Environmentalists may be reveling in the defeat of Proposition 23, but their joy will be short-lived.
Proposition 23, you may recall, was an effort largely funded by the oil industry to suspend Assembly Bill 32, California's landmark legislation that rolls back greenhouse gas emissions to 1990 levels by 2020. Last Tuesday voters overwhelmingly rejected the proposal, leaving AB 32 intact and on schedule. Happy ending, right? Not so fast.
Also on the ballot was Proposition 26, labeled the "Stop the Hidden Taxes" initiative. Sponsors touted the proposition as a way to prevent legislators from sneaking in hidden fees to generate new revenues without public knowledge. The answer, they said, was to label fees, levies, fines, charges and other revenue sources as "taxes," which require a two-thirds vote by the legislature. The proposition also requires local governments to obtain voter approval before raising any fees.
So what's this have to do with Proposition 23 and AB 32? Everything.
The hallmark of AB 32 is the requirement for companies to reduce pollutant emissions through a cap-and-trade program for energy emitters. The California Air Resources Board (ARB) has responsibility for creating and enforcing the program. That's where Proposition 26 comes in. To the extent that enforcement extracts costs from producers and/or users, such costs could be construed as fees--now described as taxes. As a result, the ballot proposition-turned law may require a two-thirds approval vote from the legislature for the ARB to do its work.
Simply put, Proposition 26 paves the way to undo AB 32. If you didn't know this, others did. Chevron contributed $4,000,000 to the "Yes on 26" campaign. Conoco, Philips Petroleum, and Shell kicked in another $750,000.
Of course, fees-turned-taxes apply to a lot of businesses. That's why the American Beverage Association (soft drinks) gave $2,500,000, Philip Morris (tobacco) chipped in $1,000,000, and Anheuser Busch (beer) ponied up $625,000.
The political process is so porous in California that if special interests can't get their way through one route, there's always another. That's just what happened with the passage of Proposition 26. And to add insult to injury, the new law is retroactive to January 1, 2010.