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Full disclosure: We have spoken with Mr. Hiltachk in March 2019 about another local measure election (Los Angeles County, Measure E, 2019). Our impression was that he was more interested in finding paying clients. That's totally understandable. He also represented one our members in another local election case (San Mateo County, Measure Q, 2020) with disappointing results. In that case, we attempted to point out to members of his firm all the ballot label violations in a school bonds measure.
We're not going to go into all the details of this case. The Supreme Court has a complete list of links to all the documents filed with the court at its web site.
The focus of the discussion will be a few key arguments and rebuttals in which the court demonstrated interest during the oral argument.
For reference, the full transcript of the oral arguments is reproduced below.
This case is not about what TPGAA will accomplish. On the part of the government, that would be considered speculation about harm. On the part of Hiltachk, it would be less speculation and more about purpose or intent.
When Hiltachk presents evidence, answers questions, or argues, he is in the capacity of both the proponent and the lawyer for the proponent. These materials are, at least, evidence of what he believes TPGAA will do. This evidence can be used in future proceedings. In other words, to the extent that Hiltachk boxes in TPGAA to certain purposes and effects, he will have a hard time in a later case to argue that the evidence he presented here is misunderstood or not applicable.
In his opening argument, Hiltachk, referring to the Legislature's predictions of drastic effects, states at 27:53: "First of all, it's possible that the Taxpayer Protection Act may not apply. So we're dealing with speculation upon speculation upon speculation." He's right. Anything about the future is speculative, thus Nancy Pelosi's infamous quote mentioned elsewhere.
Nevertheless, that's a very cagey way of putting it. Maybe he truly doesn't believe that. More likely he is smartly trying to allay the government's fear arguments, but more importantly not box himself in to specifics about what TPGAA does.
Remember that, as in all legal proceedings, the person making the claim bears the burden of proving it. So the Legislature must prove that TPGAA is a revision or whatever other arguments it makes. Hiltachk must only argue to the extent that he undermines the Legislature's claims.
For the convenience of our audience, below are all the materials (copied from the Supreme Court's web site) filed in the case to date.
More than 18 months after TPGAA was approved to circulate petitions and 9 months after it formally qualified for the next ballot, the Legislature, along with the Governor, filed a petition for writ of mandate to direct the Secretary of State (Weber) to remove TPGAA from eligibility.
While the writ is directed to Weber, the real party in interest is the proponent of TPGAA. There is only one named proponent, Thomas Hiltachk, who is also a lawyer representing the proponent. Patently, Hiltachk is not the proponent in the sense that regular people would consider it. Hiltachk represents the funders. Hiltachk is paid by the funders for everything he does, both as the proponent and as the lawyer for the proponent.
From the point of view of the public and the point of view of the funders, Hiltachk's opening argument reveals that TPGAA is a money-maker. A money-maker for him and his firm. In the world of lawyers, the lawyers who bring in the money for the firm are called rainmakers. Hiltachk is a rainmaker.
At 27:44 Hiltachk states: "This is most decidedly a case that begs for post-election analysis, and there are multiple reasons for that." In other words, either by temperament or by design, TPGAA is going to be in court. The more it's in court, the better -- for Hiltachk.
Go back and look at our analysis for
We have only respect for people who bring home the bacon. Where the ethics gets dicey is when there is a conflict of interest. Bringing in money for the firm versus accomplishing something beneficial for tax payers.
Several times during Hiltachk's argument time, Justice Liu questioned him about specific examples of what TPGAA applied to. The examples, at 43:12, were "park fees, library fines, traffic tickets." Hiltachk expertly avoided direct answers. At 47:39, he responds, "Prior to the expansion of the administrative state in the last 20-30-40-50 years, all fees were approved, proposed, and enacted by statute in California." He's good at dodging the questions. In front of an appellate court that's good. For us hoi polloi voters, it begs the question: What are we voting for?
None of the amici curia, on either side, were given time for oral argument. That's probably all for the better. There was very little of value, but a lot of whining, in the briefs that we reviewed.
We're not going to go into a deep analysis of Ms. Kaminski's declaration as it is mostly irrelevant. Like Yonan for Hiltachk, she is a less experienced lawyer assigned a task that likely took a lot of time and therefore billed to the tax payers of California at a much lower rate than Ms. Prinzing. She likely also had the help of non-lawyer staff at an even lower billing rate.
First, we note her research source, the California Election Data Archive (CEDA). We discovered CEDA about eight years ago, when our scope expanded from school bond elections. On page 6 of her declaration, Kaminski cites a Supreme Court opinion that cites CEDA as "a compilation of candidate and ballot results for all local California elections." The Supreme Court is in error, most likely because the lawyers, who are members of the brain-trust, in the cited case
So, instead of relying on personal knowledge, Kaminski relied on hearsay and inadvertently lied to the Supreme Court. We point this out again because it is a pattern with lazy lawyers and lazy judges (and their clerks). Clearly the lazy lawyers in the cited case didn't do their homework. So now we have an opinion that contains a patently false statement. Why were we able to point this out? Because we spend the time, thousands of unbilled hours over the years, to get to the root. Does this CEDA issue make a difference in this case? Likely not. However, there have been thousands of special district measure elections since 1995 that are not included in CEDA. Since January 1, 2022 we know there are XXX special district elections that are not included in CEDA's compilation. How do we know that? Because we spent the time to gather that missing information. What's the verse from the Bible? It's part of the Parable of the Wise and Foolish Builders. "Everyone who hears these words of mine and does them not, is like a foolish man who built his house on the sand. And the rain came down, and the floods came, and the winds blew, and beat on that house; and it fell -- and great was the fall of it." - Matthew 7:26-27 (ESV) It takes more work to build a house on a solid foundation, like a rock, just like it takes more time to build a case on a solid foundation.
To her credit, however, Kaminski didn't rely solely on CEDA and included many special district measures not compiled in CEDA in her Exhibit A. Also, to her credit, she includes school bonds in her Exhibit B. Yonan's declaration excluded school bonds, perhaps because of the constitutionally set vote requirements that are not overridden by TPGAA, perhaps to avoid the wrath of the California Teachers Association, or perhaps for the actual legal reason which eluded Kaminski.
The legal reason is that Art. XVI, Sec. 18 provides that general obligation bonds have a special status. They are unlimited tax rate issuances. That means they will be repaid, come hell or high water or earthquake or asteroid impact no matter how high the tax rate needs to go. The other legal reason is that proposed bond issuances are automatically validated after sixty days from the resolution authorizing their issuance in accordance with Code of Civil Procedure section 864. We know of two school districts with bond elections in 2022 that adopted resolutions to issue bonds where there was no present intention to issue bonds at the time the resolutions were adopted. The strategy to accomplish this was discussed at illegal closed sessions with bond counsel under the ruse of Government Code section 54956.9 (the litigation exception to the Brown Act) in order to prevent the public from learning the strategy. They got away with the illegal closed sessions because the district attorney cleared the Brown Act violation complaint by "talking" to the districts' counsel. You just can't make up the extent to which local governments will commit criminal offenses because they know the alleged prosecutors will look the other way.
Just waiting out the 60 days is all it takes to prevent any action against bonds. Those proposed issuances are well past the validating period. Those districts, and perhaps others, were protecting themselves against the bond election being vitiated. There may be more such resolutions out there. Whether the tactic is lawful is another story. So some property owners in California are paying taxes into a sinking fund for bonds that have yet to be issued. Do you think any property owners, when they get their tax bill and see amounts for voter-approved bond measures check whether the bonds have actually been issued? Pretty wild, huh? This is the kind of slimy stuff that the people of California have to deal with from the corrupt public officials and the coterie of professionals who earn their millions at the public trough.
Other districts may have actually issued bonds for at least some part of the authorization. There are no appellate opinions that have considered overturning an election when part of the bond authorization has been issued. While the issued bonds are untouchable, it would not be too wild to argue in court that the court cancel bond authorization for the remaining unissued bonds. The board of supervisors of a county already has the power to cancel, by resolution, unissued bond authorization, so we contend that a court could cancel unissued bond authorization or direct the board of supervisors to do so. TPGAA, as you must realize by now, doesn't deal with any of these details. TPGAA only deals with details it's interested in.
Did Kaminski not know the laws involved? Was she told to include school bonds to make the petitioners' case more dramatic? Good questions, right? Unless a lawyer gets her on a witness stand under oath in some case, and the lawyer is willing to buck the corrupt system, we will never know.
Nevertheless, with respect to the ad valorem bond measures on both Exhibit A and Exhibit B, Kaminski does not delve into the law, Chapter 5 of Division 9 of the Elections Code, which applies to all elections where the voters approve an ad valorem tax to repay bonds.
