California and National Elections

Californians Reject Oil Tax, But Observers Think the Issue Will Resurface

BERKELEY - California voters on Tuesday rejected Proposition 87, a measure that would have established an oil tax to fund alternative energy research. The campaign sparked by Proposition 87 was the most expensive in California history with a total of $155 million raised by both sides.

The results reflect the reluctance of voters to approve taxes, said Ethan Rarick, director of the Center on Politics at the Berkeley Institute of Governmental Studies. The no votes also reflected the oil companies’ success at painting the proposition as a measure that would increase the cost of gas.

“Gas prices are the ultimate pocketbook issue,” said Rarick.

“I don’t think that the economics of Prop 87 were ever made all that clear,” said Dan Kammen, a professor at UC Berkeley’s Energy and Resources Group and a co-author of the measure. He echoed Rarick’s comments that the opposition succeeded in framing the proposition in voter’s eyes.

The Yes on 87 campaign fell short in explaining the positive economic benefits of the proposition, he said. And with the No campaign spending almost $100 million, the proposition didn’t stand a chance, he added.

“$100 million will buy a lot of votes,” Kammen noted.

Prop 87’s strongest support was in coastal counties, especially the Bay Area. San Francisco had the strongest showing, with 73 percent of voters supporting it. This was in keeping with a recent Field poll that stated that support for the measure was strongest in coastal regions, while inland areas tended to be against the measure.

But the support of coastal communities was not enough to carry the measure. Only 45.3 percent of voters supported Prop 87 while 54.7 percent opposed.

Supporters had hoped that the success of the measure would focus attention on global warming and encourage the United States to work more fervently toward increasing its use of alternative energy.

“This is not a repudiation about the need to do more about alternative energy,” said Nick DeLuca, a spokesman for the No on 87 campaign.

Prop 87 had “the right end but the wrong means,” he said.

While the proposition was soundly rejected, neither side believes the issues it raised will go away.

DeLuca suggested that the state might still make alternative energy a priority and then line up existing resources to support it, rather than creating a new tax in pursuit of clean energy goals the way Prop 87 was designed.

But Kammen still sees room for an oil tax.

“I’m sure that California is going to pass a tax on oil. I just don’t think it’ll go to energy,” he said. Instead, he expects any revenues to go into the General Fund, rather than directly into funding energy research. Some of that research might have been done by the oil companies themselves, he suggested.

“In a weird way, it’s worse for oil companies that it goes somewhere else,” Kammen said.

Opponents of 87 had claimed that the measure would reduce state oil production, leading to increased foreign imports and higher gas prices.

Supporters disputed this contention and pointed out that the initiative was specifically designed to prevent oil companies from passing the tax on to consumers. In addition, the world market determines oil prices—not California production, said Severin Borenstein, the director of the University of California Energy Institute, who is not affiliated with either side of the proposition.

Opponents also worried that the proposition would reduce funding for schools and public safety.

The oil tax revenues would have been exempt from state General Fund spending requirements. The California Legislative Analyst’s Office said any tax revenue losses would probably not exceed a few million dollars for local property taxes, $10 million in state income taxes, and $15 million in state oil revenues. Supporters said that this money was necessary to put muscle behind California’s global warming laws.

The Yes on 87 campaign’s included environmentalists, venture capitalists, the American Lung Association of California, well-known Hollywood figures, and prominent Democrats like Bill Clinton and Al Gore.

The coalition opposed to Prop 87 included oil companies, the California Chamber of Commerce, several education administrators, and firefighter and police groups.

Both sides raised more than $155 million during the campaign. Chevron and Aera Energy provided most of the No on 87 campaign’s funding, with $71 million of $95 million total, while the Hollywood producer Stephen Bing provided $50 million of the $61 million that the Yes on 87 campaign raised.