Action Guide November 7, 2000

DESCRIPTION

Proposition 37 is a constitutional amendment that would redefine as taxes any fees enacted by state or local government to study, monitor, or mitigate the environmental, societal or economic effects of an activity. If defined as a tax, local charges would require a two-thirds vote of the electorate in most cases, and at the state level, a two-thirds vote of the legislature would be needed. The proposition affects fees that are imposed primarily to address health, environmental or other societal or economic concerns when the fees do not already impose a regulatory obligation on the payer to address the problem. Some fees would be exempt, including fees authorized before July 1, 1999 and penalties or money paid as damages for the cost of remedying a specific event, such as cleaning up a hazardous waste spill. The measure also would classify as a tax any regulatory fee greater than the cost of regulating the activities of a business.

Example given by the Legislative Analyst's Office: Under current law, the state could impose a fee on businesses that sell cigarettes and use the money for services to people with smoking-induced illnesses by a simple majority vote of the legislature, rather than the two-thirds which would be required under Proposition 37.

The fiscal effect on state and local government is difficult to determine since it is hard to predict how many fees would not achieve the higher requirements for approval. However, Proposition 37 is likely to reduce government revenue from fees and potentially increase government expenditures for remedial action.

BACKGROUND

State and local governments impose taxes on people and businesses, primarily for general public services such as education and public safety. In contrast, fees usually pay for a particular service of benefit to certain individuals or businesses. The two main types of fees are user fees, such as garbage fees or park entrance fees, and regulatory fees, which pay for monitoring of rules to regulate activities of businesses or people as they affect the public. Under the State Constitution it is easier to create new fees than new taxes, and some businesses have claimed that charges that should have been taxes were improperly being classified as fees in order to make them easier to pass.

For example, in 1991 the state imposed a new fee on paint companies and other businesses whose products have contributed to lead in the environment. The money is used for screening, evaluation, and follow-up on treatment of children at risk of lead poisoning, identifying sources of contamination, and public education (the Childhood Lead Poisoning Prevention Act). The Sinclair Paint Company went to court to argue that the fee was a tax providing a broad public benefit, not a regulatory fee. The California Supreme Court, however, rejected that argument in a 1997 ruling, saying government may impose fees on companies that make contaminating products in order to help correct adverse health effects from those products. Some businesses then joined to put on the ballot this measure, which would in effect overturn the Court's decision.

According to campaign funding reports for the period through June 2000, more than 90 percent of the money spent in favor of Proposition 37 was contributed by oil, tobacco, and alcohol companies.

IMPORTANT POINTS

• Polluters should pay for the costs of cleaning up the pollution they cause.

• Businesses whose activities cause adverse health problems for individuals should pay for programs to monitor and correct those problems.

• This measure is an attempt to shift those costs from big business interests to the public. That is why the campaign for Proposition 37 is being paid for by oil, tobacco and alcohol corporations.

• The taxpayer will end up footing most of the costs that businesses would evade through the passage of Proposition 37.

• The California Supreme Court says that "A reasonable way to achieve Proposition 13's goal of tax relief is to shift the costs of controlling . . . pollution from the tax-paying public to the pollution-causing industries themselves." This is the ruling Proposition 37 would overturn.

• Proponents of Proposition 37 are trying to scare the public with foolish examples of fees that no one is really proposing. Proposition 37 would actually affect fees like the one oil companies now pay into the Oil Spill Prevention and Response Act trust fund.

SUPPORTERS Signing the ballot argument for:	OPPONENTS Signing the ballot argument against:
Larry McCarthy, President California Taxpayers' Association David Moore, President Western Growers Association Susan Corrales-Diaz, Director California Chamber of Commerce	Clancy Faria, President Peace Officers Research Association of California Lenny Goldberg, Executive Director California Tax Reform Association Jon Rainwater, Executive Director California League of Conservation Voters

The rebuttal to the supporters' arguments was signed by Gail Dryden, President, League of Women Voters of California; Lucy Crain, M.D., M.P.H., District Chair, California District IX of American Academy of Pediatrics; and Marguerite Young, California Director, Clean Water Action.

Other organizations opposing the measure include: American Cancer Society; Natural Resources Defense Counsel; Children's Advocacy Institute; Common Cause; California Nurses Association; California Professional Firefighters; Coalition for Clean Air; Sierra Club; Congress of California Seniors; Consumer Federation of California; and California Association of Professional Scientists.

RESOURCES

Anne Henderson, LWVC Legislative Director, annehenderson@worldnet.att.net

Doris Fine, LWVC Government Director, doris_fine@hotmail.com

Margo Reeg, LWVC State and Local Finances Program Director, creeg@whittier.edu

Doug Linney, Taxpayers Against Polluter Protection, 1904 Franklin Street, Suite 909, Oakland 94612, 510-444-4793, info@polluterprotection.com, www.polluterprotection.com

SAMPLE LETTER TO THE EDITOR

Editor,

Big business wants to pass on the costs of dealing with the effects of pollution and other adverse health consequences of their activities to taxpayers and individuals. That is what Proposition 37 is about, and that is why I oppose it.

The oil, tobacco and alcohol companies that sponsored this measure want you to believe it is about taxpayer protection. But the state Supreme Court says, "A reasonable way to achieve Proposition 13's goal of tax relief is to shift the costs of controlling . . . pollution from the tax-paying public to the pollution-causing industries themselves." Proposition 37 would overturn that ruling.

I will vote NO on Proposition 37.