Limits on Transportation Funding Upheld

In Shaw v. People ex rel. Chiang (here), the Court of Appeal invalidated several legislative appropriations that it said violated restrictions on the permissible uses of transportation funding contained in a series of initiatives and legislative constitutional amendments. While much of the case involves the precise wording of the various provisions at issue, from a constitutional perspective there are two interesting holdings.

First, the court considered the interplay between Article IV, Section 9, which provides that a "section of a statute may not be amended unless the section is re-enacted as amended," and Article II, Section 10(c), which says that an initiative can't be amended, except by another initiative, unless the initiative itself permits amendments. Here's how the issue arose. Revenue and Taxation Code Section 7102 is a statute that distributes the state's share of the sales and use tax. An initiative added a subdivision to the statute that limited the permissible uses of a portion of sales tax revenue derived from the sale of gasoline. However, because of Article IV. Section 9, the initiative had to reenact the entire statute. That wouldn't have mattered much, except that the initiative also provided that future amendments to the statute (not just the subdivision of the statute added by the initiative) could be enacted by the Legislature, but only if the amendment was consistent with, and furthered the purpose of, the measure.

The trial court held that amendments to the entire statute had to comply with this requirement. However, it also held that, since the purpose of the entire statute was to distribute sales tax revenue, any amendment that did that furthered the statute's purpose and was thus permissible. The Court of Appeal disagreed, rightly holding that this interpretation would make any amendment of the statute permissible, thus essentially eliminating the consistency requirement. Instead, the court held that any amendment to the statute as a whole had to be consistent with, and further, the purpose of the initiative, which was to provide a dedicated source of revenue for mass transportation.

That's fine as far as it goes, but it leaves an important question hanging. Suppose the Legislature wanted to amend a subdivision of the statute that had nothing to do with transportation funding. Under the decision, the amendment would be invalid, unless it was approved by the electorate, because by hypothesis it wouldn't further the initiative's purpose. That seems like quite a stretch, particularly since the court acknowledged that the initiative's failure to limit the amendment-restricting language to the particular subdivision of the statute, rather than the statute as a whole, was probably an oversight.

The second aspect of the court's decision that is interesting from a constitutional perspective is its treatment of initiative language restricting legislative budget-making. In People's Advocate v. Superior Court, the same court had invalidated a provision of an initiative statute that purported to limit future Budget Act appropriations for the Legislature. (Jerry Falk and I represented the Assembly in that case.) But the court also said that an initiative could appropriate money without posing a constitutional problem, if the initiative provided for a continuing appropriation. Since the initiative involved in the Chiang case did that, its limitation on the use of pre-existing funds was not invalid under People's Advocate.

This decision is not good news for the Legislature, particularly given the state's budget crisis. But it won't become effective until the Supreme Court either decides the case or denies review. Stay tuned.