Proposition 26, approved by Californians on Tuesday, now
requires a two-thirds supermajority vote in the California state
legislature to pass many of the fees and charges that under prior
rules were enacted by a simple majority vote. Supporters of the
initiative call it the "Stop Hidden Taxes" initiative,
because they believe that such fees amount to taxes, and should
therefore require the same supermajority vote required to enact
income or sales tax increases.
While the target of Proposition 26 was not specifically
environmental fees, the impact of this new law could fall heavily
on environmental programs. In particular, Proposition 26 may thwart
establishment of a stable funding stream for key state
environmental efforts including the Green Chemistry Initiative
which, although already enacted, does have established
funding.
The Green Chemistry Initiative is aimed at controlling exposure to
hazardous chemicals by creating a systematic, science-based process
to evaluate chemicals of concern in various products. Proponents
believe that the effort will stimulate innovation in
California's product development sector.
However, since Proposition 26 requires a 2/3 vote not just on
revenue bills, but on any legislation that results in a single
person paying more tax (taxes being broadly defined), the
Proposition can be read as transforming into a tax any regulatory
action that requires a business to pay a higher regulatory fee. In
addition, state government now has the evidentiary burden of
demonstrating that a fee is not a tax, essentially giving the
taxpayer the legal presumption that the tax is invalid.
Similarly, California's Global Warming Solutions Act, AB 32, is
another high-profile program under which the state may impose
future regulatory fees to fund the program. To the extent that
future AB 32 fees go beyond amounts necessary to effectively
compensate the state, those fees could potentially be reclassified
as taxes under Proposition 26. However, because AB 32 was enacted
well before Proposition 26's effective date, it is unclear
whether the program will be drawn into the Proposition 26
limitations.
While it will remain unclear for the immediate future what fees now
require a 2/3 majority vote, it appears certain that the Green
Chemistry Initiative will be among the first to face the funding
challenge under Proposition 26.
Voters showed strong support for California's Global Warming
Solutions Act, rejecting a ballet proposition that would have
suspended implementation of the Act until unemployment dropped to
5.5% or less for a full year. The measure was opposed by Governor
Schwarzenegger, who argued that it would undermine growth of the
state's green economic sector.
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