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Davis, California

Sunday, March 3, 2024

Editorial: Oil Tax

As California faces unprecedented budget shortfalls, the state’s higher education system is suffering like never before. What began as a promise of free education for all residents a generation ago now languishes under budget cuts and fee increases.

Despite these troubled economic times, a way to right this wrong exists. Instituting an oil severance tax – a tax on oil drilling – could bring $1 billion to California’s higher education system.

This idea has been thrown around several times in the past 30 years but is gathering steam once again in the form of a bill authored by Representative Alberto Torrico (D-Fremont).

Perhaps the most effective argument in favor of this tax is plain common sense. Of the 22 major oil-producing states in the U.S., California is the only one without a similar tax. Oil is the most valuable natural resource in history, and to give oil companies free reign to extract it without ensuring that Californians see some benefit is insanity.

Oil companies usually respond to bills like this with dramatic warnings about California losing jobs and companies moving elsewhere to avoid taxes. This may very well be true in just about any other business except oil production. Companies must drill where the oil is; there’s no getting around that, no matter what the tax code is. If California’s current oil executives don’t like it, there’s a long list of petroleum companies looking for new fields to develop.

This said, Torrico’s bill isn’t perfect. It mandates that 60 percent of the revenue go to the California State University system, 30 percent to the University of California and 10 percent to community colleges. The bill claims the proportions are based on need, but provides little explanation of the breakdown. According to the Legislative Analyst’s Office, the breakdown doesn’t reflect the relative amount of state support the institutions currently receive, the student populations or the cost to educate students.

Without further explanation, it’s difficult to justify giving the majority of these much-needed funds to a single branch of the education system. Nonetheless, the bill would bring vital funds to the UC, CSU and community college systems and should be taken seriously.


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