Sacramento Capitol Building image via wikipedia user Suvicce

The California Supreme Court sided with Gov. Gavin Newsom and Democratic leaders in the Legislature on the constitutionality of a sweeping anti-tax measure, ruling today that it cannot go before voters in November.

The business community-sponsored initiative, formally known as the Taxpayer Protection and Government Accountability Act, broadly aimed to make it more challenging to raise taxes in California, including by requiring the Legislature to seek approval from the voters for any new or higher state tax.

Newsom and legislative leaders sued last fall to stop the measure, arguing that it amounts to an illegal attempt to revise the California Constitution and would impair essential government functions. 

In a unanimous decision, the Supreme Court agreed, ordering Secretary of State Shirley Weber to refrain from taking any steps to place the initiative on the Nov. 5 ballot.

The proposed changes “are within the electorate’s prerogative to enact,” Justice Goodwin Liu wrote, “but because those changes would substantially alter our basic plan of government, the proposal cannot be enacted by initiative.”

The extraordinary decision marks the first time in more than two decades that the court has struck an initiative from the ballot. It last happened in 1999, with a measure that sought to restrict state officers’ pay and transfer redistricting power out of the Legislature.

Critics called into question the intentions of the seven-member court — six of whom were appointed by Democratic governors, including three by Newsom. Proponents of the initiative called the ruling “the greatest threat to democracy California has faced in recent memory” and accused the court of putting “politics ahead of the Constitution.”

“Direct democracy and our initiative process are now at risk with this decision, showing California is firmly a one-party state where the governor and Legislature can politically influence courts to block ballot measures that threaten their ability to increase spending and raise taxes,” Rob Lapsley, president of the California Business Roundtable, Jon Coupal, president of the Howard Jarvis Taxpayers Association, and Matthew Hargrove, president and CEO of the California Business Properties Association said in a joint statement. “This ruling sends a damning message to businesses in California and across the country that it is politically perilous to invest and grow jobs for the future.”

A spokesperson for Newsom said in a statement that “the Governor believes the initiative process is a sacred part of our democracy, but as the Court’s decision affirmed today, that process does not allow for an illegal constitutional revision.”

In his opinion, Liu acknowledged the unusual nature of the preelection review, but wrote that waiting until after voters weighed in to consider the constitutionality of the initiative “would be more challenging than in a typical case” because it includes a retroactive provision that could invalidate existing taxes.

It “would thus require the state and localities to start preparing to administer special elections if they wish to avoid nullification of taxes or charges,” Liu wrote.

Proponents, led by the California Business Roundtable, introduced the initiative to crack down on what they contend are loopholes created by legislators and court rulings that weakened previous voter-approved tax accountability measures and allowed an unelected administrative bureaucracy to flourish. It has been heavily supported by the real estate industry and a private ambulance company, which frequently battle local governments over taxes, fees and assessments to fund public services.

The measure would also have increased the margin to pass a voter-initiated special tax at the local level, to two-thirds from a simple majority; restricted how officials can calculate the cost of fees that fund public services and programs; and reclassified some of those charges as taxes.

These changes could have upended the operation of California government at every level, prohibiting administrative agencies from setting levies and requiring the Legislature or local governments to turn to the voters to adjust them. Cities, counties and the unions that represent their employees have raised alarms that the initiative would blow a hole in their budgets, threatening their ability to provide essential services.

They celebrated the Supreme Court decision as a victory over corporate greed.

“The Taxpayer Deception Act was a flagrant attempt by a few extremely wealthy real estate developers to undermine our entire democratic system and our voice as voters and devastate the vital services Californians rely on — all to avoid paying their fair share,” David Huerta, president of SEIU California and SEIU United Service Workers West, said in a statement. “Today’s ruling is a strong warning to corporate interests that even those with the fattest pocketbooks will be held accountable to follow our laws.”

Opponents argued in court during a hearing last month that, rather than simply amending tax law in the state constitution, the initiative amounted to a fundamental restructuring of how government operates — a more substantial change that can only be proposed by a two-thirds vote of the Legislature or through a constitutional convention. The initiative’s proponents countered that the power of the legislative branch has always been shared with the public and urged the justices not to intervene in a political conflict that should be settled by voters.

Democratic lawmakers must now decide by June 27 whether to continue with a competing measure that they placed on the November ballot last year to undermine the California Business Roundtable initiative.

The legislative measure flips the California Business Roundtable’s own higher standards around, requiring any changes to the threshold for approving state and local taxes pass by that same margin. That would have meant the anti-tax initiative needed to secure two-thirds support from the electorate to become law, rather than a simple majority, a high hurdle for a statewide ballot measure.

A representative for Assembly Speaker Robert Rivas, did not immediately respond to a question about the Legislature’s plans, but in a statement, the Salinas Democrat said he was “very pleased the California Supreme Court rejected this unlawful and extreme effort to take power away from local communities to pay for essential services like police and firefighters.”

Republicans slammed the ruling as partisan politics that silenced more than a million voters who signed the petition to place the initiative on the ballot.

“I’m disgusted,” Senate Minority Leader Brian Jones, a San Diego Republican, said in a statement. “The court has failed in its duty to the people of California and our democratic system and instead simply caved to pressure from the governor and legislative Democrats.”