Those measures would be invoking either Proposition 46 (1986), a Legislature constitutional amendment with a two-thirds vote requirement, or Proposition 39 (2000), a statewide initiative-by-voter-petition constitutional amendment with a 55% vote requirement.
Elections Code section 9401 requires that every bond measure that imposes an ad valorem tax must create what is generally referred to as a tax rate statement. The tax rate statement is a bunch of estimates that go into determining the estimated tax rate. The financial advisor to the local governing body usually provides the estimates based on what the local governing decides, policy-wise, about what it wants to achieve in terms of tax payer impact. If the local governing body wants the tax payers to hardly notice the tax, it can delay issuance of bonds until other, existing general obligations have been redeemed. It can also decide to issue some "evil" capital appreciation bonds, where the governing body gets the money now, but the tax payers don't see it on their tax bill for years, sometimes 10 years. Then all of a sudden the tax payers are popped with a balloon-like tax rate, because the debt has been accreting interest for all those years.
No matter what the local governing body wants, for Proposition 39 (2000) bond measures, the estimated tax rate must come in at or under the maximum rate allowed by Education Code section 15268 ($30 per $100,000 assessed value for elementary and high school districts) or section 15270 ($60 per $100,000 assessed value for unified school districts and $25 per $100,000 assessed value for community college districts). Capping the tax rate prevents, theoretically, a district from creating too much debt relative to the total assessed value of property in the district. That's theoretical. In fact, if the desired bond authorization amount results in a tax rate that exceeds the maximum allowed by statute, districts regularly divide the bond authorization amount into more than one measure so that a bond authorization that might have required a $120 tax rate in a single measure requires only a $60 tax rate for each of two measures. Property-poor districts use this tactic on a regular basis, whether or not it is actually legal. The statutes, above, set the limits for "a single election". "Election" is not defined. We contend it means a single election date. The sleazy C.A.S.H. acolytes silently presume it means a single measure or contest. Since the voters in property-value-poor districts, are more likely to be clueless about the law or believe that the election officials follow the law, this scam has never been challenged in court. The other likely illegal work-around is to divide the district functionally by type of school or geographically into "school facility districts" and split the over-the-limit tax rate between the functional or geographic boundary. If it's that easy to get around the statutory limit, what purpose does it serve? (Remember the maxim: Quando aliquid prohibetur ex directo, prohibetur et per obliquum. [what cannot be done directly cannot be done indirectly.])
Theoretically, either the registrar, or the county counsel, or the board of supervisors should reject any measure or measures where the estimated tax rate exceeds that allowed by statute for a single election. While we don't know of instances of single-measure Proposition 39 (2000) tax rates exceeding the statutory limit, we suspect that the issue never even crosses the minds of those with duties involving elections. In a pinch, the district can also get a formal waiver from the maximum tax rate for a single election under the general waiver authority of the California Department of Education. We've never seen a waiver request related to school bonds denied.
There is, however, one provision of section 9401 that applies in the context of TPGAA. It's subdivision (a)(1) (emphasis added):
The best estimate from official sources of the average annual tax rate that would be required to be levied to fund that bond issue over the entire duration of the bond debt service, based on assessed valuations available at the time of the election or a projection based on experience within the same jurisdiction or other demonstrable factors. The estimate shall also identify the final fiscal year in which the tax is anticipated to be collected.
So, unless voters read the tax rate statement, where that estimated "final fiscal year" is provided, they have no clue as to the duration (how long) over which the tax levy will run. The tax payers, via the local governing body, pay the financial advisor for this information. It's known. But the local governing body, when it comes time to put the duration on the ballot uses language that intentionally avoids the mandatory disclosure of the duration in order to hide the bad news from the uninformed voter as to how long they will be paying the tax. Obviously, the Legislature believe a true duration, even if estimated would effect the decision of the voter, just like the duration of payments are disclosed in consumer debt financing. Instead, the miscreants -- the clueless governing body, the devious bond counsel, the conflicted financial advisor, and the anything-for-the-win campaign marketing or public opinion research firm -- who all want to make sure the measure passes, use meaningless language like the popular "while bonds are outstanding" or some other rubbish about "maturity." All this language discloses nothing about the duration of the tax. They do this uniformly, in every jurisdiction in the state (look at Kaminski's Exhibit B) as if by a common scheme, to violate the law, often referred to as a conspiracy. Now, with all-mail elections it's honest services fraud, a federal crime involving the use of the mail. Could a consumer debt financing disclosure get away with a duration of "until paid off" or "while debt is outstanding?" Apparently, the brain-trust, by sworn testimony presented in this case, believes it can.
Had the brain-trust actually been on the side of disclosure, it would not have used the word "duration." "Duration" is already used in section 13119(b). It is ignored there. It will be ignored in the Constitution. Had the brain-trust actually looked at how "duration" has been misused in tax elections since AB195 was enacted, it would have used language that answers the question "How long?" We contend that "duration" should be replaced with "the fixed or estimated period of years over which the tax will be collected (example, "for 30 years") or the date on which the tax expires (example, "until June 30, 2054") or, if the tax has no sunset date, "forever."" (See Manipulating Elections.)
There's a related story to tell here. In 2018, the first year elections were subject to AB195 (amending Elections Code 13119), our members sent letters to every county registrar in the state. Registrars in counties with school bonds on the ballot in June received a letter in March, at the filing deadline for the June primary election. All received a similar, but lengthier, letter in late July or early August, more than a week before the November general election filing deadline. This story is about Monterey County, so you can read the 27-page letter that was sent to Mr. Valenzuela and his deputies, county counsel, and the board of supervisors.
For the March 2020 (presidential primary) election, Mr. Valenzuela appeared to have taken the letter to heart. For all bond measures that were completely within his jurisdiction, he required either the final year (from the tax rate statement) or a number of years printed on the ballot as the duration. When bond counsel for a wealthy Monterey County school district learned of the requirement just prior to the August filing deadline for the November general election, he raised holy hell. He threatened a lawsuit if Valenzuela rejected the school district's bond measure as submitted. Corrupt county counsel folded, as did Valenzuela. The C.A.S.H. bully got his way. We have the details on how we learned of this behind-the-scenes kerfuffle.
Well, you might argue, as the bully argued, that the final year is just an "estimate." But, as we've already explained, every piece of information required on the tax rate statement, including the tax rate itself, is just an "estimate" too. Since a whole series of variables, that are all dynamic, go into calculating the estimates, no one can predict before an election what the actual taxes will end up being over the next 25 to 40 years. The Legislature has determined that regardless, a "best estimate from official sources" satisfies its requirement to inform voters as to the nature of a tax that will effect their property for decades.
Factually, the tax rate for a general obligation, as set by Art. XVI, Sec. 18 is unlimited. Did the bully want the ballot to read "tax rate as high as necessary to repay the debt?" What voter would vote for that?
So to conclude the discussion of Kaminski's declaration, she is either oblivious to the law or in on the con. Nearly every ad valorem tax bond measure ballot label is intentionally written to hide the known, estimated duration, which is usually around 30 years. Unless a local governing body intends on sitting on unissued bond authorization for decades, most plan to issue all the bonds authorized within a 5 to 10 year period after the election. There are some school and college districts, however, who put school bond measures on the ballot at regular intervals, "banking," so to speak, bond authorization. We know of many district with hundreds of millions and a few with billions of "banked" bond authorization. This "banking" results in newer property owners, years down the road, suddenly getting hit with huge spikes in taxes when the "banked" bond authorizations get issued. We contend that the districts that "bank" bond authorization do it for the "rainy day." When the economy goes south and the voters are unlikely to approve new taxes, the districts simply start issuing some of their "banked" authorization, to the further determent of the economy, but to the advantage of public and private unions who benefit from all that "banked" bond authorization. To our knowledge there is no way for a prospective property owner to easily determine how much potential tax liability exists for "banked" or unissued bond authorization. If the brain-trust were really interested in the plight of tax payers, it would sponsor legislation or an initative that automatical cancels unused bond authorization after a fixed number of years and makes it a public offense for bond counsel, financial advisors, and underwriters to issue or attempt to issue cancelled bond authorization.
If TPGAA had any teeth, every ad valorem tax bond measure elections since 2021, including all the measures that are or will be on the ballot in 2024, would be void. But when the brain-trust acquiesces to the nonsense of the bullies, the tax payers don't have anyone on their side.
For a discussion of the toothless TPGAA, read our commentary under TPGAA Section 6 (Art. XIII C, Sec. 2(g).).
When we started out in 2015, our primary focus was opposing the ballot label violations (dishonest ballots) for school bonds. We soon learned an even worse situation existed for school parcel taxes, so we added that to our area of interest. Again, with experience, we found the dishonest ballot issue was statewide and not limited to taxes. We contend that we can demonstrate that nearly every local measure ballot label violates the statutory law as well as the constitutional prohibition against the government using public moneys to take sides in an election.
