Calbuzz triggered a rhubarb when we noted that deep inside one of California Forward’s budget reform proposals was language – intentionally inserted, we concluded — that would wipe out the Legislature’s ability, granted in 1997’s Sinclair Paint vs. Board of Equalization to raise fees by majority vote.
Granted, this analysis of Cal Forward’s assault on the Sinclair Paint case is some serious weed whacking – far outside our Calbuzz Official Comfort Zone of Political Palaver and Cheap Shots. Since no one else in the, uh, actual press corps appeared ready to take up this significant issue, we figured, ah, what the hell.
Apparently in response to our squawking about the matter, some of Cal Forward’s liberals now have pushed the group to redraft some of the language in the measure. Their proposal still cuts into the Legislature’s ability to raise fees by majority vote — which will still infuriate progressives — but only when fee revenues would “replace funding for specific programs, services or activities previously funded by a tax that is repealed or reduced in the same or the prior fiscal year.”
Here’s what 
Cal Forward’s Bob Balgenorth, President of the State Building and Construction Trades Council of California, wrote to us about their latest effort:
Now there’s even less to fight about.
For months, Calbuzz has cast its ever-skeptical eye on California Forward’s reform proposals – devoting most of its attention to the controversial issue of fees, and the number of votes required to impose them.
Much of what’s proposed in the Best Practices Budget Accountability isn’t contentious. After so many years of turmoil, it’s only common sense to take lessons learned from other states and use them to help California get its budget back on track. But even in the best of times, fees are tricky political turf.
The state’s ongoing budget crisis has only made matters worse. Business interests – the group most often expected to pay – see fees as a tax by another name. Consumers, labor and environmentalists, on the other hand, want fee collections to match the cost of regulation, mitigation and the services government provides.
None of that stopped California Forward from including the fees issue in its deliberations about the common-sense reforms we believe the state urgently needs. After all, if a non-partisan organization like ours couldn’t make the tough calls, who would?
After much debate and discussion, we chose a course that reflects both sound principles and political reality: regulatory fees and those used to mitigate the impacts of projects or charged for services like state park entry will still need a majority vote in the Legislature, but fees imposed to take the place of taxes will now require a 2/3 vote just like the taxes they replaced.
End of controversy? Not hardly. Calbuzz read our proposal differently – and a few others did as well.
We listened. As a result, this week the California Forward Action Fund amended our budget reform proposal to further clarify the issue while keeping the original balance. You can read our revised proposal here. [It’s a pdf]
Like any change made at this point in the process, the amendment took time and money. But we believe it was worth the effort and expense, if for no other reason than to demonstrate our commitment to pursue these reforms as openly and transparently as possible.
Californians are hungry for the reforms we’ve incorporated into the initiatives we’ll soon be circulating for the November 2010 ballot. But they’re just as eager for leaders who keep their word, even in the face of criticism and controversy. At California Forward, we’re committed to both.
Now, you may ask yourself, “WTF is this all about?” And who could blame you? But, if you care about the Legislature’s authority to raise revenues – a subject we at Calbuzz deeply, emotionally and psychologically, if not religiously, think is pretty damned important, then it matters.
Back in 1997, when the California Supremes decided the Sinclair Paint case, one of the guys who argued on behalf of the Western States Petroleum Association, Western Independent Refiners Association, California Manufacturers Association, California Chamber of Commerce and California Taxpayers’ Association — what you might loosely call your business interests – was Richard E. Nielsen, of counsel at Pillsbury Winthrop Shaw Pittman in San Francisco. He was a former Deputy Attorney General with the Tax Division of the California DOJ and a former tax auditor with the California State Board of Equalization.
“The Supreme Court stated that all regulatory fees are necessarily aimed at raising revenue to defray the cost of the regulatory program in question, but that fact does not automatically render those fees taxes,” Nielsen wrote.
“Over $45 million in fees have been collected under the Act,” Nielsen concluded. “The potential impact of Sinclair is tremendous since it is completely dependent upon the Legislature’s propensity to camouflage taxes as fees. Virtually every industry can be found to place some type of burden on society and now the Court has only limited the Legislature’s ability to impose fees on those industries within the bounds of its inventiveness.”
This is what anti-tax forces were worried about. Until Calbuzz noted what was going on, Cal Forward was so eager to appease business interests they were prepared to require a two-thirds vote on any fee that would replace “revenue that in the same or the prior fiscal year was generated by a tax” – or, as we saw it, any fee that replaced tax revenues of any sort. When they realized what they’d done, Cal Forward altered this language. Their new proposal would limit which fees that require a two-thirds vote.
Here’s a scenario that explains why the news Cal Forward language is different from the old.
Let’s say the general fund budget for state parks is $130 million and the governor says there’s going to be a 10% cutback across the board, which would mean a cut to the parks budget of $13 million.
But let’s say an enterprising legislator comes up with the idea of a $1 per auto pollution clean-up fee tacked onto all state park entry fees, with the new revenue – which just happens to be $13 million — dedicated to park maintenance and clean-up.
The Sinclair Paint decision makes it perfectly possible for the Legislature to do this with a majority vote.
But under the previous California Forward proposal, that fee increase would have required a two-thirds vote of the Legislature. That’s because the previous proposal said a two-thirds vote was needed for “any bill that imposes a fee that replaces revenue that in the same or the prior fiscal year was generated by a tax.” And since general funds that pay for parks are generated by taxes, the provision would have applied.
The new proposal, however, only requires a two-thirds vote “if the fee is imposed in order to replace funding for specific programs, services or activities previously funded by a tax that is repealed or reduced in the same or the prior fiscal year.”
Instead of being tied to “revenue…generated by a tax” the two-thirds requirement now would be tied to “funding…funded by a tax that is repealed or reduced.” So the new parks pollution clean-up fee – as permitted by Sinclair — could be passed by a majority vote.
You’re getting sleepy…your eyes are getting heavy….
