BILL NUMBER: SB 1017 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 1, 2014
INTRODUCED BY Senator Evans
FEBRUARY 14, 2014
An act to add Chapter 8 (commencing with Section 99500) to Part 65
of Division 14 of Title 3 of the Education Code, and to add Part 21
(commencing with Section 42001) 42301)
to Division 2 of the Revenue and Taxation Code, relating to
taxation, education finance, making an
appropriation therefor, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 1017, as amended, Evans. Taxation: Oil Severance Tax
Law. Education finance: oil and gas severance tax.
(1) Existing law establishes the University of California, under
the administration of the Regents of the University of California,
the California State University, under the administration of the
Trustees of the California State University, and the California
Community Colleges, under the administration of the Board of
Governors of the California Community Colleges, as the 3 segments of
public postsecondary education in this state.
This bill would establish the California Higher Education
Endowment Corporation (CHEEC) in state government. The bill would
establish an oversight board to govern the CHEEC , and
would require that board to appoint the chief executive officer of
the CHEEC. The bill would require the CHEEC to annually allocate the
moneys in the continuously appropriated California Higher Education
Fund, which would be created by the bill, to the California Community
Colleges, the California State University, and the University of
California, the Department of Parks and Recreation, and to the
California Health and Human Services Agency, in specified proportions
and for expenditure as provided. The bill also would authorize the
board to invest the moneys in the fund in accordance with prescribed
procedures. The bill would require the board to submit a report
to the Legislature, on or before April 1 of each year, on specified
topics.
(2) Existing law imposes various taxes, including taxes on the
privilege of engaging in certain activities. The Fee Collection
Procedures Law, the violation of which is a crime, provides
procedures for the collection of certain fees and surcharges.
This bill would , commencing January 1, 2015, impose an
oil and gas severance tax upon any operator, as defined, for the
privilege of severing oil or gas from the earth or water in this
state for sale, transport, consumption, storage, profit, or use, as
provided, at specified rates, calculated as provided. The tax would
be administered by the State Board of Equalization and would be
collected pursuant to the procedures set forth in the Fee Collection
Procedures Law. The bill would require the board to deposit all tax
revenues, penalties, and interest collected pursuant to these
provisions into the California Higher Education Fund.
Because this bill would expand the scope of the Fee Collection
Procedures Law, the violation of which is a crime, it would impose a
state-mandated local program.
(3) This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
(4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(5) Funds appropriated by this bill and allocated to the
California Community Colleges would be applied toward the minimum
funding requirements for school districts and community college
districts imposed by Section 8 of Article XVI of the California
Constitution.
(6) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares:
(a) California is the nation's fourth largest producer of oil,
after only North Dakota, Texas, and Alaska, and it is the only one of
36 oil producing states that does not have a severance tax. For
example, Alaska employs a minimum severance tax of 25 percent that
can range up to 50 percent depending on the net value of oil and
natural gas, while Alabama, Kansas, Texas, North Dakota, Mississippi,
Oregon, and Florida tax oil and gas at 8 percent, 8 percent, 7.5
percent, 6.5 percent, 6 percent, 6 percent, and 5 percent,
respectively.
(b) California is currently tied with Mississippi for the highest
unemployment rate in the nation, and is ranked 47 out of 50 in
quality of education in the United States.
(c) A recent study prepared by the Public Policy Institute of
California found that, by the year 2025, the state will experience an
educated labor shortage of about one million college-educated
workers. This would leave firms unable to fill vacancies, which would
potentially raise the unemployment rate in California and lead firms
to look outside the state for an adequately educated workforce.
(d) A study conducted in April 2012 by the Institute for the Study
of Societal Issues at the University of California, Berkeley,
sponsored by the California Chamber of Commerce, the California Civil
Rights Coalition, and the Campaign for College Opportunity, found
that for every dollar the state invests in higher education, the
state receives a $4.50 return on its investment. Moreover, a person
with a bachelor's degree will earn, on average, $1.34 million more in
his or her lifetime than one without a college education.