So we looked at the amicus curia from the California School Boards Association to see what the school districts were whining about this time.
At page 21, the concluding paragraph to the argument regarding "School Parcel Tax Measures," we read this gem.
Yet, the Measure would eliminate the flexibility provided by citizen initiatives because it expressly supersedes this Court's decision in City of Upland and changes the required threshold from a simple majority to a supermajority of two-thirds to pass a special tax. (Measure, §§ 3, subd. (e), 6 [proposed art. XIII C, § 2, subd. (c)].) As a result, efforts for a parcel taxes to support school districts' various program needs by a voter's initiative can only be placed on the general election ballot. This would significantly diminish the ability of voters throughout the state to approve tax measures necessary to fund the operations of their local schools.
Every aspect of this statement is untrue, a lie. It's just an example of the rampant dishonesty by Coalition for Adequate School Housing (C.A.S.H.) and all of its cohorts, such as CSBA. TPGAA's proposed revision to Art. XIII C, Sec. 2(c) places no restriction on when an election may be held.
The implied basis of the lie is that
When will some court actually sanction the tax-payer-funded lawyers like these, who lie to their face and in writing?
There have been some who have placed initiative-by-voter-petition measures on the ballot as the electors of a city for a parcel tax to benefit a school district. (San Francisco County, Measure G, 2018, Los Angeles County, Measure A, June 7, 2022). The scheme is to get a parcel tax passed by majority vote under
The oral arguments on the case were heard on May 8, 2024.
The following is the transcript that of the video recording made by the court for this case. The transcript identifies the speakers and appears to be very precise, which indicates to us that court personnel conformed the transcript to the video recording. Consequently, we have made no edits to the text. We have, however, removed the fractional seconds portion of the timestamp.
00:00:22 CHIEF JUSTICE `: Good morning, everybody. 00:00:24 Welcome to Oral Argument before the California Supreme Court. 00:00:28 The clerk may call the calendar, please. 00:00:30 COURT CLERK: Good morning. The Supreme Court of California hearing oral arguments 00:00:33 in San Francisco on Wednesday, May 8, 2024, at 9:00 a.m. 00:00:38 Case No. S281977, Legislature of the State of California, 00:00:43 et al., Petitioners v. Shirley N. Weber. 00:00:47 Secretary of State, Respondent; Mr. Thomas W. Hiltachk, 00:00:52 Real Party in Interest. For Petitioners, Ms. Margaret R. Prinzing. 00:00:58 MARGARET PRINZING: Ready. COURT CLERK: For Real Party in Interest, Mr. Thomas Hiltachk. 00:01:02 THOMAS HILTACHK: Ready. COURT CLERK: Case Nos. 00:01:05 269099 and S271493, Golden State Water Company, 00:01:11 Petitioner v. Public Utilities Commission, 00:01:14 Respondent; California American Water Company, 00:01:17 et al., Petitioners v. 00:01:19 Public Utilities Commission, for Respondent. 00:01:21 For Petitioner, Mr. Joseph M. Karp. 00:01:25 JOSEPH KARP: Ready. COURT CLERK: For Respondent, Ms. Darlene M. Clark. 00:01:29 DARLENE CLARK: Ready. COURT CLERK: Case No. S271721, Tina Turrieta, 00:01:35 Plaintiff and Respondent v. Lyft, Inc, Defendant and Respondent; 00:01:39 Million Seifu et al., Interveners and Appellants. 00:01:43 For Appellant Brandon Olson, Ms. Monique Olivier. 00:01:46 MONIQUE OLIVIER: Ready. COURT CLERK: For Respondent Tina Turrieta, Mr. Allen Graves. 00:01:52 ALLEN GRAVES: Ready. COURT CLERK: For Respondent Lyft, Inc., 00:01:54 Mr. Felix Shafir. 00:01:57 FELIX SHAFIR: Ready. 00:02:00 CHIEF JUSTICE GUERRERO: Thank you. Calling the first matter, the Legislature 00:02:03 of the State of California v. 00:02:05 Shirley N. Weber, Secretary of State. 00:02:08 Good morning, Counsel. MARGARET PRINZING: Good morning, Your Honors. 00:02:11 May it please the Court. Margaret Prinzing on behalf of the California Legislature, 00:02:16 Governor Gavin Newsom, and John Burton. 00:02:18 We appreciate the opportunity to address these issues here today. 00:02:23 CHIEF JUSTICE GUERRERO: Thank you. Counsel, you've requested eight minutes of rebuttal. 00:02:26 MARGARET PRINZING: Correct. CHIEF JUSTICE GUERRERO: Thank you. 00:02:28 MARGARET PRINZING: The initiative measure before this Court is unlike any that has come before it. 00:02:32 While other measures have burdened or restricted the power 00:02:35 of the legislative and executive branches, 00:02:38 this measure would fundamentally restructure 00:02:40 the power of government to raise revenue 00:02:43 as set forth in the California Constitution. 00:02:46 CHIEF JUSTICE GUERRERO: Counsel, I'm going to interrupt you just from the beginning. 00:02:49 I'm sure that we'll get into all of the details about the initiative and the challenges to it. 00:02:56 I just have a threshold question I'd like you to address first as to the preelection review 00:03:02 and why this Court should consider it 00:03:06 and not put it on the ballot instead of allowing the voters to consider it. 00:03:10 MARGARET PRINZING: Absolutely, Your Honor. 00:03:13 So under this Court's precedents, 00:03:17 the general rule is to delay review until after the election. 00:03:22 However, this Court in Legislature v. 00:03:26 Deukmejian said that is based on the assumption 00:03:31 that the delay will not require negative consequences. 00:03:36 And in this instance because of the retroactivity provisions in the measure, 00:03:42 delaying review will cause negative consequences 00:03:47 and is already causing negative consequences. 00:03:51 As a reminder, the retroactivity provision here reaches back 00:03:55 over a 34-month period to January 1, 2022; 00:03:59 and it puts at risk every tax measure 00:04:03 that was passed in that period that doesn't fully comply with the measure 00:04:07 and every newly-defined exempt charge. 00:04:10 And as a consequence governments right now, as we speak, 00:04:14 up and down the state -- they're in the budget season. 00:04:16 They're trying to balance their budgets; 00:04:18 and they have to do so without knowing what amount of revenue 00:04:24 will be reasonably available to them 00:04:26 because if this measure passes, they may lose multiple sources of revenue. 00:04:32 So that is already causing a great deal of harm. 00:04:36 And as we move towards the election 00:04:39 and after the election, the harm will only continue. 00:04:42 JUSTICE EVANS: Counsel, couldn't we take an approach similar to the one we took in Briggs v. 00:04:47 Brown, where we stayed implementation 00:04:49 pending our post-election review and I think eventually 00:04:52 stayed the effective date of the initiative? 00:04:54 Why isn't that a possibility here? MARGARET PRINZING: So if the Court were 00:04:59 to stay the retroactivity clause 00:05:02 in the sense of totaling that 12-month period 00:05:05 that governments would have to bring tax statutes 00:05:08 and exempt charges into compliance with the measure, 00:05:12 that might mitigate the harm. 00:05:14 And I say "might" because as I've mentioned, 00:05:18 the budget process is already going. 00:05:21 It's happening now, and governments are having to 00:05:24 make decisions now based on this uncertainty. 00:05:28 So what you've suggested might help mitigate that harm; 00:05:34 but it's not going to eliminate it 00:05:36 because even if we could remove 00:05:39 or lessen the uncertainty for this budget cycle, 00:05:42 governments have to engage in long-term planning. 00:05:46 And even if the retroactivity clause is stayed, 00:05:49 that really prolongs the uncertainty 00:05:51 and makes it difficult for governments to engage 00:05:54 in that long-term planning that is necessary for-- 00:05:57 JUSTICE JENKINS: But it would freeze frame -- it would freeze frame these concerns 00:06:01 that you are outlining in terms of the budgeting process sufficient 00:06:06 for this Court to vet the initiative -- 00:06:11 correct? -- and then add certainty. 00:06:13 MARGARET PRINZING: Well, it would freeze frame it in the sense 00:06:18 that it would give governments more time in order -- 00:06:24 if the measure were to be enacted where they could 00:06:27 then try to bring the measures into conformity. 00:06:30 But that's not the chief harm that we've identified. 00:06:33 The chief harm that we've identified is the uncertainty that is now infecting the budget process 00:06:38 and the government process in general. 00:06:41 I can point, for example, to the Amicus Brief 00:06:46 that was filed by United to House LA Coalition. 00:06:50 And Measure ULA in Los Angeles 00:06:55 is a measure that both Real Party in Interest 00:06:58 and Petitioners agree would be subject to the retroactivity clause. 00:07:03 And as the Coalition outlines in its Amicus Brief, 00:07:06 because of the uncertainty of whether that revenue 00:07:09 will still be available -- and this is revenue that the voters approved 00:07:12 to combat homelessness in Los Angeles County -- 00:07:17 the City of LA, aware of this measure, 00:07:20 has capped spending under the measure to $150 million 00:07:24 regardless of what revenue may become available. 00:07:27 And they've limited the spending to certain programs. 