California’s unique political system can be a mystery to those unfamiliar with its idiosyncrasies. However, a basic understanding of some important California political tenets can pay huge dividends. There are two key tools for protecting important policy interests in California: (1) the initiative measure; and (2) the referendum.
An initiative measure is a policy proposal that is placed on the ballot for public vote. An initiative measure is generally used when there are political barriers to legislation, but broad public support exists for the proposed policy. Initiatives have few legal restrictions, but generally they must only pertain to a single subject and comport with the United States Constitution.
A referendum measure is used to give voters an opportunity to approve or reject a recently enacted law. Proponents of a referendum are generally seeking repeal of recently enacted legislation. Thus, for a referendum to succeed, the statute being referred must have broad public opposition.
Proposition 26 is an example of an initiative measure. Proposition 26 was enacted in November 2010 and amended California’s Constitution to more broadly define “taxes” and more narrowly define “fees” for purposes of the two-thirds legislative vote requirement related to tax increases. Specifically, Proposition 26 requires a two-thirds legislative vote for “any change in state statute which results in any taxpayer paying a higher tax.” Proposition 26 defines tax as “any levy, charge, or exaction of any kind imposed by the State, except” certain regulatory fees, user fees and court-ordered fines and penalties. Prior to Proposition 26, bills that raised taxes, but had no net revenue impact, required only a majority vote. Thus, so-called “revenue-neutral” bills allowed for tax increases without having to secure Republican votes. Proposition 26 now provides taxpayers with a basis on which to challenge tax increases that do not meet the requirements for enactment—a major policy accomplishment that could not have been achieved by legislation.
A referendum measure is more restrictive than an initiative because only certain statutes are subject to referral. The California Constitution prohibits the referral of statutes that call for elections or are deemed to be “urgency measures,” “tax levies,” and “appropriations for the usual and current expenses of the state.” The restriction on referral of tax levies generally means that a tax increase would not be subject to referendum. However, if the statute is not deemed to be a “tax levy” or other nonreferrable statute, it is fair game for the referendum process. For a referendum measure, a taxpayer must file a title and summary and obtain 505,000 signatures to qualify the measure for the ballot and public vote. It is estimated that several million dollars of funding is required to fund the process to obtain the requisite number of signatures for ballot qualification, absent major grass roots support. Once signatures are obtained and the referendum is certified for the ballot, the fate of the recently enacted law is left to California voters.
While initiative and referendum measures offer taxpayers the ability to achieve a desired result through public support, the measures carry some burdens. Under California’s campaign finance disclosure laws, taxpayers that pursue an initiative or referendum measure must disclose their company name, how much they spend on the campaign, and any contributions received in support of the campaign. In addition, despite significant financial investments, an initiative or referendum measure may be unsuccessful. Thus, taxpayers should carefully weigh these risks and benefits in assessing the best path to achieving their desired objectives.