Summary: During times of budgetary pressure, government may attempt to shift costs to business. In order to protect the economy, and ensure the effectiveness of economic stimulus measures, CMTA recommends that a two-year moratorium on new business fees and taxes be instituted.

State agencies are being asked to submit plans to the administration for 15% cuts in general fund revenues. To offset this loss, agencies may attempt to impose new fees or taxes on the regulated community. Such cost shifting undermines the ability of business to weather difficult economic times and leads to further erosion of the state’s economy.

One CMTA member was concerned that an annual $2,000 Department of Conservation fee for mining facilities would be simply increased to make up for revenue losses and eliminate any need for department expense cuts.

Another example is the Department of Toxic Substances Control (DTSC) and its steady drop in fee revenue. Rather than scale back program activities or staff, it is likely that DTSC will offset this with new or increased fees on the shrinking number of businesses it regulates.

In lean times these are the policies that are so often made when there isn’t enough money to go around.

Proposals:

• Impose a two-year moratorium on new fees and taxes. During this period, any new costs associated with legislative mandates should be absorbed in existing revenues. This approach is consistent with many of the Governor’s actions on 2001 legislation.
• Track administrative penalty activity. Agencies can also use administrative penalty authority to backfill other revenue losses. Typically, administrative penalty assessments are not subject to judicial challenge. Notify agencies that evidence of disproportionate fines suggesting abuse of this authority will result in a full audit of administrative penalty programs and related activities invoking this authority.