(e) Since the budget cuts enacted in 2010, over 32,000 teachers
and faculty have been laid off. This has resulted in cuts in classes
being offered, an increase in the ratio of students to teachers, and
a reduced quality of education in the state. Moreover, University of
California student fees have almost doubled in the last five years
alone, while California State University student tuition fees have
risen 80 percent, and California Community College student tuition
fees have risen 130 percent. As a result, over 750,000 students are
no longer seeking to attain an advanced degree in California.
(f) This proposed severance tax is intended to provide at least $1
billion of annual revenue that will, among other things, promote
economic stimulus through the education of our citizens so that they
can excel, innovate, and become eligible for high-paying professional
careers.
SEC. 2. Chapter 8 (commencing with Section 99500) is added to Part
65 of Division 14 of Title 3 of the Education Code, to read:
CHAPTER 8. THE CALIFORNIA HIGHER EDUCATION ENDOWMENT
CORPORATION
Article 1. General Provisions
99500. As used in this chapter, the following terms have the
following meanings:
(a) "Board" means the oversight board described in subdivision (a)
of Section 99505.
(b) "Corporation" means the California Higher Education Endowment
Corporation established pursuant to Section 99502.
(c) "Director" means the chief executive officer of the
corporation appointed pursuant to Section 99506.
(d) "Fund" means the California Higher Education Fund established
pursuant to Section 42147 42321 of the
Revenue and Taxation Code.
99502. The California Higher Education Endowment Corporation is
hereby established in state government for purposes of implementing
this chapter.
Article 2. Oversight Board
99505. (a) (1) The corporation shall be governed by an oversight
board, which shall be composed of the following voting members:
(A) Two members appointed by the Board of Trustees of the
California State University.
(B) Two members appointed by the Regents of the University of
California.
(C) Two members appointed by the Chancellor of the California
Community Colleges.
(D) Two members appointed by the Senate Committee on Rules.
(E) Two members appointed by the Speaker of the Assembly.
(F) One member appointed by the Treasurer.
(G) One member appointed by the Superintendent of Public
Instruction.
(H) (i) One member who is a student enrolled in the California
Community Colleges at the time of the appointment. The member
appointed pursuant to this subparagraph shall be enrolled in the
California Community Colleges for the duration of his or her term.
(ii) The Board of Governors of the California Community Colleges
shall appoint the student member from a list of three eligible
persons furnished by the Student Senate.
(I) (i) One member who is a student enrolled in the California
State University at the time of the appointment. The member appointed
pursuant to this subparagraph shall be enrolled in the California
State University for the duration of his or her term.
(ii) The Trustees of the California State University shall appoint
the student member from a list of three eligible persons furnished
by the California State Student Association.
(J) (i) One member who is a student enrolled in the University of
California at the time of the appointment. The member appointed
pursuant to this subparagraph shall be enrolled in the University of
California for the duration of his or her term.
(ii) The Regents of the University of California shall appoint the
student member from a list of three eligible persons furnished by
the University of California Student Association.
(2) (A) At least one member appointed pursuant to paragraph (1)
shall be a nonmanagement employee of the California State University.
(B) At least one member appointed pursuant to paragraph (1) shall
be a nonmanagement employee of the University of California.
(b) The oversight board shall also include the following ex
officio, nonvoting members:
(1) The Chancellor of the California State University.
(2) The President of the University of California.
(3) The Chancellor of the California Community Colleges.
(c) The Legislature requests that the Regents of the University of
California and the President of the University of California comply
with the membership requirements in subparagraph (B) of paragraph (1)
of subdivision (a) and paragraph (2) of subdivision (b).
(d) Except as specified in subparagraphs (H), (I), and (J) of
paragraph (1) of subdivision (a), each of the members identified in
subdivisions (a) and (b) shall be appointed to serve a term of four
years.