00:07:30 So right now as we speak, this measure is already having 00:07:34 a detrimental impact in just that one circumstance 00:07:37 by preventing money flowing to homelessness, 00:07:40 one of the issues that many of us in California agree 00:07:44 is one of the most urgent problems facing the state. 00:07:48 In addition, the Coalition identifies the time frame 00:07:54 that they would be operating under if this measure stays on the ballot in November. 00:07:59 In order to meet that 12-month time period, 00:08:04 the initiative -- they would have to begin 00:08:06 circulating the initiative again in December; 00:08:09 and that means starting the campaign, starting the planning process, even before the election. 00:08:14 Now potentially, staying that 12-month period 00:08:18 could mitigate that harm; but again, the other uncertainties 00:08:21 that I'm talking about would remain. 00:08:23 Then I also want to mention some additional harms 00:08:29 in delaying this until after the election 00:08:31 that have been identified by this Court. 00:08:34 In Senate v. Jones, this Court noted that 00:08:37 when an invalid measure stays on the ballot, 00:08:40 it steals time, attention, and money 00:08:43 away from the valid measures that are on the ballot. 00:08:47 Those harms are going to begin this summer 00:08:50 when the campaigns and the voter attention starts 00:08:56 focusing on the measures that are on the ballot. 00:08:59 If this measure is on the ballot, it will steal time, attention, and money away from that. 00:09:03 CHIEF JUSTICE GUERRERO: Shifting back to your point 00:09:05 about the merits of the challenges, there are -- 00:09:09 depending on how you count it, there's different challenges. 00:09:12 Primarily there seem to be three. 00:09:14 As an example, you focus on the need to submit new 00:09:18 or increased taxes to the voters for them to approve it. 00:09:21 And you talk about the harmful impacts and state 00:09:24 that that alone constitutes a revision to the Constitution. 00:09:29 Are you asking us to look at each of the individual 00:09:32 impacts in isolation, or are you asking us to consider the totality 00:09:36 of the circumstances in making our decision here? 00:09:39 MARGARET PRINZING: We are absolutely asking you 00:09:42 to consider the totality of the measure, 00:09:46 and that's really for a couple of reasons. 00:09:49 The measure, as it exists, is not just an ad hoc collection 00:09:56 of various changes that are revenue-related. 00:10:00 It is a comprehensive measure that is intended 00:10:04 to fundamentally restructure the way government power 00:10:10 is exercised to raise revenue under the Constitution. 00:10:14 So while we do think that it is possible for the Court 00:10:18 to simply look at the one provision 00:10:21 that you've identified, Your Honor, 00:10:23 or some of the other provisions -- like the shifting of power between the legislative 00:10:27 and executive branches -- and say that that alone constitutes a revision, 00:10:33 it is really the entire measure 00:10:35 that shows the revisionary sleeve of-- 00:10:37 JUSTICE LIU: If we held that the measure 00:10:40 as a whole constituted revision, does that admit the possibility 00:10:45 that particular components of it might not? 00:10:50 MARGARET PRINZING: Well, I'm going to return 00:10:53 to the fact that this measure, 00:10:58 as drafted and would be presented to the voters 00:11:01 if allowed to do so, is a comprehensive measure. 00:11:06 JUSTICE LIU: Yeah, I get that. I mean I guess the question for us 00:11:08 is if we take this holistic approach that you suggest, 00:11:12 does that mean that the initiative proponents 00:11:15 could then break up the measure 00:11:18 essentially into three or four component parts 00:11:21 and then seek individually to enact each one? 00:11:26 MARGARET PRINZING: Well, I think there are provisions 00:11:31 in this measure that if presented on their own would not constitute a revision 00:11:40 but could constitute an amendment 00:11:42 and therefore could be presented to the voters in that way. 00:11:47 There are some provisions along those lines. 00:11:50 But the provisions that we've highlighted 00:11:53 are the main provisions in the measure, 00:11:58 and that is clear not just I think 00:12:02 from the briefing before the Court but also from the text of the measure itself in the findings, 00:12:09 in the statement of purposes. 00:12:12 It outlines the various purposes 00:12:15 that the voters have in enacting the measure; 00:12:18 and it lists all, or nearly all, 00:12:21 of the provisions that we're challenging here. 00:12:24 JUSTICE LIU: I understand. So let's just take what I think in your briefing 00:12:29 is the primary measure about subjecting state taxes 00:12:35 to a vote of the electorate, right? 00:12:40 Is that a revision in and of itself? 00:12:43 MARGARET PRINZING: Yes, Your Honor, we believe that it absolutely is. 00:12:46 JUSTICE LIU: Okay, so we don't need to go further then. 00:12:48 If that is your position and we agree with it, 00:12:50 then we don't need to go further. MARGARET PRINZING: Correct, Your Honor. 00:12:53 JUSTICE LIU: Okay, can we focus on that for one second? 00:12:56 So do you have a sense of just kind of 00:13:01 on an annual average basis 00:13:03 how many statutes or how much legislation that affects? 00:13:11 MARGARET PRINZING: So that is a good question, 00:13:14 Your Honor. And in an attempt to answer it, 00:13:18 I will point to the Kaminski Declaration 00:13:20 that we filed in connection with our papers. 00:13:23 That declaration identifies 15 state measures 00:13:28 that we believe could be subject 00:13:32 to the measure's retroactivity clause. So in that sense, I think that it does respond 00:13:39 to your question. 00:13:42 How much that breaks down on an average annual basis, 00:13:45 I'm afraid I can't say. 00:13:47 But I do want to point out that that scope 00:13:54 is within the bounds -- 00:13:56 I mean that frequency, that number, 00:13:58 is within the bounds of what this Court 00:14:00 has said in the past is revisionary. 00:14:03 So here I'm referring to Raven v. 00:14:05 Deukmejian, where this Court discussed the existing -- 00:14:13 how Prop 115 would change the scheme that existed at the time. 00:14:20 And that scheme was that the courts 00:14:23 sometimes voluntarily deferred to federal courts for purposes 00:14:28 of interpreting parallel constitutional provisions. 00:14:33 But sometimes the state courts would not do so. 00:14:36 They would depart from federal precedent 00:14:39 when they had cogent reasons to do so; 00:14:41 and this Court listed out the number of times 00:14:44 that that had occurred, and I believe it was eight times in 16 years. 00:14:52 So that was sufficient to constitute a revision 00:14:56 in Raven v. Deukmejian, and I think-- 00:15:00 JUSTICE JENKINS: But Raven isn't a qualitative analysis; is it? 00:15:05 MARGARET PRINZING: It's not, Your Honor. JUSTICE JENKINS: Right, and so the question that led us here 00:15:08 was really trying to get a sense of the number of statutes that are impacted, 00:15:12 that portends of the sort of qualitative analysis 00:15:17 that we have outlined in our jurisprudence. 00:15:20 But I thought the thrust of your position 00:15:23 is that in fact the Legislature's core power 00:15:31 to initiate taxation 00:15:35 is relegated to a position of proposing taxes 00:15:40 under the definition of tax in the proposition. 00:15:43 I thought that was your core position. 00:15:46 MARGARET PRINZING: Absolutely right, Your Honor, 00:15:49 that is our core position. I was simply trying to respond to a question 00:15:54 that Justice Liu raised. JUSTICE JENKINS: Yeah. 00:15:58 MARGARET PRINZING: But that's it exactly. 00:16:00 From the beginning, from the founding of the state, 00:16:03 the Legislature has had the supreme power of taxation. 00:16:08 And this measure would revoke that power 00:16:11 for the first time in the history of California 00:16:13 and instead put it in the hands of the voters. 00:16:17 JUSTICE GROBAN: But I want to make sure I understand your back and forth with Justice Liu. 00:16:23 You answered both look at this measure 00:16:26 in terms of totality and key parts together -- 00:16:29 look at them in a holistic fashion. 00:16:31 You also answered, quite understandably, 00:16:35 if you just look solely at the measure 00:16:39 that the component that you've focused on 00:16:41 in the briefing and you're discussing now, 00:16:44 the impediment upon the Legislature's ability 00:16:46 to pass taxes, 00:16:49 that alone would constitute a revision. 00:16:52 So how do you want us to rule -- 00:16:55 based on one or based on totality? 00:16:57 What are you asking for? MARGARET PRINZING: Well, Your Honor, 00:17:02 we're asking the Court to find 00:17:05 that this measure constitutes an unlawful revision 00:17:08 so that it can't appear on the ballot. 00:17:11 And I think there are different ways for this Court to get there. 