As state budgeters look toward another multi-billion dollar budget deficit this summer, attorneys
for the Legislature and Gov. Schwarzenegger have issued
a new opinion reaffirming the legality of a plan passed
by Democrats last December that raised revenues without
requiring a two-thirds vote.
The March 9 opinion from Legislative Counsel Diane Boyer-Vine, addressed to Gov. Schwarzenegger, reaffirms a
2003 opinion by her office that finds a bill that raises
one tax and lowers another by an equal or greater amount
only needs simple majority votes in each legislative
“We think that a tax bill is not subject to the two-thirds vote requirement if the cumulative effect of
the ‘changes in state taxes’ … when considered in their entirety would be neutral
or would produce a net decrease in state tax revenues,” her March 9 opinion states.
The latest Legislative Counsel opinion is a reprise
of a May 2003 decision, which Democrats used as the basis for their
December budget proposal. Steinberg jokingly refers
to that 2003 decision as “The Pelican Brief,” a reference to a legal crime thriller written by John
The governor refused to sign the December budget, although
he did not cite the majority-vote issue as a reason.
In December, Speaker Karen Bass, D-Los Angeles, and Senate Leader Darrel Steinberg, D-Sacramento, guided a revenue increase package through
their respective houses without any Republican votes.
The plan would have eliminated an 18 cents-per-gallon excise tax and raised the state’s sales and income taxes. A separate bill in the budget
package instituted a 39 cents-per-gallon fee on gasoline.
The net effect of the December package was a 13 cents-per-gallon hike in gas levies, a 3/4-cent increase in the state sales tax, a 9.9 percent surcharge on oil pumped in California, and
a 2.5 percent income tax surcharge for every California
But Democrats argued the plan did not require a two-thirds vote because the tax bill was “revenue neutral,” and the new revenues came from fee increases. Fees,
which are defined as revenues dedicated to a specific
purpose or project, do not require a two-thirds vote.
The package was rejected by Gov. Schwarzenegger, who
complained that the $18 billion proposal was not large enough to solve the
state’s budget problem. Schwarzenegger called the plan a
“terrible budget,” and quickly promised a veto.
“This package that they are sending down does really
only do one thing, and this is punish the people of
California,” he said shortly after the December vote.
Schwarzenegger said the Democrats’ proposal did not go far enough to close what he identified
as a $41 billion budget hole. But the governor was notably
silent about the structure of the plan, which legislative
Republicans decried as unconstitutional.
And as the state faces a budget gap that could be anywhere
from $8 billion to $15 billion, (depending on the outcome of the May 19 special election), state numbers crunchers are already looking for solutions.
Schwarzenegger spokesman Aaron McLear said the request
that prompted the March 9 Legislative Counsel opinion was not made to test any
hypothetical budget plan or theory. It was made by
the governor’s Department of Finance on behalf of the members of
a tax commission, consisting of legislative and gubernatorial
appointees, charged with making recommendations about
the state’s tax structure and policy.
The commission, led by Gerald Parsky, is scheduled
to make a series of tax recommendations to the Legislature
and Gov. Schwarzenegger in June.
Former Assemblyman Fred Keeley, who was appointed by
Steinberg to the tax commission, said the request was
made by some members of the panel who do not have the
legislative background that Keeley, former Speaker
Curt Pringle, former Assemblywoman Becky Morgan and
others on the commission have.
“Every time an issue comes up, we ask for some third-party to give us information so everybody has a complete
understanding of the issues,” Keeley said.
The Legislative Counsel’s response was addressed to Gov. Schwarzenegger, however,
because the governor is an official client of the counsel’s office.
But Keeley added, “the issue of majority-vote budget based on the theory of revenue neutrality
is very interesting to us. I think part of it came
from a place where there were some observations that
when the Legislature sent that budget to the governor,
he didn’t seem to pitch a hissy fit that it was done on a majority
While the governor may not have pitched a hissy fit
over the majority vote budget, the same cannot be said
by Republican legislative leaders, who quickly filed
a lawsuit as soon as the Democrats released their majority-vote proposal.
The lawsuit claimed the Democrats’ budget plan violated Proposition 13, which state voters approved in 1978 and which limits increases in property taxes and set
the two-thirds majority requirement for tax bills.
But the Legislative Counsel opinion points out there
have been numerous efforts since Proposition 13’s passage to address the revenue-neutrality issue. The opinion cites ACA 53, which died in the Legislature in 1984, and Proposition 36, which was rejected by voters on the 1984 ballot. “Each of those measures would have amended [Proposition 13]” to require a two-thirds vote for any tax increase, not just tax increases
that are passed “for the purpose of increasing revenues.”
In the lawsuit filed against the Democrats’ plan, Howard Jarvis Taxpayers Association President
Jon Coupal called that reasoning
a “convoluted effort ... based on false theory.”
That fight disappeared when the governor rejected the
Democrats’ plan. But the March 9 letter is a reminder that another major budget problem
is in California’s future, and that a future budget proposal may well
wind up before a judge.