It was a very busy election season, you may recall. Not only did you need to ready for Act II of that age-old political drama, titled “President Loses House,” but for your average California voter, proposition preparation was particularly laborious.
Most of the pre-election focus centered on Proposition 19, marijuana legalization; and Proposition 23, an attempt to derail California’s landmark greenhouse-gas reduction law. But while both of those failed at the ballot box, two under-the-radar initiatives, which may end up fundamentally changing the way California is governed, passed.
Proposition 25 lowers the required vote margin to pass the state budget from two-thirds to a simple majority. Proposition 26, however, goes in the opposite direction, upping the votes needed for state, county, and city governments to levy certain fees, from a simple majority to two-thirds.
One noteworthy aspect about these twin victories: Proponents of 25 folded opposition to 26 into their campaign, and proponents of 26 did the same regarding 25. But since both measures passed, both blocs won. And lost.
I asked KQED’s two policy and political wonks, Scott Shafer and John Myers, what they make of the 25/26 situation.
QUESTION On a broad level, the Dems/unions were pro-25, anti-26; Considering that they each only got half of what they want, who came out ahead?
JOHN MYERS I think the election results are a version of what Cold War political scientists used to call “mutually assured destruction,” where both sides launch their missles without regard to whether an attack wipes them out, too. That said, I think the passage of Prop 26 will have a bigger policy impact than the passage of Prop 25, while 25 will have the bigger political impact. Prop 26 is a far-reaching change in the imposition of fees, modifying governing decisions made on both the state and local level.
Prop 25, while a noteworthy change to the annual budget dance, will have the largest impact in short-term demands that the business community traditionally makes through Republicans, who then hold out on a budget deal. But the bottom line is that organized labor and big business both won… and lost…
SCOTT SHAFER I think Prop. 26 was the sleeper initiative. Didn’t get much attention, totally overshadowed by the other races. But in terms of impact it could be big. The League of California Cities led the No on 26 campaign, such as it was, because their members worried this would hamstring them further in efforts to generate revenue. The Yes on 26 folks said that’s exactly the point – that increasingly fees are just an easier way to raise revenue than taxes, not legitimately tied to a particular service or benefit to the payer. QUESTION What fees are covered under Prop 26? And are only future fees affected, or will 26 be applied retroactively?
JOHN MYERS Prop 26’s most immediate effect will be its impact on last year’s state budget deal. That budget included a complicated “tax swap” element, which shuffled and redistributed some of the gas taxes collected at the pump. The effect on consumers was zero — but the transfer of those revenues to state coffers and away from local coffers was big. The passage of Prop 26 (along with Prop 22) could result in about $1 billion in additional budget red ink, plus what may be an additional $1 billion in short-term cash woes.SCOTT SHAFER It IS retroactive to January 1, 2010 so it captures that gas tax/fee deal. It could also apply to any local measures passed during that time that do not meet the new definition of fees.
QUESTION Opponents portrayed Prop 26 as a giveaway to big business in that many fees levied on certain industries will now require a two-thirds super-majority. But do some of these fees end up being paid by consumers? And does 26 impact any fees paid DIRECTLY by individuals, not businesses?
SCOTT SHAFER Critics of fees say businesses never really pay them because they just get passed on to their customers. There’s some truth in that. Prop. 26 DOES apply to fees potentially paid by consumers. For example several weeks ago Mayor Newsom vetoed a fee on alcoholic beverages that would have been paid by patrons of bars and restaurants. Now that will be considered a tax and require a 2/3 vote.
QUESTION A legal question: How can a statewide vote dictate the revenue-gathering policies of individual cities and counties? So you have San Francisco, for example, voting against 26, yet now the city is still subject to its mandates…
JOHN MYERS Remember that Prop 26 was an amendment to the state constitution, the document which governs everyone. Constitutional amendments can, and often have, dictated both state and local government actions. Proposition 13, for example, is a constitutional amendment, forbidding local governments from raising property taxes beyond certain levels…
SCOTT SHAFER Yes, it’s no different from, say, Proposition 8 which prevented SF from performing gay marriages even though the city voted against it.
QUESTION Were the Democrats outmaneuvered on this one? They win 25, so now they can pass a budget without having to deal with Republicans. But they can’t raise any revenue under Prop 13 and can’t institute new fees under Prop 26. So isn’t it like, they now have all the responsibility without any of the authority?
JOHN MYERS Remember that Prop 25 is an amendment to the state constitution, so it will apply in both good and bad years. In years where there’s plenty of revenue, there will be very few restraints for the majority party (which, hard as it is to believe now, may not always be Democrats!). In lean years, yes, it will limit the choices.
But remember that this year’s $20 billion deficit fix included no new taxes and no new fees; it closed the gap through spending cuts, presumed borrowing (mostly from the feds), and funding shifts/transfers. With that in mind, might that mean the budget would have been agreed to months earlier under 25? Perhaps.
The more intriguing question for me is whether majority Democrats will now start to splinter when it comes time to pass a budget. Will the most liberal or moderate Democrats in the Legislature start to hold out for their own specific demands, much in the way GOP legislators did? It seems possible; after all, during this fall’s budget impasse some liberal Dems had to have their arms twisted mightily by leaders to vote for some of the deepest spending cuts.
SCOTT SHAFER What John said.
QUESTION How will AB 32, California’s law aimed at reducing greenhouse gases, be affected by Prop 26?
SCOTT SHAFER To a certain extent environmentalists may have overstated the harm Prop. 26 would do to environmental regulation. The measure EXCLUDES many fees, which will allow simple majority votes to pass them.
However, Prop. 26 does in fact require that a charge imposed for a regulatory program designed to mitigate the social or economic burdens created by the operations of fee payers be treated as a TAX. This likely means for example that the California Air Resources Board’s (CARB) fee imposed on the source of greenhouse gas emissions to pay for implementation of AB 32 would be considered a tax, requiring a 2/3 vote. That’s a very stiff barrier to enacting those charges on polluters.
That said, ALL of this will end up in the courts for years to come.