00:17:15 We've been focusing so far on the profound change 00:17:20 to the legislative power, 00:17:22 but we think the changes and the shifting of power 00:17:28 between the legislative and executive branches 00:17:31 is also profound and is also a revision standing on its own. 00:17:35 So to really get to the heart of your question, 00:17:39 I think the Court has multiple ways it could get to the ruling 00:17:45 and provide the relief that petitioners have-- 00:17:48 JUSTICE KRUGER: Could I ask you on the totality analysis, 00:17:51 it's sort of to suggest that there may be a different answer 00:17:54 if we look at these provisions together 00:17:56 than if we look at them separately, 00:17:59 which is what I understood your response earlier 00:18:01 to Justice Liu to be -- would suggest a motive analysis 00:18:04 that's pretty different from how we ordinarily engage 00:18:08 in the constitutional adjudication, right? 00:18:11 So usually we look at the constitutional validity 00:18:15 of different provisions of an enactment individually 00:18:19 unless there is some sort of operational connection 00:18:22 between those different provisions. 00:18:25 I guess I'd like to understand a little bit 00:18:28 why you think the kind of review we're doing here, 00:18:31 where the question we're answering is whether this is an amendment to the Constitution 00:18:35 versus a revision to the Constitution calls 00:18:39 for a different kind of analysis. What is different about the question we're answering here? 00:18:44 MARGARET PRINZING: Well, I think that the measure, 00:18:48 as we said, has been presented 00:18:50 and would be presented to the voters 00:18:52 as a comprehensive series of changes. 00:18:56 So any part of it that is revisionary 00:19:00 makes the measure revisionary. Now in order to engage in a more segmented analysis, 00:19:07 the Court or a court would have to find 00:19:10 that the measure is severable; 00:19:12 and we don't believe the measure is severable. 00:19:15 And this goes back to the comprehensive nature 00:19:18 of the measures itself. So for a court to find it severable, 00:19:22 among other things the court would have to determine 00:19:26 that if some of these other provisions 00:19:29 were to be struck down as invalid -- 00:19:33 the revocation of the Legislature's power to tax, 00:19:36 the shift of authority between the legislative 00:19:38 and executive branches -- the court would have to determine 00:19:42 that the voters would want the rest of the measure 00:19:44 to stand on its own, 00:19:47 that they would have approved that measure 00:19:51 without the offending provisions. 00:19:53 And we don't believe this is severable because, again, just on the face of the measure, 00:19:58 if you look at the statement of purposes, 00:20:01 it goes through many of the provisions. 00:20:05 The voters enact this measure for one purpose -- 00:20:08 for this purpose, for this purpose. 00:20:10 So if you take some of those provisions away, 00:20:14 then the purpose of the measures has been defeated. 00:20:18 So the measure isn't severable; and I think that if one provision or two provisions 00:20:23 which are absolutely the main key provisions, 00:20:27 then the entire measure has to fall. JUSTICE LIU: So I think we haven't really gotten 00:20:31 to the heart of your argument yet on the merits. 00:20:34 So if I could ask you to sort of focus on that. 00:20:37 So let's go back to the tax part. 00:20:41 So, yes, it's true that the Legislature has long 00:20:44 had since the beginning this power to tax. 00:20:50 I guess that's -- I mean, that kind of argument 00:20:52 could be made in any of these kinds of cases 00:20:54 because after all what is being proposed 00:20:57 is a change to the Constitution. 00:20:59 So if you could tell us a little bit, 00:21:03 what is the significance of the Legislature having this power 00:21:08 as opposed to sharing that power with the electorate? 00:21:12 Why would that be such a major transformation? 00:21:15 MARGARET PRINZING: So first of all just to respond 00:21:19 to a point in the question itself, 00:21:22 while it may be true that any ballot measure makes a change in the Constitution, 00:21:26 what qualifies a revision as a revision 00:21:29 is that it's a fundamental change in the structure of government and its powers. 00:21:33 And that's what's happening here; it's a fundamental restructuring of the government power. 00:21:38 But with the respect to the power to tax, 00:21:41 this Court has described that tax in Watchtower v. 00:21:45 County of LA as probably the most vital 00:21:48 and essential attribute of government 00:21:51 without which government cannot function. 00:21:55 And what we would be talking about here with this measure 00:21:58 is the Legislature would no longer have that power. 00:22:02 It would instead be delayed 00:22:05 through the voter approval requirement and would be in the hands of a body 00:22:10 that is not the Legislature. 00:22:12 Furthermore, this Court has talked in other cases, 00:22:17 often in the referendum context, 00:22:20 about the need for the Legislature specifically, 00:22:24 as opposed to the voters, to have the ability to act on tax matters independently. 00:22:32 So in Wilde v. City of Dunsmuir, for example, 00:22:36 this Court talked about how it's necessary under the power of the referendum 00:22:42 to carve out a space for the Legislature 00:22:44 to be able to independently to ensure 00:22:46 that essential government services could be provided. 00:22:49 JUSTICE LIU: Is this -- okay, so I mean you mentioned Wilde. 00:22:53 So is this really about delay and uncertainty? 00:22:59 MARGARET PRINZING: It's really-- JUSTICE LIU: That part I get. 00:23:01 Okay, let me just say that part I understood. 00:23:04 But I'm wondering if there's more to your argument 00:23:06 about the structure of government, 00:23:09 the nature of politics. 00:23:11 Qualitatively, what do you envision happening -- 00:23:16 other than delay and uncertainty, which I understand. 00:23:18 I mean that's built into the measure because of course if you have another step in the process, 00:23:22 you're going to have that. But I think their argument is but that promotes 00:23:28 a certain kind of accountability, right? 00:23:31 I mean that's in the name of the measure, right? 00:23:33 So I'm asking you on your side 00:23:36 what do you think is the change qualitatively? 00:23:42 MARGARET PRINZING: So with respect to the one 00:23:45 provision that we're chiefly focusing on thus far -- 00:23:49 and I've gotten to 23 minutes so I'll try to wrap this up 00:23:54 unless Your Honors want to continue this -- 00:24:00 the revision inquiry really looks at the change 00:24:05 in the structure of government and the power. 00:24:08 And this particular provision of the measure 00:24:11 helps illustrate how that operates here. 00:24:16 So if the power to tax is taken away from the Legislature 00:24:21 and given to the voters, then taxing becomes qualitatively different 00:24:25 in the state of California because the tax that the Legislature might propose 00:24:32 in order to secure a two-thirds majority 00:24:35 of the Legislature could be very different than the tax 00:24:39 that would be proposed to the voters. 00:24:42 So you have a qualitative change there, 00:24:44 and you also go from having decisions about taxes being made 00:24:52 by a full-time Legislature with professional staff 00:24:56 who have the capacity and the ability 00:24:59 to make revenue decisions in the context 00:25:02 of the entire system of California government. 00:25:06 They know all the revenues that are coming in, 00:25:09 the revenues that aren't coming in, 00:25:12 the spending priorities that have flexibility and do not. 00:25:16 And the Legislature can make those revenues in that context. 00:25:21 The voters simply don't have the capacity to do that. 00:25:26 JUSTICE EVANS: Can't that same argument be made with direct democracy for virtually any topic 00:25:31 in terms of the voters' level of engagement or expertise versus full-time legislators? 00:25:36 MARGARET PRINZING: Well, again, 00:25:38 I'm happy to continue; but I've gone over my time. 00:25:42 CHIEF JUSTICE GUERRERO: Answer the question, and then we'll wrap up. 00:25:44 But you can reserve the rest of the time, and we'll give you more if you need it. 00:25:47 MARGARET PRINZING: Absolutely. 00:25:49 So I'm sure that argument could be made, 00:25:54 but we're not making that argument in general. 00:25:58 We're making that argument specifically as it relates to taxes, 00:26:04 and that's based on the role that the Constitution carves out 00:26:13 for the Legislature on taxing purposes. 00:26:17 And that's in Article II, Section 9, by exempting tax measures from the referendum. 00:26:22 And it's also based on this Court's precedents. 00:26:25 I talked about Wilde v. City of Dunsmuir. 00:26:28 But this Court also made statements in Rossi v. 00:26:31 Brown about how if taxing decisions 00:26:36 were subject to voter approval, then it might become impossible, 00:26:42 and it would certainly be delayed, 00:26:45 for the Legislature to try a path of balanced budget 00:26:49 or raise revenues that are necessary for current operating expenses. 00:26:54 So it really does come down 00:26:56 to what this Court has described as one of the most vital 00:26:59 and essential attributes of government, 00:27:01 the power to tax, and what that would to our system of government 00:27:06 and what that would do to the fundamental government powers 00:27:09 if that were taken away from the Legislature. 