Wednesday, June 29, 2011

Budget Under Fire: RDA Bills and Fee Hikes Likely to Face Legal Challenges

Well, that didn't take too long. As we noted yesterday, it appeared that the California Legislature and Governor Jerry Brown had waded into murky legal waters with some of the maneuvers they made to close the state's budget gap. Well, it turns out we weren't alone in thinking that. Capitol Weekly is reporting that the League of California Cities is planning to take a lawsuit straight to the state Supreme Court, possibly within days, over the "backfill" component of Brown's plan to abolish the state's 425 redevelopment agencies. Meanwhile, the AP reports that the Howard Jarvis Taxpayers Association may file a separate challenge to the new fees for vehicle licensing and rural homeownership. Together, the state is counting on these moves to generate over $2 billion in revenues next year.

The Legislature's plan to abolish the RDAs has two components: a bill that wipes the agencies out as of October 1, and a bill that allows individual RDAs to avoid dissolution by making payments to state-level special funds that support school, fire, and transit districts. Critics allege that the second set of provisions violates Prop 22, a voter-approved initiative preventing state agencies from raiding funds allocated to local government agencies. By their argument, it's unconstitutional for the state to seize property tax dollars in this way. Watchers of the RDA saga will note that the Legislative Counsel's office concluded, in an opinion back in May, that Brown's original plan to force the RDAs to reimburse the state for the costs of abolishing them was unconstitutional. We don't really have a dog in this fight, but it seems to us that the League has a pretty strong argument.

The legal challenge that may arise with respect to the fee hikes is based on Prop 26, which requires a two-thirds majority vote to pass tax and fee increases. The vehicle fee money will apparently go to the DMV, while the fire fee money will go to the California Department of Forestry and Fire Protection. According to state Sen. Mark Leno, the fact that they're paid for specific state services makes them okay by the law. Prop 26 is a little hazy on the types of fees it allows, but it does require the state to prove that its hikes aren't prohibited taxes. Our guess is that the fees would probably survive a court challenge, but they do seem to run head-on into the intent of the measure, which aimed to keep the government from disguising tax increases as fees. We'll wish the Jarvis folks luck, but note that they've got a hard road with this one.

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