BACKGROUND TO THE PROPOSITION

Until 1933, the state Constitution allowed passage of budget bills with a majority vote in each house of the state Legislature. In June of that year, a complicated measure appeared on the ballot that changed this vote requirement from a majority to two-thirds supermajority in each house in any year when revenues grew by more than five percent. In the early 1960’s, because the state’s revenues had consistently grown by more than five percent for so many years, the Legislature eliminated that condition upon recommendation of a constitutional revision commission.

The two-thirds rule for raising taxes came in 1978, as a byproduct of Proposition 13, a landmark initiative which limited property tax assessments. Prop 13 also instituted a two-thirds supermajority in both legislative houses for increases in all state tax rates or amounts of revenue collected, including income tax rates. Prop 13 did not allow new taxes for local governments, but later amendments provided for new or increased local taxes to be approved by the people: a two-thirds supermajority in local elections is required for special taxes, but a majority of the people can approve a general tax that goes into a city's general fund.

In 2004 California voters rejected Proposition 56, which proposed to allow the Legislature to pass the budget and budget-related tax and appropriation bills with just a 55 percent vote. Opponents of Proposition 56 argued that the measure would make it too easy to raise taxes.

California is one of only three states – Arkansas and Rhode Island are the others – to require a two-thirds vote to adopt a budget. California is the only state that mandates a two-thirds vote for both budgets and taxes.

RELATIONSHIP TO TWO-THIRDS RULE FOR TAX ISSUES

Section 3 of the text of the proposition, entitled “Purpose and Intent,” contains the following statement: “This measure will not change the two-thirds vote requirement for the Legislature to raise taxes.” However, the portion of the text that actually amends the Constitution does not contain a reference to taxes. To quote the Legislative Analyst: “This measure’s constitutional provisions do not specifically address the legislative vote requirement for increasing state tax revenues, but the measure states that its intent is not to change the existing two-thirds vote requirement regarding state taxes.”

The issue has been raised by opponents of the proposition, who claim that in fact taxes could possibly be raised under the proposition. They also filed a legal challenge to the inclusion of the phrase “Retains Two-Thirds Vote Requirement for Taxes” in the official ballot label. Opponent Alan Zaremberg, president of the California Chamber of Commerce, argued that the phrase is misleading. After a lower court agreed to remove this phrase, the court of appeal ruled that the phrase is not misleading and should remain in the ballot label.

LATE BUDGETS

One of the consequences of the two-thirds vote requirement can be seen in our state’s budget history. Over the past 30 years, the Legislature has passed a budget bill by the June 15th deadline only five times. During that same period, a final budget—passed by the Legislature and approved by the Governor—was in place on July 1st of the applicable fiscal year on only ten occasions. As of August 31, 2010, the budget for fiscal year 2010-11 is late, but so far has not set the record, as can be seen from the following partial list of late budgets:

Latest budget prior to 2010-11: Fiscal year 2008-2009
Governor: Arnold Schwarzenegger
Date Signed: Sept. 23, 2008

Second latest budget: Fiscal year 2002-2003
Governor: Gray Davis
Date Signed: Sept. 5, 2002

Third latest budget: Fiscal year 1992-1993
Governor: Pete Wilson
Date Signed: Sept. 2, 1992