00:27:11 And in that way, it's unique from other kinds of changes 00:27:15 that are clearly within the voters' power of initiatives. 00:27:18 CHIEF JUSTICE GUERRERO: Thank you, Counsel. We'll allow you to reserve the rest of your time. 00:27:21 We'll now hear from Mr. Hiltachk. 00:27:33 THOMAS HILTACHK: Good morning. May it please the Court. 00:27:35 Tom Hiltachk on behalf of Real Party in Interest. 00:27:39 Let me start by addressing the issue of preelection review 00:27:41 since that was a question raised. 00:27:44 This is most decidedly a case 00:27:47 that begs for post-election analysis, 00:27:50 and there are multiple reasons for that. 00:27:53 First of all, it's possible 00:27:56 that the Taxpayer Protection Act may not apply. 00:27:59 So we're dealing with speculation upon speculation upon speculation. 00:28:03 Many of the effects of the Taxpayer Protection Act 00:28:06 are mostly speculative; in fact, they're all speculative 00:28:09 and based not on evidence submitted to this Court 00:28:12 but on the opinions of people in the government 00:28:14 who do not want change. 00:28:17 But most importantly is the issue that we were just recently discussing, 00:28:20 which is that there are remedies available 00:28:23 in a post-election environment 00:28:25 that are not available in a pre-election environment; 00:28:28 most notably, severability, Raven being the perfect example. 00:28:33 The initiative in Raven, Proposition 115, was not struck in its entirety. 00:28:37 This Court struck one provision of Raven, 00:28:40 having found it to be a revision, in fact the only case that has ever found 00:28:45 any provision of the Constitution 00:28:47 to be a qualitative revision. 00:28:49 And so I believe that this case most decidedly 00:28:52 should be decided after the election-- 00:28:55 JUSTICE GROBAN: But wouldn't the mode you describe, 00:28:58 post-election review with the opportunity for severance, 00:29:03 have its own concomitant "speculation" problems to use your word? 00:29:06 Because then we're sitting in a posture, 00:29:09 if severance is the available remedy, of saying, 00:29:14 well, we think this initiative probably would have qualified 00:29:18 even if it didn't have section X, Y, and Z. 00:29:22 And we think it probably would have passed upon vote, 00:29:27 even if it didn't have section X, Y, and Z. 00:29:31 That feels speculative too; doesn't it? THOMAS HILTACHK: No, it doesn't; and the reason 00:29:34 is that this Court has identified factors 00:29:37 that it can consider to answer those questions. 00:29:40 So the three tests of severability 00:29:42 are grammatically severable, functionally severable, 00:29:46 and is there intent behind that. 00:29:48 A campaign, ballot arguments, ballot materials -- 00:29:53 all of that reflects on those issues; 00:29:55 so the Court would not be speculating. This Court would have actually have facts. 00:29:59 It would have evidence that it could consider 00:30:02 to make that determination. JUSTICE GROBAN: Right, I like to think 00:30:06 that any of the factors we lay out 00:30:09 are imbued with perfect infallibility; 00:30:12 but again, you're saying, "Well, we can use rules like grammar to know 00:30:18 how voters would have voted." 00:30:21 There's some speculation in that. THOMAS HILTACHK: No, the grammar test 00:30:24 is whether it's-- 00:30:26 JUSTICE GROBAN: Or the ballot -- 00:30:28 or, oh, this was not a primary focus -- 00:30:33 X was more a primary focus of the ballot materials than Y, 00:30:36 so we know how voters would have voted if not for this provision. 00:30:43 You won't meet me halfway and say that requires some degree of spec -- 00:30:48 the voters would have done X if they had a ballot 00:30:52 in front of them that looked different than the one that was actually in front of them? 00:30:56 THOMAS HILTACHK: I think the history of this Court with respect to consideration of voter intent -- 00:31:02 not just with respect to issues of revision or importance -- 00:31:08 have been used to determine legislative intent, 00:31:13 where you don't have that process 00:31:15 in the enactment of statutes through a legislative process. 00:31:18 This Court has relied on ballot materials 00:31:21 extensively to consider those types of questions. 00:31:25 I think it's equally suitable here. In fact, this Court has done that in cases like this, 00:31:30 including-- JUSTICE LIU: What about the present 00:31:34 ongoing detriments that your counsel 00:31:38 on the other side has identified? 00:31:42 You don't think the-- THOMAS HILTACHK: Only if they exist. 00:31:44 To the extent they exist, they are largely 00:31:47 a function of local governments choosing to ignore the fact 00:31:51 that the Taxpayer Protection Act has been qualified. 00:31:54 It was submitted more than two years ago. 00:31:57 Local governments have had an opportunity to bring any measure that has passed into compliance 00:32:02 from the get-go, and they still could. 00:32:07 And so to give you an example, Counsel mentioned Measure ULA. 00:32:12 Measure ULA was an attempt to use the so-called Upland 00:32:16 loophole to enact a tax that would otherwise have required 00:32:20 a two-thirds vote, clearly prior to Upland. 00:32:23 There's no resolution of this Upland decision by this Court. 00:32:27 It's not clear that Measure ULA is legal at all. 00:32:30 In fact, measure ULA is the subject of a lawsuit. 00:32:34 Thus, the City of Los Angeles is already has to be concerned 00:32:39 about whether it can count on Measure ULA income 00:32:43 because that measure is subject to challenge. 00:32:45 So over the long haul, this Court has long said 00:32:50 that local governments are not entitled 00:32:53 to any form of revenue forever; it's always subject to change. 00:32:57 CHIEF JUSTICE GUERRERO: Counsel, can you speak to what was in the Amicus Brief 00:33:01 by three individuals who are probably the most knowledgeable 00:33:04 in terms of finance for state government? 00:33:08 They speak to -- and there are others who speak to -- 00:33:11 the need to be able to respond quickly in emergencies 00:33:15 and provide various examples. 00:33:18 I was wondering, do you agree that 00:33:20 if the measure had been in place those same types of remedies 00:33:24 could not have been implemented in the same way? 00:33:27 THOMAS HILTACHK: No, and there's multiple reasons for that, 00:33:30 mostly based on historical fact. 00:33:34 The State has faced emergencies in the past, 00:33:37 and the State has recovered from those emergencies 00:33:40 in most instances without ever choosing to raise revenue by taxation. 00:33:46 This is a quarter of a trillion dollar State budget. 00:33:50 JUSTICE JENKINS: So an emergency appropriation for PPE 00:33:54 in the pandemic -- which would be impacted, wouldn't it? 00:33:58 THOMAS HILTACHK: Well, most emergencies in California or in the nation, 00:34:02 the Federal Government is a backstop and provides relief -- 00:34:06 in fact has provided significant relief 00:34:08 in California emergencies in the past, 00:34:11 Loma Prieta being an example. I think the Amicus Brief suggested 00:34:15 that the Federal Government covered 75% 00:34:17 of the cost of Loma Prieta. 00:34:20 CHIEF JUSTICE GUERRERO: But they also say that that cannot be relied upon, and they need the flexibility 00:34:24 to be able to respond quickly themselves. THOMAS HILTACHK: In the past -- in fact, 00:34:27 during the Great Depression when the Legislature thought it might need 00:34:31 some more revenue via taxation -- 00:34:33 it went to the ballot. It asked the voters whether they should approve taxes 00:34:38 to get out of the worst economic conditions 00:34:42 the state has ever faced. So the Legislature has full power 00:34:47 to call an election at any time 00:34:49 and to ask the voters to solve a problem 00:34:52 that it believes needs solving. 00:34:54 But more fundamentally, 00:34:56 we have state mechanisms in place to deal with emergencies. 00:35:00 We have emergency reserve funds that did not exist many, 00:35:04 many years ago, have been added by the voters 00:35:07 into our Constitution over the last 20 years. 00:35:10 So we have funds available. We have the authority in existing law 00:35:14 for the governor to draw funds from any location to deal with emergencies. 00:35:19 So in terms of just the immediate impact 00:35:22 of any emergency, there are mechanisms in place to respond to that. 00:35:26 And if the Legislature believes it needs 00:35:28 a more long-term solution, it can certainly ask the voters. 00:35:32 JUSTICE LIU: So setting emergencies -- 00:35:35 and I know there's some disagreement about that -- 00:35:38 I want to go to what I think is another part 00:35:41 of the heart of your opponent's argument 00:35:45 which concerns the structure of government 00:35:47 and the sort of relocation of the power, which is very -- 00:35:57 I think everyone would agree -- is very fundamental to government, right? 00:36:02 That statement of course does not turn -- 00:36:05 is not dispositive of whether the Legislature should have 00:36:07 that power or the electorate should. But I think there's one line of thinking, 00:36:12 which is that we have a republican form of government; don't we? 00:36:16 I mean generally speaking, we have elected representatives 00:36:21 that help to distill the public will, deliberate, 00:36:27 take facts into account, have a long view, 00:36:32 have a broad view of things. 