The biggest mystery around the state Capitol these days is how and when the Davis administration intends to follow through on its threat to triple California's car tax without a vote of the Legislature.
Gov. Gray Davis has a legal opinion from his lawyers and from state Controller Steve Westly saying he can do this in times of fiscal distress. Essentially, it says that anytime the Legislature and the governor agree to spend more money than they expect the state to take in from general taxes, the car tax, or vehicle license fee, goes back to where it was before a series of reductions that began in 1998.

The opinion has several holes in it. One is that it appears the state met its rather low standard a year ago, and perhaps even two years ago, as California's budget began its steady slide into a permanent deficit condition. Yet the tax wasn't increased back then. Why not?
The opinion also fails to address the crucial question of when the tax, once raised, might go back down again. If the tax is automatically increased in bad fiscal times, will it automatically be reduced again when the balance in the treasury has stabilized?

Several weeks ago, I ran that question by Assemblyman John Campbell, a Republican from Irvine and vice chairman of the Assembly Budget Committee. Campbell, a strong opponent of the car tax increase, was intrigued, and sent letters to the governor, the controller and the Legislature's own lawyers asking the same question. Not surprisingly, Davis and Westly never replied.

But Legislative Counsel Diane Boyer-Vine did respond, and her opinion is something of a bombshell. While it's not binding on the Legislature or on Davis, the opinion contradicts the administration's view on key points and is likely to add momentum to expected attempts to block the tax increase in court or repeal the tax altogether by ballot initiative.

The confusion stems from the law that cut the car tax in 1998, and several later revisions. The car tax is a local revenue source controlled by the state. But state lawmakers didn't want to reduce local resources. So when they cut the tax, they agreed to replace the money in city and county coffers with revenue from the state budget. This "backfill," as it was called, grew over time to more than $4 billion a year.

Many local officials feared that the state would eventually renege on its commitment. So lawmakers added a provision that allowed the tax to increase in the unlikely event that the state treasury ever ran dry. The Department of Motor Vehicles, which collects the tax, is to eliminate the tax cut in proportion to the state's revenue shortage "during any period in which insufficient moneys are available to be transferred from the general fund" to local governments to reimburse them for the tax reduction.

The question then turns on your definition of "insufficient moneys." The governor's opinion says this determination involves a vague and ultimately subjective examination of revenue forecasts for the current and next fiscal years, expected spending levels, loans, fund shifts, data from the governor's May revision of the budget, competing claims on cash and other factors.

The legislative counsel's opinion, however, says the words mean exactly what they say: The state has "sufficient money" to meet its obligations to local government as long as there is cash in the general fund not legally encumbered for some other purpose. Only if the state is out of cash and can't make its payments to local governments does the car tax go up.

The problem is that such a condition is unlikely to ever exist because part of the controller's job is to get loans for the state to prevent the treasury's checks from bouncing.

But even if somehow the tax were raised, in the legislative counsel's view, the increase would remain in effect "only for the period during which the insufficiency exists." The tax, in other words, would have to go back down again as soon as the state had a positive balance in its checking account. And this determination would be made monthly -- by the controller.

The level of your annual car tax would depend on when you bought your car and the fiscal condition of the state each month. That's a recipe for political and fiscal chaos. As state policy, it's not sustainable.

There's a political case to be made for raising the car tax: It never would have been cut in the first place if lawmakers knew then that the state's income tax revenues would plummet in the stock market crash, draining what was once a multibillion-dollar surplus. Winning that argument, though, requires a two-thirds vote of the Legislature, and Republicans have said they'll never provide the votes necessary to make it happen. So it appears that Davis will soon raise the tax by remote control, basing his action on a legal opinion that's now in much dispute.

If the Legislature's lawyer is correct, a court might someday rule the coming car tax hike illegal.