If you thought Governor Gavin Newsom’s new gas tax, SBX1-2, was about punishing big, bad oil companies, it’s not. It’s actually about much more – and none of it is good news for taxpayers.
For those who weren’t paying attention last week, SBX1-2 was Newsom’s attack on California’s oil producers who, he alleges, have been gouging consumers with high gas prices. This is horrible legislation, not only for its substance, but also for how it became law. The bill’s unusual number, SBX1-2, is the first giveaway that this was not normal legislation, but rather the product of a “special session,” which Newsom called last December.
After no action on Newsom’s declared “crisis” for months, the bill was jammed through in less than a week. There were no meaningful hearings, no public testimony, no opportunity for those directly impacted to present opposing views. Because the legislation was moved during a “special session,” it was able (by design) to avoid many of the procedural requirements of normal legislation. This was a shameful display of raw political power which, thanks to one-party rule, is now all too common.
As for substance, SBX1-2 sets a new speed record in California’s headlong rush toward Soviet-style central planning. The Newsom gas tax law creates a new agency under the California Energy Commission with powers to investigate petroleum companies and impose new penalties, costs and regulations. This new agency is vested with the authority to decide how much profit oil and gas businesses are allowed to make.
SBX1-2 is a gross insult to taxpayers. First, the Legislature’s own analysis projects that it will cost nearly $10 million annually with a minimum of 34 new enforcement bureaucrats. Specifically, according to the Assembly Appropriations Committee, “this bill will result in significant ongoing costs to the [California Energy Commission] in the millions of dollars annually, to develop rules and review data submissions; to establish and administer the Advisory Committee and the Division; to exercise its new authority to set a maximum margin; and to administer a penalty, if created.”
But this cost is a bargain compared to what the creation of this new Orwellian agency will do to the price of gas and other petroleum products. The regulatory scheme created by SBX1-2 is almost certain to disrupt California’s energy market and threaten the reliability of the state’s already fragile fuel supply.
More fundamentally, ponder the notion of the heavy hand of state government judging what an “excessive” profit is. What industry is next? Will there be a new state agency to put a price cap on automobiles? (Oh wait, there is already a bill that would do that).
But SBX1-2 poses another threat that few are talking about. If the Covid era taught us anything it is that government-declared emergencies – real or imagined – create more opportunities for corruption.
Recall that during the pandemic when no-bid contracts were being handed out, behested payments on behalf of the governor surged. These are “donations” for charitable or governmental purposes that are specifically requested by elected officials, often from companies with business before the state. In 2020 alone, hundreds of millions were “donated” at the “behest” of the governor. The practice was so pervasive it even caught the attention of the Los Angeles Times which wrote that “many of the donors have other business before the governor, received no-bid government contracts over the last year or were seeking favorable appointments on important state boards,” which “creates the appearance of a pay-to-play system.”
With SBX1-2, one can easily envision politicians extorting petroleum companies to give campaign contributions or “behested payments” as “protection” money. (“That’s a nice refinery you have there. It would be a shame if something happened to it.”)
So yes, the way SBX1-2 became law was a perversion of the legislative process and, yes, the bill is substantively destructive. (Justifiably designated as a “Job Killer” by the California Chamber of Commerce). But the real threat is the expansion of oppressive state government creeping into more areas of our personal lives and businesses. And that inevitably opens the door to more “pay-to-play” corruption and the flagrant waste of taxpayer dollars.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.