00:36:36 We also have in this state direct democracy 00:36:39 as a result of the early 20th Century changes. 00:36:44 But those, I think, were meant to act as a check 00:36:48 on the basic republican form of government 00:36:52 that we have in the event, as historical examples suggest, 00:36:58 of capture of those elected representatives by forces 00:37:04 that the electorate would not want to govern them. 00:37:06 Okay, doesn't this measure essentially shift us 00:37:12 from a republican form of government 00:37:14 far more strongly towards a direct democracy 00:37:18 given how fundamental the taxing power is? 00:37:21 And isn't that the major reworking of government 00:37:25 that is achieved by this measure? 00:37:27 THOMAS HILTACHK: No, I don't believe so; and I think this Court answered that question in Amador -- 00:37:31 or that issue was raised specifically. 00:37:34 But let me tell you why I don't believe that's true 00:37:36 even before 1911 00:37:39 and the enactment of the initiative of referendum power. 00:37:41 Because our Constitution, since its inception, 00:37:44 has stated that all political power is inherent in the people. 00:37:48 And it stated that the people have the power to reform 00:37:52 and alter their government whenever they decide it needs reform. 00:37:56 So I don't believe California has ever been a pure republican-- 00:38:00 JUSTICE LIU: Well, the same Constitution from the very beginning also contemplated a difference 00:38:04 between amendments and revisions. 00:38:06 THOMAS HILTACHK: But it also contemplated voter consent 00:38:09 over certain matters, including the ability for the government 00:38:13 to go into debt in general obligation-- 00:38:15 JUSTICE LIU: But doesn't that exception just prove the rule, 00:38:18 which is that that was a specific carve-out 00:38:20 from a general power of taxation that the Legislature had? 00:38:24 THOMAS HILTACHK: No, I don't think it proves the rule. I think it shows that voter approval 00:38:28 has been a component of California's history 00:38:31 since its inception and that the extension of that 00:38:34 to other matters is perfectly within the realm of reason. 00:38:38 But at least since 1911 00:38:41 and the enactment of the initiative referendum power, 00:38:44 which addressed the issue of taxation specifically, 00:38:48 which this Court identified in the Rossi case, 00:38:51 has noted that the power of the legislative branch is shared. 00:38:55 It's a shared power between the people and the Legislature. 00:38:59 So there is no unilateral power of the Legislature 00:39:04 to impose taxes-- JUSTICE LIU: I think it's shared in the sense that of course 00:39:10 there are these direct democracy checks 00:39:12 on what the Legislature does. 00:39:15 But I think given how fundamental the power of taxation is, wouldn't your proposal 00:39:19 essentially create a fourth branch of government? 00:39:23 THOMAS HILTACHK: Absolutely no -- in fact, I believe that's actually the argument 00:39:26 that the Petitioners are making, is that the people are in fact a fourth branch of government. 00:39:30 It's actually the only way that they can make the argument under Raven 00:39:34 that there was a transfer of power from the Legislature 00:39:38 to another branch of government. 00:39:40 I believe that to be false and simply wrong 00:39:44 because this Court has never said that. 00:39:46 This Court has always said that legislative power 00:39:49 is shared between the people and the Legislature. 00:39:52 In the area of taxation -- 00:39:54 that could be no more evident than in recent history 00:39:59 Propositions 13, 218, Prop 62, Prop 26. 00:40:04 But even going back to just five years 00:40:08 after the initiative process was enacted in 1911, 00:40:12 there was an initiative measure, a constitutional amendment, placed on the ballot in 1916 00:40:17 that would have imposed a single form of taxation in California 00:40:21 by repealing every other form of taxation in California. 00:40:27 That measure did not pass. CHIEF JUSTICE GUERRERO: Mr. Hiltachk -- I'm sorry. 00:40:30 THOMAS HILTACHK: The response by the Legislature to that initiative 00:40:33 was to ask the voters to repeal the power of taxation 00:40:38 from the initiative process in 1917. 00:40:41 That did not pass. So what we have is essentially a two-way street, 00:40:48 where the legislative power is shared 00:40:51 amongst these two groups -- the people on the one hand, the Legislature on the other -- 00:40:55 but that the people have the last word. 00:40:59 CHIEF JUSTICE GUERRERO: Can I focus your attention to shift to another area, 00:41:01 on what seems to be and has been described 00:41:04 as a dramatic expansion of the referendum power? 00:41:08 Whereas in the past it had certain limitations 00:41:11 to exclude most revenue now laws, 00:41:13 and now the argument is that a minority 00:41:17 can now really hold up billions of dollars in revenue 00:41:20 as a result of the definitional changes that have been proposed through this measure. 00:41:25 Isn't that a fundamental change in the functioning of our government? 00:41:28 THOMAS HILTACHK: No, and I don't believe TPA does that at all; 00:41:30 and when I say, "TPA," I mean the Taxpayer Protection Act. 00:41:33 With respect to the referendum power, 00:41:36 the only change effected by the Taxpayer Protection Act 00:41:40 is essentially a reversal of this Court's decision in Wilde, 00:41:44 where the Court felt that there was an ambiguity 00:41:47 about the definition of a tax in the referendum provisions 00:41:52 and that because a referendum of taxes 00:41:55 is not permitted under the Constitution --which I believe, by the way, is a policy decision 00:42:00 not a constitutional mandate -- 00:42:03 that the only change is that we are saying 00:42:07 and making clear that taxes and fees are different. 00:42:11 And if it's a fee, a fee is subject to referendum; 00:42:14 and a fee has been subject to referendum since the referendum power was enacted. 00:42:18 So there really is no fundamental long-term change 00:42:21 with respect to the power of referendum. 00:42:24 JUSTICE LIU: Well, I guess the nature of the question is that given the number -- 00:42:29 if you're looking at these provisions of the TPA 00:42:31 that have to do with removing 00:42:34 from executive decision-making -- namely, agencies -- 00:42:39 both at the state and local level the ability 00:42:41 to set certain fees, anything that has a revenue, 00:42:44 and you've defined state law extremely broadly -- 00:42:47 I mean, the measure does anyway -- 00:42:50 then a whole lot of things now require legislative approval; 00:42:55 and they are now then subject to referendum. 00:42:58 So you might say the referendum power 00:43:00 has always extended to these things, but the canvas is now extremely broad. 00:43:06 Isn't that true? I mean, we're talking about -- at the local level, 00:43:10 we're talking about things like it 00:43:12 was said in the briefing -- things like park fees, library fines, traffic tickets. 00:43:17 I mean, are we -- do you agree that the TPA reaches that far? 00:43:23 It would seem so by its terms. By its very terms, it reaches that far. 00:43:27 THOMAS HILTACHK: I don't believe TPA does that. I believe the initiative of referendum power 00:43:31 has always done that -- that the referendum has always been available. 00:43:35 JUSTICE LIU: Control -- I mean the TPA, let's be clear -- the TPA defines exempt charges 00:43:41 to mean any other revenue-raising kind of measure. 00:43:46 So if a local senior center wants to charge a fee 00:43:50 for rental of its facilities, that has to be approved now 00:43:54 by a city council in order to do that; 00:43:57 and it is thus subject to the referendum power, right? 00:44:01 If you want to impose a library fine 00:44:04 and you don't give individual 00:44:06 due process to the person subject to the fine, 00:44:10 that too can be subject to a legislative approval. 00:44:14 I mean, this is vast; and your briefing does not deny, 00:44:19 actually, that all of these effects are part of the TPA. 00:44:23 I guess I'm giving you a chance here. Do you agree that this is part of the reach of the measure? 00:44:28 THOMAS HILTACHK: Let's start at the local level. I do believe that most fees enacted at the local level are, 00:44:35 in fact, enacted via ordinance. 00:44:39 It is only in the largest cities in the state of California 00:44:42 that have vast executive branch agencies 00:44:46 that would be subject matter of this -- 00:44:50 of those types of things. So in that instance, those types of fees have been the subject 00:44:55 of potential referendum for over 100 years. 00:44:59 And the fact that you don't see that very often 00:45:02 ought to allay any concerns about that. 00:45:05 With respect to state law, what we have evolved into 00:45:10 is an administrative state that has far too much power 00:45:15 among non-elected bureaucrats, who no one knows their name, 00:45:20 setting fees not for a fishing license fee -- 00:45:25 that's not what this is about -- but raising billions of dollars out of the economy 00:45:30 without any legislative oversight. 00:45:33 And so what we've shown here is that the Legislature picks and chooses the things 00:45:37 that it wants to have a say over in the fee context. 