California's high court hears arguments in sweeping anti-tax measure case

BY SourceMedia | MUNICIPAL | 05/08/24 03:32 PM EDT By Keeley Webster

The California Supreme Court heard arguments Wednesday in a case brought by the state's Democratic leaders that would block a sweeping anti-tax measure from November's ballot.

The initiative, called the Taxpayer Protection and Government Accountability Act, would amend the California constitutional rules governing how the state and local governments can impose taxes, fees and other charges, according to an analysis by the Legislative Analyst's Office.

The court was asked to decide two central issues: if the initiative constitutes an impermissible revision of the California constitution by voter initiative, and if the measure would impair essential government functions.

The high court heard arguments from the attorneys representing both sides and now has 90 days to publish a written opinion.

Backed by the California Business Roundtable and California Business Properties Association, the initiative would require a two-thirds majority vote from lawmakers and approval from a majority of voters for any increase in state or local taxes. It would also overturn any tax measure approved since Jan. 1, 2020, that doesn't meet those requirements.

"The initiative before the court is unlike any other measure that has come before it," Margaret R. Prinzing, a partner with Olson-Remcho, who represents opponents, told the Justices. "This measure would fundamentally restructure the power of government to raise revenues as set forth in the constitution."

With Gov. Gavin Newsom's support, Senate President Pro Tempore Toni Atkins, D-San Diego, and Assembly Speaker Robert Rivas, D-Hollister, in September filed an emergency petition, with the state Supreme Court seeking to remove the initiative from the ballot.

More than a dozen amicus briefs supporting efforts to block the measure were filed by entities including state employee unions, three former directors of the California Department of Finance, and the League of California Cities.

The boards of the California Public Employee Retirement System and the California State Teachers' Retirement System both voted to take a stance in opposition to the measure.

The initiative is an unlawful effort to revise the state constitution, fundamentally restructure the roles of the California's legislative and executive branches, as well as the roles of local governments, Atkins and Rivas said in a statement at the time. It would also eliminate the state's ability to respond to emergencies, since every tax increase would not only have to be approved by two-thirds of the legislature but would also need to be approved in a majority through a voter referendum, according to lawmakers.

Chief Justice Patricia Guerrero asked Prinzing why the court needs to intervene before the issue is put to voters.

"It's because the retroactivity in the measure is affecting localities' ability to pass a budget," Prinzing said. "The measure is retroactive for a 34-month period. It puts at risk every tax measure that doesn't apply with the initiative. Governments have to balance budgets ? and they are working on them now ? without knowing what revenue will be available to them, because if this passes it could put multiple streams of revenue at risk."

Proponents ? and even some former lawmakers ? have argued that asking the court to rule before voters have a chance to weigh in sets a dangerous precedent.

"This is a case that begs for post-election analysis," Thomas Hiltachk, managing partner at Bell, McAndrews & Hiltachk, the attorney arguing the case as well as the real party named in the case, argued during the hearing.

Petitioners' only stated "emergency" justifying the court's "highly disfavored" pre-election intervention is a provision in TPA that requires state and local governments to bring any taxes or fees adopted after Jan. 1, 2022, in compliance with its requirements within one year of its effective date, Hiltachk argued in a brief.

"On this point, petitioners' claims of 'sweeping' impact are both purely speculative as to future events and wildly overblown," Hiltachk said.

"Petitioners make no attempt to identify or quantify the number of tax measures subject to reauthorization under TPA, other than the use of the word dozens or numerous," Hiltachk said.

The initiative's backers "believe that from among the 58 counties, 482 cities, and over 1,000 special districts in the state, there are fewer than two dozen local tax measures that may not have fully complied with the requirements of TPA ? and more than 100 local tax measures recently approved by the voters did comply with the requirements of TPA," he said.

Justice Goodwin Liu asked whether the measure looks to shift the state's governance from its currently largely republican form of government ? in which voter interests are represented by elected officials in combination with the direct democracy of the initiative process ? to one in which there is a more strongly democratic form of governance.

"I don't think that is true," Hiltachk said. "I don't think we have a pure republican form of government now. It also requires voter consent including the ability to go into debt with general obligation bonds."

Liu asked whether the broadly written measure could also require either legislative approval or city council approval of virtually any fee approved at an administrative level down to park fees, library fines or traffic tickets.

"It is true that many more fees will be subject to referendum power, but it is just a rollback," Hiltachk said. "I am not saying government agencies have no role in setting fees. What I am suggesting is that in a government like ours, the Legislature should not absolve itself from this responsibility."

The opposing sides are also arguing whether the measure "revises" the constitution, which the court would have to weigh in, or "amends," the constitution, which other tax measures have done.

Hiltachk argued previous propositions limiting taxing powers, such as Propositions 13, 218 and 26, have amended the constitution.

But Prinzing said the measure goes far beyond what Propositions 13, 218 and 26 did.

"If enacted, this measure would strip the Legislature of its authority to enact statewide taxes, something that none of the three previous constitutional amendments even came close to doing," Prinzing said. The initiative's proponents "cannot deny that the measure would eliminate the Legislature's core foundational power to tax."

Prinzing further argued it would not only revise the constitution but would also "severely limit executive branch functions in ways that no previous measure ever has, and limit the voters' power to increase their own taxes."

"This fundamental rebalancing of the powers of the three branches of government would revise the constitution, which an initiative may not do," Prinzing said.

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