More than 1 million people signed a petition to put a measure on the ballot this November that would have required voters to approve any tax increase passed by the state Legislature. It also would have required all local tax increases to be approved by two-thirds of voters instead of a simple majority vote.

The biggest impact, however, would have been that the measure threatened to retroactively reverse most tax increases approved since Jan. 1, 2022. Local governments warned they would have lost billions of dollars in revenue that had previously approved by voters. And it would have threatened recent statewide tax increases, including one on guns and ammunition set to take effect July 1.

That prospect alarmed Newsom and legislative leaders so much that they took the unusual step of asking the state Supreme Court to remove the measure from the ballot before voters had a chance to decide it.

California voters are allowed to bypass the governor and the state Legislature to amend the state Constitution at the ballot box, something they do frequently. Voters have amended the Constitution to protect abortion rights, declare marriage is between a man and a woman and dock legislators’ pay if they fail to pass a budget on time.

But the court has recognized a distinction between amending the Constitution — adding something new — and revising it by altering the way government works. Voters can amend the constitution by a ballot measure, but they cannot revise it.

In this case, the court ruled the ballot measure is a revision because it would take away the Legislature’s power to raise taxes — a shift the justices said would “fundamentally rework the fiscal underpinnings of our government at every level.” The only way to add these rules to the Constitution, the court ruled, would be for the Legislature and voters to approve a call for a new constitutional convention.

Matthew Hargrove, president and CEO of the California Business Properties Association, called the ruling “a gut punch to direct democracy in California.” Rob Lapsley, president of the California Business Roundtable, accused the court signaled its willingness “to back the progressive agenda at every turn moving forward.”

“There is no independent judiciary in California anymore,” Lapsley said. “Be scared. Because it’s only going to get worse.”

Newsom declined to speak to reporters after the ruling, but he issued a written statement — attributed to an aide — that said he supports the ballot initiative process but noted it “does not allow for an illegal constitutional revision.”

The issue is tricky for Newsom, a Democrat now in his second term who is a potential candidate for president. Newsom has tried to counter California’s reputation for high taxes by publicly opposing many new tax proposals, including campaigning publicly against a new tax on the rich.

But he has been willing to temporarily raise taxes on some businesses to balance the budget, something he is proposing to do again this year. And he signed a tax increase last year on guns and ammunition that is likely to be challenged in court once it takes effect on July 1.

Republicans on Thursday were quick to portray Newsom as “greedy,” arguing his successful attempt to block the measure will continue to make things more expensive in California, whose taxes on incomes, sales and gasoline are among the highest in the country.

“The California Democrat machine’s love affair with new taxes to pay for their ludicrous policies keep costing Californians their hard-earned money, and Newsom just made it that much easier to take even more,” said Jessica Millan Patterson, chairwoman of the California Republican Party.

Removing a measure from the ballot before an election is rare, but not unprecedented in California. In 1999, the court threw out one that would have cut lawmakers’ salaries and removed their authority to set boundaries for legislative districts. The court removed that measure from the ballot because it included more than one subject.

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Unfortunately, the proposal still relies on too many budget gimmicksand fund shifts. The Newsom plan also underestimates the severity of the current budget shortfall that must be addressed. Making matters worse, growing economic headwinds, including the tech industry laying off over 81,000 people and California’s subpar personal income growth, raises concerns that the deficit will continue to widenthroughout the year.

The focus on budget responsibility obscures some troubling trends. For example, while focusing on administrative efficiencies, the Governor fails to demand efficiencies in the programs that can yield substantial long-term budgetary savings.

Consider the Administration’s own admission at an Assembly Budget Committee hearing this week that they have no idea whether billions in Project Homekey homelessness expenditures have worked. Taxpayers deserve better with California facing a massive shortfall.

The May Revise also focuses too much on one-time budgetary savings, budget gimmicks, and fund shifts in the hope of restoringspending once revenues have returned to “normal.” But what Gov. Newsom calls normal are the unsustainable revenue surges that are inevitably followed by revenue crashes.

Spending these revenue surges has caused the growth in state expenditures to outpace growth in residents’ incomes. A budget that temporarily reduces spending and plays budgetary games only to continue the Governor’s profligate spending ways sets the state budget up for a future budget crisis.

This approach also wastes the important breathing room that the rainy-day fund reserve is supposed to provide – blowing through half the fund’s balance this year and next while failing to put the state on a sustainable budget path.

Basic budget arithmetic demonstrates that there are three options going forward – greater spending restraint, increased borrowing, or higher taxes.

There are many other ways to reduce spending including making more proposed one-time spending cuts permanent and further reducing Proposition 98 education spending. These reductions are by no means easy or costless, although the sheer amount of ineffective spending by the state (such as Project Homekey spending) demonstrates the many opportunities for the state to do better with less.

More budgetary borrowing, which took the state years to pay off when widely used in the 2000’s, is simply another way of kicking the problem down the road.  Nor is now the time to embrace billions in new borrowing for housing, the environment, schools, or other priorities we cannot afford.

This leaves the tax increase option. While he rejects tax increases this year, not making sufficient additional cuts this year makes future tax increases more likely.

Remember the 2009 budget crisis.  Politicians of both parties embraced budgets during the 2007-09 economic meltdown thatavoided tough spending choices and set the state up for a devastating 2009 budget that included billions in painful cuts to important programs and billions in tax increases.  

Like today, problems were evident well before the 2008-09 budget crisis. The failure to take sufficient actions caused credit rating agencies to downgrade California’s rating five times. Lower credit ratings increased borrowing costs, making addressing the problem more expensive.

Only after the crisis was undeniable, did politicians finally implement actual painful budget solutions that included nearly $60 billion in budget actions. These efforts required actual declines in year over year spending in excess of 15 percent relative to 2007.

The 2009 budget crisis should have taught our political leaders that spending gimmicks and blind hope turns today’s troubles into a worsecrisis tomorrow.

Now action on the Newsom budget turns to the Legislature.  One major question looms – will liberal lawmakers who never met a spending increase they didn’t like embrace cuts – even temporary ones – to CalWORKs, childcare and environmental programs?  Not likely.

Californians are now watching to see if Gov. Newsom and legislative leaders have learned their lesson and will pass a final state budget that reins in the state’s excessive spending sooner rather than later.

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