00:45:41 My state bar fees are set by a statute. 00:45:45 That statute could be subject to referendum. 00:45:48 But other fees are not set by statute; 00:45:51 they're granted to an agency to make that decision. 00:45:54 I'm not suggesting for a moment that executive branch agencies 00:45:59 will have no role in the setting of fees. 00:46:01 In fact, I think they will be the primary determiner 00:46:04 of what the right amount of fee is. 00:46:07 What I'm suggesting is that in a government like ours, 00:46:13 our representatives -- let's go back to your question 00:46:16 about representative democracy -- 00:46:18 should not absolve themselves of responsibility 00:46:21 for having any input -- 00:46:23 JUSTICE LIU: I think -- I mean I think that maybe good/bad/medium as a general principle. 00:46:31 I guess we're not here to discuss 00:46:33 necessarily the merits of the TPA. 00:46:35 I think the only question is how big a change 00:46:37 does this work in the structure of government? 00:46:42 And if the concern were what you said, 00:46:46 which is about billions of dollars being raised by, 00:46:49 in your view, unaccountable officials, 00:46:53 then a measure could be drafted to target those large measures. 00:46:58 But that's not how this measure is written. 00:47:00 This measure does not have a dollar cap. 00:47:03 It does not have some sort of threshold 00:47:05 that decides what's a big decision, what's a small decision, right? 00:47:09 So we're talking about every decision 00:47:13 down to the library fines, right? 00:47:16 And so if library fines are subject to these requirements, 00:47:22 I guess virtually anything is in terms of revenue raising; 00:47:26 and that's the breadth of the measure. 00:47:29 If you wanted a measure that spoke to the concerns 00:47:32 that you've raised, that would be a different measure. 00:47:36 But this measure seems quite broad. 00:47:39 THOMAS KELCH: Prior to the expansion of the administrative state in the last 20-30-40-50 years, 00:47:47 all fees were approved, proposed, 00:47:51 and enacted by statute in California. 00:47:54 And because that was the case, 00:47:57 all of those fees were subject to referendum power. 00:48:01 So it is true that more fees -- many more fees -- 00:48:05 would be theoretically subject to referendum power; 00:48:08 and it really is just a rollback to a condition that existed decades ago, 00:48:13 prior to the Legislature deciding 00:48:16 that it was going to empower executive branch agencies 00:48:20 to raise revenue, lots of revenue. 00:48:24 And what TPA does is restore not only the people's power 00:48:29 to have a check and balance on that 00:48:31 but to require the Legislature to be part of that process -- 00:48:35 to have ownership over that process. 00:48:37 That's accountability; that's not a revision; 00:48:41 and that does not impair essential government functions. 00:48:45 I believe my time is about up, but I'd like to close with just one comment. 00:48:54 In our view, the Taxpayer Protection Act 00:48:56 merely amends existing provisions of the Constitution 00:49:00 that were all previously approved by the voters. 00:49:03 It does not revise the Constitution in any way. 00:49:06 There is no transfer of power from the legislative branch 00:49:10 to any other branch of government or any other entity at all. 00:49:14 This is a shared power, and this tug of war over taxation 00:49:18 has been going on for over 100 years. 00:49:22 To reach any other conclusion, this Court must disregard 00:49:26 130 years of Supreme Court precedent. 00:49:29 Doing so now thrusts this Court into making a political judgment 00:49:33 it should not make Rather, that judgment should and must be entrusted to the voters. 00:49:39 Thank you. CHIEF JUSTICE GUERRERO: Thank you, Mr. Hiltachk. 00:49:43 Ms. Prinzing, you have about four minutes; 00:49:48 but we did take you over your time, so we'll see how it goes, thank you. 00:49:53 MARGARET PRINZING: Thank you, Your Honor. I'll begin with the ending. 00:50:02 With Real Party suggesting 00:50:06 that the measure would roll us back to 00:50:10 before we had the administrative state, so back to the 19th Century, 00:50:15 we don't disagree with that characterization; 00:50:18 but it goes to the far-reaching nature of this change. 00:50:25 This Court in 1917, in Gaylord v. 00:50:28 Perry, talked about how the modern state necessitated -- 00:50:32 made it "imperative" is the word that this Court used -- 00:50:35 for the Legislature to be able 00:50:37 to delegate quasi-legislative functions 00:50:40 to the executive branch. 00:50:42 This measure would prevent that from occurring 00:50:46 across a broad range of delegations. 00:50:49 That's a far-reaching change in the fundamental government 00:50:51 plan that interferes with a power 00:50:53 that this Court has already described as imperative. 00:50:59 The discussion about the referendum measure 00:51:02 I think was very illuminating. 00:51:04 I don't think I need to add much to it.. 00:51:06 But I do want to make this point, 00:51:09 that the shift from the executive branch 00:51:14 to the legislative branch -- and by the way, 00:51:17 that is a very clear shift that the measure does make, 00:51:20 shifting power between those two branches -- 00:51:23 but in any event, it sweeps so widely, 00:51:27 as Justice Liu suggested. 00:51:29 It's not just about fees. 00:51:32 So many actions of the executive branch takes place at the state 00:51:35 and local level -- executive orders, regulations, opinion letters, 00:51:41 enforcement actions, legal interpretations, 00:51:45 other legal authority whatever that is supposed to mean. 00:51:48 All of those things the executive branches 00:51:51 would lose the power to do. 00:51:53 It would have to be enacted by the legislative branch, 00:51:57 making a statute that would become subject 00:51:59 to the referendum. This is a vast change 00:52:02 in our fundamental government structure. JUSTICE LIU: Can I ask you about the thrust of what I understand 00:52:06 Real Party's argument to be about at least the taxing part of this measure? 00:52:11 There's quite a bit of history discussed in the briefing, 00:52:14 and the basic point I think from the other side is, 00:52:17 look, this has been going on for a long time. 00:52:22 The negotiation of the proper division of roles 00:52:27 between the elected representatives whom we have 00:52:30 and the power of the people directly to legislate. 00:52:36 And all this is, is another shift 00:52:40 in a long-running negotiation which has, 00:52:44 I think Real Party points out, the ultimate power of this -- 00:52:50 over this ultimately resides in the people. 00:52:53 So what is so different about this measure 00:52:58 compared to all the other negotiations 00:53:01 that have happened in the same vein, 00:53:05 I guess, that have occurred throughout the last century at least? 00:53:08 MARGARET PRINZING: Scope...and the nature 00:53:11 of the change. So there have been -- and, by the way, 00:53:15 this illustrates how robust the voters' power of initiative 00:53:18 is in taxation matters. 00:53:21 Regardless of what happens in this case, 00:53:23 it remains extremely robust. 00:53:25 But let's compare Prop 13 to this measure. 00:53:29 Prop 13 of course many people would consider 00:53:32 to be one of the most consequential measures 00:53:35 in the state of California, and you may or may not agree. 00:53:42 But as this Court said in Strauss v. Horton, the measure of a revision 00:53:45 is not the importance of the change but its scope. 00:53:49 So with Prop 13, it made relatively discreet changes 00:53:54 to the state power to tax. 00:53:56 It imposed a two-thirds voting requirement, 00:53:59 and it took one tax outside of the Legislature's power. 00:54:03 This measure would fundamentally restructure, 00:54:07 take away this Legislature's taxing power over all taxes 00:54:12 and turn it into the power to propose. 00:54:15 That's a fundamental shift in power that separates it 00:54:19 from all the other tax measures that have come before it. 00:54:25 And in my waning moments here, I do want to address one other point that Real Party 00:54:31 made suggesting that because the measure would shift 00:54:37 the taxing power from the Legislature to the people that it's not really a shift in power 00:54:41 since both parties exercise the legislative power. 00:54:47 A shared power does not mean the two entities are interchangeable. 00:54:52 If the two parties were interchangeable, we would have no need for an initiative process. 00:54:57 The voters in the Legislature obviously occupy different spaces. 00:55:03 And in the area of taxation, 00:55:05 this Court has identified that distinction as important, 00:55:10 essential, necessary. 00:55:12 And this measure would obliterate that distinction 00:55:15 when it comes to taxes, and that is a fundamental change in our government structure; 00:55:21 so it's a revision. And it's a revision that would occur in ways 00:55:25 that would endanger the government's ability to provide essential government services. 00:55:30 CHIEF JUSTICE GUERRERO: Thank you, Ms. Prinzing. We appreciate the arguments of both counsel 00:55:34 and all the Amicus parties as well. 00:55:36 The matter is submitted.