Budget Initiative Battle Line: Fees

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If you follow California politics, you're well versed in the pros and cons of reducing the legislative vote for a new state budget to a simple majority of each house. But should the issue make it to the ballot this fall, you might see opponents focus on one specific budget process: the raising of fees, which critics like to say are just another word for taxes.

It's a complicated issue, and one that shows just how eternal the fight seems in California over the way the state budget is crafted and implemented.

Unlike earlier battles over the two-thirds vote to pass a budget in the Legislature, this one isn't about making it easier to raise taxes. Keep in mind that while the two-thirds budget vote dates back to a 1933 constitutional amendment (revised in 1962), the two-thirds vote for a tax increase was enacted in 1978 as part of the far-reaching Proposition 13.

In 2004, voters rejected an initiative that called for a reduction in both vote thresholds. And while some continue to push for a majority vote two-fer, this year's most viable (read: well funded) measure leaves tax increases out of the mix, focusing only on a majority vote for a budget and punishment of legislators if they don't enact it on time. The backers of the measure include the California Federation of Teachers and the labor union AFSCME. And with more than $1.4 million in reported campaign contributions, they've got a reasonable chance of getting the initiative on the November ballot.

But the measure doesn't seem to be any more palatable to those who have fought changes in the budget process in the past, at least according to the California Chamber of Commerce. On Monday, the powerful business group announced its formal opposition to the measure.

The reason? Not taxes, but fees.

Unlike taxes, most fees can be increased by a simple majority vote in each house. And critics have long argued that Democrats are tempted to call a revenue increase a 'fee' just to avoid the two-thirds threshold for a tax hike. The seminal event in this drama remains a 1990s fracas about fees imposed on -- and fought by -- the Sinclair Paint Company, a fight the company and the anti-tax community lost in 1997 at the California Supreme Court.

A fee increase can be enacted by a majority of the Assembly and Senate, but it can't take effect for 90 days unless it's part of an urgency measure, which requires... you guessed it... a two-thirds vote. Still with me? Good.

Now, back to the initiative in question... which makes a change not only to the vote required for passage of a state budget, but also in how the budget is defined:

For purposes of this section, other bills providing for appropriations related to the budget bill shall consist only of bills identified as related to the budget in the budget bill passed by the Legislature.

That provision may or may not make sense to most of us (language only a lawyer could love), but it appears to say that the Legislature can call any bill "related" to the budget. Granted, that's not altogether different from what happens now -- budgets currently require approval of a series of so-called 'trailer bills' that contain enacting language.

But here's the thing: because the current system mandates that any budget bill or trailer bill going into effect immediately must be approved by a two-thirds vote (because it's either the budget or an urgency measure), those bills can't be overturned by a ballot referendum. So says the state constitution:

The referendum is the power of the electors to approve or reject statutes or parts of statutes except urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the State.

Every exception to the referendum power listed above requires a two-thirds vote, seen to some as a reasonable barrier to unfair legislative action. But CalChamber argues that the majority vote budget initiative would implicitly add a new non-supermajority loophole to the referendum ban. Still with me? Good.

They say because any "budget related" bill would be deemed part of the budget... and because that could include a fee increase... and, furthermore, because all of this could then be done by a majority vote and would take effect immediately... the 'majority vote budget' initiative bans voters from any attempt to overturn a fee increase included in a budget.

Phew.

The real story here, as always, is that business and anti-tax groups believe the Legislature's Democratic majority continues to be hell bent on seeking ways to label as a 'fee' things that are really a tax. Even Governor Schwarzenegger has run afoul of fee critics from time to time -- one notable example being his defense of a water proposal in 2006.

Supporters of the majority vote budget initiative say the above scenario is just that... a scenario.

"Their policy argument is built on a series of hypotheticals," says Andrew Acosta, a political consultant working on the campaign in favor of the 'majority vote budget' initiative. He says the argument is nothing more than a "red herring" to divert from the real issue in front of voters: "a broken system that allows a handful of members of the Legislature to hold up the entire budget process."

Thought that was the end of the story? Think again! There's a different initiative also aimed for the November ballot that would -- surprise -- raise the legislative vote for imposing new fees to two-thirds of each house. And the proponent of the initiative is -- again, surprise -- CalChamber president Allan Zaremberg.

Zaremberg's fee initiative also includes what's known in politics as a 'poison pill,' a short paragraph on the final page that says if "another measure" dealing with "taxes or fees" is on the ballot and passes... then that measure is in "conflict" and may be declared null and void. Hmmm, I wonder what other measure might have some impact on fees...

But would the two actually be in "conflict"? At least two budget watchers I spoke with on background, on different sides of the spectrum, say no. Their viewpoint is that a tighter definition of fees would merely mean that there would be fewer chances for legislators to attach new fees as part of a majority vote budget. Which backers of the 'majority vote budget' say isn't what they're trying to do in the first place.

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About John Myers

John Myers is senior editor of KQED's new California Politics & Government Desk. He has covered California politics for most of the past two decades, serving previously as Sacramento bureau chief for KQED News and most recently as political editor for KXTV News10 (ABC) in Sacramento. In 2014, he was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • H Peters

    As California and the nation seek into a deeper morass, it may be time to rethink taxes and fees. With the advent of the Bush tax cuts, and Schwartzeneggers recinding of the vehicle license fee, the idea that cutting taxes is fiscally sound is sinking the country. A balance needs to be struck. Reagan raised taxes when necessary. It is necessary. Cutting taxes is irresponsible, but politically popular. We, as a state and a nation can continue to be irresponsible, but only at our peril. It is a reality that is being ignored by the mainstream media.

  • Eric McGhee

    Great post, John.

  • Mark Goldstein

    Great explanation, John, of a complex and important subject.

    As for Mr. Peters comments, with the highest sales taxes, the almost highest marginal income taxes, higher than average per capita property taxes, and public pensions 60%-100% higher than what one would see in the private sector what taxes would he want us to raise? Will that help our beloved California climb out of 50th in business climate surveys? I think not.

  • EarlRichards

    There is a leadership void in Sacramento. Why did the governor allow the budget crisis to happen in the first place?