The Twin Battle Over the Budget

Proposition 25 would make it easier to pass a budget each year, while Proposition 26 would make it tougher to raise revenues.

Gridlock in Sacramento is not just about partisanship; it’s also about process. State lawmakers fail to pass a budget on time in most years because California law requires a two-thirds-super-majority vote of the Legislature to pass a budget. But Proposition 25 would ease capitol stalemates by changing California law to conform with those in 47 other states that only require a simple majority vote on budget bills.

However, opponents of Prop 25 contend it’s a Trojan horse that would make it easier to raise taxes. They say the measure contains a hidden provision that would allow legislators to circumvent a state law requiring a two-thirds vote on any tax increase — if they include tax hikes in the budget. “If you look closely at the language, it only requires a simple majority of the vote on taxes in the budget,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “It’s an agenda to grab more taxpayer funds.”

But Prop 25 supporters argue that the anti-tax groups are seeing things that don’t exist. “It’s a totally bogus issue,” said state Treasurer Bill Lockyer. “You can’t incorporate a tax increase into the budget. Any tax bill would still have to have a two-thirds vote.”

Prop 25 backers point to a recent state appellate court ruling that agreed with them. “In our view, Proposition 25 cannot be interpreted to operate as an end-run around the two-thirds vote requirement for raising taxes,” the Third District Court of Appeals ruled in August. “We find nothing in the substantive provisions of Proposition 25 that would allow the Legislature to circumvent the existing constitutional requirement of a two-thirds vote to raise taxes.”

But Prop 25 opponents note that the appellate court ordered that its decision not be published and so it does not apply to other courts. In addition, they argue that Democrats wouldn’t be pushing for Prop 25 unless it would make it easier to raise taxes. Democrats respond that they back Prop 25 because it will allow them to make budget appropriations that they agree with — such as more money for social programs and the environment and less for prisons — without having to obtain Republican buy-in.

Proposition 26, on the other hand, would make it much tougher for state and local governments to raise revenues. It would redefine numerous “fees” as “taxes,” thus requiring a two-thirds vote in the Legislature or a two-thirds vote of the electorate. “It’s so hard to get anything done now in Sacramento and this would make it even harder,” Lockyer said. “It also could be very restrictive for local governments.”

But anti-tax groups contend that state and local governments call taxes “fees” to get around the two-thirds vote requirement. “It’s a needed reform,” Coupal said. “The whole purpose to label something a fee is to avoid voter approval.”

The measure, however, is not only backed by anti-tax groups, but also by large oil, chemical, and alcoholic beverage companies. The reason is that Prop 26 would turn oil recycling fees imposed on oil companies, hazardous materials fees imposed on chemical businesses, and liquor fees imposed on alcoholic beverage companies into taxes. State and local governments enact such fees to clean up toxic waste sites and for code and law enforcement. Not surprisingly, Chevron had pumped $2.5 million into the Yes on 26 campaign as of late last week, and the American Beverage Association, a national trade group for alcoholic beverage companies, had donated $1.95 million.


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