(e) The members of the board shall annually select a member to
serve as the chairperson of the board.
99506. (a) The board shall appoint a director, who shall be the
chief executive officer of the corporation. This position is
designated as a confidential position and is exempt from civil
service under subdivision (e) of Section 4 of Article VII of the
California Constitution.
(b) The director shall serve at the pleasure of the board.
(c) The board may delegate to the director any power, duty,
purpose, function, or jurisdiction that the board may lawfully
delegate, including the authority to enter into and sign contracts on
behalf of the corporation.
(d) The director may delegate to his or her designee any power,
duty, purpose, or jurisdiction that may be lawfully delegated.
99507. (a) On or before April 1 of each year, the board shall
report to the Legislature on all of the following:
(1) The revenue and expenditure data for the corporation.
(2) The revenue and expenditure data for the fund.
(3) A review of the compliance audits conducted pursuant to
Section 99508.
(4) An examination of the level of General Fund appropriations the
University of California, the California State University, and the
California Community Colleges in light of the funding provided by the
fund.
(b) The report to the Legislature shall be submitted in compliance
with Section 9795.
99508. (a) The board shall select an auditing firm to
conduct periodic audits as provided in subdivision (b) to determine
if the funding allocated pursuant to Section 99510 is being
appropriately used to fund direct classroom instruction in compliance
with this chapter. annually audit each entity that
receives funding pursuant to Section 99512, if the entity received
moneys in the prior fiscal year, to determine if the entity used
those moneys for purposes authorized by that section. The
auditing firm shall submit a report of the results of the audit to
the board.
(b) The three segments of public postsecondary education receiving
funding from the California Higher Education Fund, the University of
California, the California State University, and the California
Community Colleges, shall be audited at least once every six years,
with the audits occurring alternately between the three public
postsecondary education segments every two years. An audit of a
public postsecondary education segment may occur independently of the
six-year cycle if the board determines that a more immediate audit
is necessary.
(c)
(b) The independent audits shall be funded with
investment returns from the fund.
(d)
(c) The board shall select a different
auditing firm to perform the audits at least every six years to
ensure the audits are conducted in a fair and equitable manner.
an auditing firm licensed by, and in good standing
with, the California Board of Accountancy. The board shall not select
an auditing firm if that firm's lead audit partner, coordinating
audit partner having primary responsibility for the audit, or audit
partner responsible for reviewing the audit has performed audit
services for the board for six consecutive fiscal years.
(d) The auditing firm shall conduct the audit in accordance with
the Government Auditing Standards issued by the Comptroller General
of the United States.
(e) If the board determines through the audits performed pursuant
to this section that any campus , entity, or related
administrative office of any segment that receives funding from this
chapter is found to have improperly used or otherwise improperly
administered moneys allocated under this chapter, the board shall
take the following disciplinary actions:
(1) Upon a first finding, the board shall place
bar the recipient campus , entity, or related
administrative office on probation status
from receiving funding made available under this chapter
during the following fiscal year and require the
recipient campus , entity, or related administrative
office to submit a remediation plan to the board for approval
as a condition of receiving future funding under
this chapter.
(2) Upon a second finding that a recipient
campus or related administrative office has subsequently mishandled
funds allocated under this chapter within five years of a finding
pursuant to paragraph (1), within five years,
the board shall bar the recipient campus , entity, or
related administrative office from receiving funds made available
under this chapter during the following fiscal year.
for the following two fiscal years and require the
recipient campus, entity, or related administrative office to submit
a remediation plan to the board for approval as a condition of
receiving future funding under this chapter.
(3) Upon a third finding that a recipient
campus or related administrative office has subsequently mishandled
funds allocated under this chapter within five years of a finding
pursuant to paragraph (2), within five years,
the board shall bar the recipient campus , entity, or
related administrative office from receiving future
funding under this chapter.
