California Supreme Court weighs removing a measure making it harder to raise taxes from the ballot

FILE – California Gov. Gavin Newsom discusses his proposed state budget for the 2024-2025 fiscal year, during a news conference in Sacramento, Calif., Jan. 10, 2024. The California Supreme Court will hear arguments Wednesday, May 8, 2024, about whether to remove a measure from the November ballot that would make it harder for state and local governments to raise taxes. (AP Photo/Rich Pedroncelli, File)

SAN FRANCISCO (AP) — The California Supreme Court is weighing whether to keep a measure off the November ballot that would make it harder for the state and local governments to raise taxes, in a legal battle pitting Gov. Gavin Newsom and Democratic lawmakers against the business groups and taxpayer advocates who organized the initiative.

Several of the seven justices who heard arguments Wednesday questioned whether keeping the entire measure from the ballot, which would be a rare step for the court, was the best option. The justices also sought to better understand the measure’s impact on local governments’ ability to raise taxes and fees.

Under the current system, the Legislature can raise taxes with a two-thirds vote in both the Senate and Assembly. The initiative would require that voters also approve any new tax hikes after legislative passage for them to take effect.

The measure would also change the voting threshold by which communities can raise taxes through ballot initiatives, from a simple majority to a two-thirds majority.

A lawsuit filed last fall by Newsom, the Legislature and others sought to have the measure removed from the ballot, saying it would change the power of taxation assigned by the California Constitution to the Legislature and weaken the executive branch’s administrative and regulatory powers.

Thomas Hiltachk, a lawyer representing supporters of the measure, told the court the initiative should be allowed because the concerns over its possible impacts are based on speculation. Aspects of it could be challenged later if it is approved, he added.

Chief Justice Patricia Guerrero, right, speaks next to Associate Justice Carol A. Corrigan at the California Supreme Court in San Francisco, Wednesday, May 8, 2024. The California Supreme Court heard arguments Wednesday about whether to remove a measure from the November ballot that would make it harder for state and local governments to raise taxes. (AP Photo/Jeff Chiu, Pool)

Statements about the measure’s impact are “based not on evidence submitted to this court but on the opinions of people in the government who do not want change,” Hiltachk said.

The court is expected to decide before June 27, the deadline for the Secretary of State to certify the general election ballot.

Opponents of the measure say it would effectively, and unlawfully, amend the state constitution without going through the usual process of ratification at a constitutional convention or two-thirds approval in the Legislature, followed by a measure put before voters. The measure would take away lawmakers’ ability to impose taxes and leave them only with the power to propose them, said Margaret Prinzing, who represented Newsom and the Legislature.

Chief Justice Patricia Guerrero speaks at the California Supreme Court in San Francisco, Wednesday, May 8, 2024. The California Supreme Court heard arguments Wednesday about whether to remove a measure from the November ballot that would make it harder for state and local governments to raise taxes. (AP Photo/Jeff Chiu, Pool)

“That’s a fundamental shift in power that separates (this measure) from all the other tax measures that have come before it,” she told the justices.

The measure would also reclassify many government fees as taxes and apply retroactively to any increase approved after Jan. 1, 2022.

Opponents also say that would curtail revenue needed by local communities for essential public services, from collecting trash to fighting fires, and make it hard to respond to emergencies like earthquakes and pandemics.

The proposal would put more than 100 local measures, totaling $2 billion in annual funding, at risk, said Carolyn Coleman, CEO of the League of California Cities. It opposes the measure, alongside firefighters and teachers unions, calling it “deceptive” and “an existential threat” to local governments.

“We’re raising the resources to fill potholes, so that we can support affordable housing in our community, so we can work to address homelessness, so that when you dial 911 there’s somebody there to answer the phone — not in two minutes — but in 30 seconds,” Coleman said. “So this really goes against the essential nature of how local government raises the revenues to provide services that everyone wants.”

Brooke Armour, executive vice president of the California Business Roundtable, which represents large companies and is a lead proponent of the initiative, disputed Coleman’s numbers, saying only about 28 local initiatives would be affected and it would only impact tax increases posed through citizen initiatives.

Special taxes put on the ballot by local elected officials already require a two-thirds vote for approval, Armour added, and all measures raising general taxes would still be approved with a majority vote.

Associate Justice Goodwin Liu asked Hiltachk about what types of fees or taxes would be affected, saying, “If a local senior center wants to charge a fee for rental of its facilities, that now has to be approved by the by the city council. In order to do that, this would be subject to the referendum power, right?”

Hiltachk responded that municipal officials normally enact those types of fees, and they would not be touched. But local and state administrative agencies would no longer be able to raise fees without the approval of the local governing body.

“What we have evolved into is it is an administrative state that has far too much power among non-elected bureaucrats, who no one knows their name, setting fees not for a fishing license fee, that’s not what this is about, but raising billions of dollars out of the economy without any legislative oversight,” he said.

Supporters of the measure say Californians face some of the highest taxes and one of the highest costs of living in the country and that the changes are needed.

“The whole issue here is that they are scared to death of the people of California being empowered to vote on state and local taxes,” said Rob Lapsley, president of the California Business Roundtable.

Newsom and Democrats who dominate statewide government have faced persistent criticism that California has become too expensive for many of its 39 million residents. A Newsom spokesman said the governor’s opposition to the measure doesn’t indicate he supports higher taxes.

“You can both be opposed to new taxes and to destructive ballot measures that would hamstring government from protecting itself in a crisis,” spokesman Bob Salladay said in a statement.