chancellor Daisy Gonzales, at a Tuesday legislative hearing: “That is a really big improvement from the prior year and it took a lot of hard work.”
So what’s aiding the bounce-back? Campuses have shortened the length of some courses from 10 weeks to 6 weeks, “getting them to the workforce much faster,” Gonzales told lawmakers.
Other campuses extended evening operations to 9 p.m. or later and added weekend courses. And while the University of California and Cal State systems have returned to in-person learning, many community college courses remain online in response to student survey data.
Expanded financial aid and other social benefits also moved the needle, Gonzales said, including emergency housing and childcare support. Indeed, the community colleges have seen a surge of new local, state and federal money — $1.8 billion more since 2020-21 — including $270 million in efforts to re-enroll students and attract new ones.
Still, Gonzales argued the system needs more support for its students, many who live in deep poverty. But one key lawmaker said the colleges should be doing more to get back students.
- Assemblymember Phil Ting, a Democrat from San Francisco, who leads the Assembly’s budget committee: “What I heard is all these things you’re asking of us; I’m trying to get a better sense of what you’re all doing so that you’re driving enrollment back up.”
CalMatters Commentary
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