(f) The board may allow a campus or related administrative office
that has been barred from receiving funding pursuant to paragraph (3)
of subdivision (e) to apply for funding under this chapter after
five years have passed since the campus or related administrative
office was barred from receiving funding pursuant to paragraph (3) of
subdivision (e).
99509. The board may adopt regulations necessary or appropriate
to implement its powers and duties under this chapter in accordance
with the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code).
Article 3. Powers and Duties of the California Higher
Education Endowment Corporation
99510. The corporation may hire employees as it deems necessary
to implement this chapter.
99512. (a) The corporation
shall annually allocate the moneys in the California Higher Education
Fund, for immediate expenditure as follows:
(1)
(a) Fifty percent of the moneys in the fund, in equal
shares, to the Regents of the University of California, the Trustees
of the California State University, and the Board of Governors of the
California Community Colleges. The moneys shall only be
used for the following purposes and in the following order of
priority: be used only for the following purposes:
(A) First, to reduce mandatory systemwide tuition and fees.
(B) Second, to hire faculty and reduce class sizes.
(C) Third, for instructional materials.
(D) Fourth, for English as a second language (ESL) programs.
(E) Fifth, for deferred maintenance.
(1) Deferred maintenance.
(2) Instructional equipment replacement.
(3) To pay off debt resulting from a statewide general obligation
bond issued by the University of California, the California State
University, or the California Community Colleges, as applicable.
(4) Minor capital outlay projects.
(2)
(b) Twenty-five percent of the moneys in the fund to
the Department of Parks and Recreation for the maintenance and
improvement of state parks.
(3)
(c) Twenty-five percent of the moneys in the fund to
the California Health and Human Services Agency to fund health and
human services programs.
(b) The funding established pursuant to this chapter shall be used
to supplement, not supplant, existing levels of state funding for
the California State University, the University of California, and
the California Community Colleges.
99514. (a) The board shall have exclusive control of the
investment of the fund. Except as otherwise restricted by the
California Constitution and by law, the board may, in its discretion,
invest the assets of the fund through the purchase, holding, or sale
of any investment, financial instrument, or financial transaction,
if the investment, financial instrument, or financial transaction is
prudent in the informed opinion of the board.
(b) The board may itself make any investment authorized by law or
sell any security, obligation, or real property in which moneys in
the fund are invested, by affirmative vote of a majority of the
board, or, by the same affirmative vote, may from time to time adopt
an investment resolution that shall contain detailed guidelines by
which to designate the securities and real property that are
acceptable for purchase or sale. While the resolution is in effect,
securities and real property may be purchased for investment by an
officer or employee of the board designated by it for that purpose,
and sales of securities may be consummated by the officer or employee
under the conditions prescribed. Purchases and sales of securities
shall be reported to the board, on a monthly basis, at its next
regular meeting.
(c) Any investment transaction decisions made during a closed
session pursuant to paragraph (16) of subdivision (c) of Section
11126 of the Government Code shall be by rollcall vote entered into
the minutes of that meeting. The board, within 12 months of the close
of an investment transaction or the transfer of system assets for an
investment transaction, whichever occurs first, shall disclose and
report the investment transaction at a public meeting.
(d) In addition to the other investments authorized by this
article, the board may invest in real estate, leases of real estate,
and improvements on real estate for business or residential purposes
as an investment for the production of income.
SEC. 3. Part 21 (commencing with Section 42001)
42301) is added to Division 2 of the Revenue and Taxation
Code, to read:
PART 21. OIL SEVERANCE TAX LAW
42001. 42301. This part shall be
known and may be cited as the Oil Severance Tax Law.
42002. 42302. For purposes of this
part, the following definitions shall apply:
(a) "Barrel of oil" means 42 United States gallons of 231 cubic
inches per gallon computed at a temperature of 60 degrees Fahrenheit.
(b) "California Higher Education Fund" or "CHEF" means the fund
that is created by Section 42147. 42321.
