In-Depth Analysis of Nov 2010 Election Results

The November 2010 election was a mixed bag for TransForm.  A strong majority of state-level elected leaders support making world class public transportation and walkable communities a reality for all Californians.  Yet the politics and economy of the moment, combined with the passage of Prop 26, will serve to make it extremely challenging to secure needed comprehensive policy reforms.

Governor-elect Jerry Brown and the State Legislature: supportive of TransForm’s agenda but politics and the passage of Proposition 26 create challenges

The election of Jerry Brown to the governorship presents TransForm and our allies with enhanced opportunities for working closely with the governor’s office promoting our policy priorities.  Brown has committed to working on fundamental reforms related to budgeting and infrastructure.  Based on his efforts as Attorney General to motivate local governments to adopt strong plans and policies for tackling global warming and his early actions as governor, all indications are that Brown will be forceful and positive on our issues.

The state legislature should continue to be sympathetic to TransForm’s priorities.  However, given the ongoing state budget mess and the depressed economy, there will also continue to be extreme wariness on the part of state legislators about supporting fee or tax increases, including even the mere creation of authority for local or regional entities to levy fees with local voter approval.  Although many state leaders are supportive of the need for more investments in public transportation, political and economic circumstances will make it extremely challenging for legislators to support the kinds of significant funding increases that are needed.

Further complicating matters and perhaps more problematic than the politics are the policy and legal uncertainties surrounding Proposition 26, the passage of which severely exacerbates the challenges TransForm and our allies face in securing major state-level policy and funding reforms supportive of public transportation.  TransForm will continue to work to move good policy at the state and local levels while also building greatly expanded statewide political capacity to broaden our policy opportunities and set the stage for winning major reforms.  Read more about Prop 26 below.  And please visit the website for TransForm's new statewide transit funding advocacy campaign, Invest in Transit, to learn what you can do to help make transit fast, frequent and affordable.

Proposition 22: good for local transportation funding but complicates state budget

Proposition 22 prohibits the state from taking or borrowing funds intended for local government programs, thereby protecting key local funding mechanisms for public transportation and affordable housing, among other programs and services.  Given the complexity of state and local funding mechanisms and the various ways in which Prop 22 may interact with or be impacted by other initiatives that passed in November 2011, the ultimate effects of Prop 22 on transit and other smart transportation funding are unclear.  The complexities and uncertainty, combined with TransForm’s position that the primary funding focus should be on expanding resources, led TransForm to remain neutral on this initiative.

Prop 22’s restrictions on state borrowing of local funds should result in more secure funding for local transportation programs.  The negative impacts of state diversions of local funds are glaringly obvious and Prop 22 will protect some very important local government revenue streams.  Californians have repeatedly voted to support higher local fees and taxes in order to fund local investments yet state government has repeatedly diverted these revenues.  This has contributed to local government cuts to road maintenance, public transportation, and redevelopment agencies.  The passage of Prop 22 will likely stop most and perhaps all of these diversions.

On the other hand, Prop 22 increases the state deficit by approximately $1 billion per year, including this year, because the state has been relying on a portion of local funds to help balance the state budget.  Additionally, Prop 22 will likely make it more difficult for the state to increase its allocations for a range of needs, including transportation.  This is the case because the passage of Prop 22 has exacerbated an already dire state budget situation and created a serious political rift between the proponents of the initiative and the state legislature.  As a result, transit agencies and local government representatives are likely to find it more difficult to engage state legislators and legislative staffers on policy and funding matters.

Proposition 26: hold on because it’s going to be a bumpy ride … but CARB’s authority under AB 32 and SB 375 likely safe

While Proposition 22 protects local funding, Proposition 26 amends California’s Constitution so that most state fees will require approval by a 2/3 vote of the legislature and most local fees will require approval by a 2/3 vote of the local electorate.  With regard to state fees, Prop 26 is retroactive to January 1, 2010.  Viewed through even the most optimistic lens, Prop 26 is going to limit the ability of the state and local governments to maintain critical programs and services.  Prop 26 will exacerbate, possibly severely, the ongoing difficulties at the state level related to funding a range of programs and balancing the state budget.

There has been much written and said about Prop 26 since the November 2010 election; much of it has been inaccurate.  This is due to the fact that many of the widely available public analyses and news stories have tended to oversimplify the issues and emphasize one particular viewpoint.  The reality is that no one knows the full extent of the damage that will be caused by Prop 26.  There is a possibility that parts of Prop 26 could be successfully challenged in court or that new funding streams could be carefully crafted to fit within the exception language contained within the initiative.  Again, nobody really knows how this will play out.

Since the election, TransForm has engaged dozens of attorneys, policy advocates, and others around the state to develop as clear and comprehensive a picture as possible of how this initiative may impact our work promoting public transportation and walkable communities and to begin plotting a course forward across this new policy and political landscape.  There are ongoing discussions about the details of the impacts and possibilities for challenging as well as options for crafting policy that fits within the exceptions carved out by the initiative.

One angle that has received a fair amount of attention is the question of whether Prop 26 will impact AB 32 or SB 375 and the ability of the California Air Resources Board (CARB) to enact new fees by majority vote as the CARB implements these laws.  It appears that the CARB’s authority to enact new fees is not impacted by Prop 26.  This is because the CARB received the authority to enact fees to implement AB 32 and SB 375 when those laws were signed into law, in 2006 and 2008 respectively, whereas Prop 26 is only retroactive to the beginning of 2010.  This does not mean that some entity won’t try to use Prop 26 to challenge the CARB’s authority to enact new fees, only that the CARB appears to have solid legal footing to enact and defend new fees.

Another angle receiving some attention is Prop 26’s impacts on the “fuel tax swap.”  There appears to be a strong likelihood that Prop 26 will negatively impact and possibly void all or part of the fuel tax swap enacted earlier this year by the legislature on a simple majority vote and signed into law by the governor.  The swap was a budget-related compromise that limited overall state-level funding available for public transportation but provided some enhanced stability to this funding.  The swap also provided the state with some additional means for paying off transportation bond debt and this made it somewhat easier to craft a state budget deal than would have been the case without the swap.

Prop 26 requires the state legislature to re-enact, with a 2/3 vote by the end of 2011, any measures enacted since the beginning of this year that raised fees or taxes.  Any measures not re-enacted in this manner by the state legislature will potentially be invalidated by the operation of Prop 26 via legal challenges to such measures.  The swap, designed to be revenue-neutral, increased the per-gallon excise tax on gasoline and the rate of the sales tax on diesel fuel while exempting gasoline from the state sales tax and reducing the per-gallon excise tax on diesel.  Whether Prop 26 would only invalidate the tax increases in the swap or invalidate the entire measure, including the removal of gasoline from the state sales tax and possibly also the reduction in the excise tax on diesel, is not known.  It is similarly unknown whether entities wishing to challenge state measures such as the gas tax swap enacted this year by majority vote must wait until the end of 2011 to have legal standing to file challenges.  Further complicating matters, it is impossible to know what actions the legislature may take in coming months to test the limits of Prop 26 or re-enact measures or portions of measures enacted this year.  However, there does appear to be a growing sense among state legislators that re-enactment of the swap by a 2/3 vote is preferable to all of the other options for moving forward.

As the issues surrounding Proposition 26 become clearer, TransForm will continue to provide updates.  TransForm will of course also be working with our allies to find creative ways to increase and protect state funding for public transportation, perhaps by exploiting some of the excepting language in Prop 26 or coordinating with the new governor and legislative leaders on a budget or special election mechanism.