(c) "Gas" means all natural gas, including casing head gas, and
all other hydrocarbons not defined as oil in subdivision (f).
(d) "Division" means the Division of Oil, Gas, and Geothermal
Resources in the Department of Conservation.
(e) "In this state" means within the exterior limits of the State
of California and includes all territory within these limits owned by
or ceded to the United States of America. "In this state" includes
the mean high tide line to three nautical miles offshore.
(f) "Oil" means petroleum, or other crude oil, condensate, casing
head gasoline, or other mineral oil that is mined, produced, or
withdrawn from below the surface of the soil or water.
(g) "Operator" means a person that, by virtue of ownership, or
under the authority of a lease or any other agreement, has the right
to drill, operate, maintain, or control an oil or gas well in the
earth or water in this state, including any person that takes oil or
gas from the earth or water in this state in any manner, any person
that owns, controls, manages, or leases any oil or gas well in the
earth or water of this state, and any person that produces or
extracts in any manner any oil or gas by taking it from the earth or
water in this state; and includes the first person that acquires
either the legal title or beneficial title to oil or gas taken from
the earth or water in this state by the federal government or a
federal instrumentality.
(h) "Political subdivision of the state" includes any local public
entity, as defined in Section 900.4 of the Government Code.
(i) "Severed" or "severing" means the extraction or withdrawing
from below the surface of the earth or water of any oil or gas,
regardless of whether the extraction or withdrawal shall be by
natural flow, mechanical flow, forced flow, pumping, or any other
means employed to get the oil or gas from below the surface of the
earth or water, and shall include the extraction or withdrawal by any
means whatsoever of oil or gas upon which the tax has not been paid,
from any surface reservoir, natural or artificial, or from a water
surface.
(j) "Stripper well" means a well that has been certified by the
division as an oil well incapable of producing an average of more
than 10 barrels of oil per day during the entire calendar month or a
gas well that is incapable of producing more than an average of
60,000 cubic feet of gas per day during the entire calendar month.
Once a well has been certified as a stripper well, that stripper well
shall remain certified as a stripper well until the well produces an
average of more than 10 barrels of oil per day during an entire
calendar month or produces more than an average of 60,000 cubic feet
of gas per day during an entire calendar month.
(k) "Unit of gas" means 1,000 cubic feet (Mcf) measured at a base
pressure of 15.025 pounds per square inch absolute and at a
temperature base of 60 degrees Fahrenheit.
42010. 42310. (a) (1) An
Commencing January 1, 2015, an oil and gas
severance tax is hereby imposed upon any operator for the privilege
of severing oil or gas from the earth or water in this state at the
rate of 9.5 percent of the average price per barrel of California oil
or 3.5 percent of the average price per unit of gas, as calculated
pursuant to this section.
(2) (A) On or before December 1, 2014, and June 1, 2015, and on or
before those dates of each year thereafter, the division shall
determine the average price per barrel of California oil for the
six-month period ending on the preceding October 31 and April 30,
respectively. The price of California oil shall be based on the first
purchase price for California Midway-Sunset crude oil as determined
by the United States Energy Information Administration's (EIA)
Domestic Crude Oil First Purchase Report. In the event the EIA
Domestic Crude Oil First Purchase Report is delayed or
discontinued, the division may base its determination on other
sources of first purchase prices of California oil.
(B) On or before December 1, 2014, and June 1, 2015, and on or
before those dates of each year thereafter, the division shall
determine the average price per unit of gas for the six-month period
ending on the preceding October 31 and April 30, respectively. The
price of gas shall be based on California's price for gas as
determined by the United States Energy Information Administration's
(EIA) report. In the event the EIA report is delayed or discontinued,
the division may base its determination on other sources of city
gate prices of California gas.
(C) The division shall notify the board of its determinations
pursuant to subparagraphs (A) and (B), on or before December 1, 2014,
and June 1, 2015, and on or before those dates on each year
thereafter.
(b) Any person that owns an interest, including a royalty
interest, in oil or its value, is liable for the tax until it has
been paid to the board.
42012. 42312. The tax imposed by
this part shall be in addition to any other taxes imposed by law,
including, without limitation, any ad valorem taxes imposed by the
state, or any political subdivision of the state, or any local
business license taxes that may be incurred for the privilege of
severing oil or gas from the earth or water or doing business in that
locality. There shall be no exemption from the payment of an ad
valorem tax related to equipment, material, or other property by
reason of the payment of the severance tax pursuant to this part.
42014. 42314. Two or more operators
that are owned or controlled directly or indirectly, as defined in
Section 25105, by the same interests shall be considered as a single
operator for purposes of application of the tax prescribed in this
part.
42015. 42315. (a) There shall be
exempted from the imposition of the oil and gas severance tax imposed
pursuant to this part, the severance of oil or gas produced by a
stripper well, unless the well produces more than five barrels per
month.
(b) The division shall notify the board of all wells that have
been certified as stripper wells.
42016. 42316. There shall be
exempted from the imposition of the tax imposed pursuant to this part
all oil, gas, or both oil and gas owned or produced by the state or
any political subdivision of the state, including such public entity'
s proprietary share of oil or gas produced under any unit,
cooperative, or other pooling agreement.
42019. 42319. Each operator shall
prepare and file with the board a return in the form prescribed by
the board containing information as the board deems necessary or
appropriate for the proper administration of this part. The return
shall be filed on or before the last day of the calendar month
following the calendar quarter to which it relates, together with a
remittance payable to the board for the amount of tax due for that
period.
42145. 42320. (a) The board shall
administer and collect the tax imposed by this part pursuant to the
Fee Collection Procedures Law (Part 30 (commencing with Section
55001)). For purposes of this part, the references in the Fee
Collection Procedures Law to "fee" shall include the tax imposed by
this part and references to "feepayer" shall include any person
liable for the payment of the tax imposed by this part.
(b) The board may prescribe, adopt, and enforce regulations
relating to the administration and enforcement of this part,
including, but not limited to, provisions governing collections,
reporting, refunds, and appeals.
(c) The board may prescribe, adopt, and enforce emergency
regulations relating to the administration and enforcement of this
part. Any emergency regulations prescribed, adopted, or enforced
pursuant to this section shall be adopted in accordance with Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code, and, for purposes of that chapter,
including Section 11349.6 of the Government Code, the adoption of
these regulation regulations is an
emergency and shall be considered by the Office of Administrative Law
as necessary for the immediate preservation of the public peace,
health and safety, and general welfare.
42147. 42321. (a) All taxes,
interest, penalties, and other amounts collected pursuant to this
part, less refunds and costs of administration, shall be deposited
first into the General Fund and then into the
California Higher Education Fund, which is hereby created in the
State Treasury. Notwithstanding Section 13340 of the Government Code,
moneys in the fund are continuously appropriated, without regard to
fiscal year, to the California Higher Education Endowment Corporation
established by Section 99502 of the Education Code.
(b) (1) Revenues, less refunds, derived pursuant to Section
42013 42310 for deposit in the
California Higher Education Fund pursuant to this section shall be
deemed "General Fund revenues" and "General Fund proceeds of taxes"
for purposes of Section 8 of Article XVI.
(2) Moneys allocated to the Board of Governors of the California
Community Colleges pursuant to Section 99512 of the Education Code
shall be deemed "moneys to be applied by the state for the support of
school districts and community college districts" for purposes of
Section 8 of Article XVI.
(c) Any
local property tax reductions that may result from the imposition of
the tax by this part shall be reimbursed from the revenues received
from the imposition of the tax.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 5. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to reduce mandatory systemwide tuition and fees as
quickly as possible, it is necessary that this act take effect
immediately.