APPEAL from a judgment of the Superior Court of Sacramento County, Jack Sapunor, Judge. Affirmed in part and reversed in part. (Super. Ct. No. 07CS01179).
The opinion of the court was delivered by: Cantil-sakauye, J.
CERTIFIED FOR PUBLICATION
This case considers the effect on the state budgetary process of a bond initiative measure (Proposition 116) almost two decades after it was approved by voters. Specifically, we consider the legality of the Legislature‟s creation of the Mass Transportation Fund, the legality of the Legislature‟s transfer of a portion of spillover gas tax revenue to the Mass Transportation Fund and the Legislature‟s appropriation of $1.2 billion*fn1 from the Mass Transportation Fund and the Public Transportation Account for the 2007-08 budget year in light of Proposition 116.
Josh Shaw, an individual California taxpayer and elector, and the California Transit Association, a nonprofit corporation, (hereafter petitioners) filed a petition for writ of mandamus, declaratory and injunctive relief against John Chiang, the California State Controller, and Michael C. Genest, California Director of Finance, (hereafter the State) challenging the Legislature‟s actions. The trial court generally upheld the challenged actions, rejecting only the Legislature‟s transfer of $409 million from the Public Transportation Account to the General Fund for past debt service payments on Proposition 108 bonds as not being consistent with the purposes of the Public Transportation Account as described by Proposition 116. Petitioners appeal from the trial court‟s rejection of their other claims.*fn2 The State cross-appeals the trial court‟s judgment regarding the $409 million transfer.
We agree with petitioners that the trial court improperly upheld the challenged legislative actions. Rejecting the position of the State in its cross-appeal, we also conclude the trial court properly invalidated the $409 million transfer. We shall reverse in part and affirm in part.
An understanding of the Retail Sales Tax Fund and certain transfers from such fund, Proposition 116, Proposition 2, Proposition 42 and Proposition 1A is essential to this opinion. These statutes and propositions are discussed at length where pertinent to the appeal, but we begin with a short overview.
California uses state retail sales and use tax revenues to fund the general operation of state government. With a few exceptions not relevant here (Rev. & Tax Code, §§ 7101, 7101.3), state retail sales and use-tax revenues are deposited in the state treasury to the credit of the Retail Sales Tax Fund. (Rev. & Tax Code, § 7101.) Revenue and Taxation Code section 7102 (section 7102) governs the withdrawal and transfer of funds from the Retail Sales Tax Fund. (§ 7102.) For many years, subdivision (a) of section 7102 has provided that a portion of the sales and use taxes from motor vehicle fuel, as determined by a specified formula*fn3 (hereafter spillover gas tax revenue), must be transferred from the Retail Sales Tax Fund to the State Transportation Fund (Stats. 1971, Reg. Sess., ch. 1400, pp. 2770, 2785). The account receiving the spillover gas tax revenue within the State Transportation Fund has been renamed several times.*fn4 Since 1997, however, the account has been called the Public Transportation Account in the State Transportation Fund (PTA).*fn5 (Stats. 1997, ch. 622 (S.B. 45), § 32; Pub. Util. Code, § 99310.) This appeal concerns the spillover gas tax revenue that would have, but for the challenged amendments and statutes, been transferred to the PTA or would have remained in the PTA.
At the June 1990 Primary Election, California voters adopted Proposition 116 (known as the Clean Air and Transportation Improvement Act of 1990), an initiative measure authorizing a general obligation bond issue of nearly $2 billion to fund primarily passenger and commuter rail infrastructure. (Pub. Util. Code, §§ 99600, 99601; Ballot Pamp., Primary Elec. (June 5, 1990) Official Title and Summary, p. 36.) Proposition 116 specified its bond funds could be spent on rail rights-ofway, stations and facilities, rolling stock, grade separations, related capital expenditures, paratransit vehicles, bicycle facilities, water-borne ferry vessels and facilities, and the railroad technology museum. (Pub. Util. Code, §§ 99613, 99620-99653.) The bonds were general obligation bonds, backed by the State of California (Pub. Util. Code, §§ 99690.5, 99691.5) with money appropriated from the General Fund to pay the principal and interest as those came due. (Pub. Util. Code, §§ 99693.5, 99694.) The voters expressed their intent that the "bond funds shall not be used to displace existing sources of funds for rail and other forms of public transportation, including, but not limited to, funds that have been provided pursuant to..., the [PTA],...; and that funding for public transit should be increased from existing sources including fuel taxes and sales tax on fuels." (Pub. Util. Code, § 99611 (section 99611).)
Proposition 116 amended Public Utilities Code section 99310.5 (section 99310.5) to read:
"(a) The account [the PTA] is hereby designated a trust fund.
"(b) The funds in the account shall be available, when appropriated by the Legislature, only for transportation planning and mass transportation purposes, as specified by the Legislature.
"(c) The Legislature may amend this section by statute passed in each house of the Legislature by rollcall vote entered in the journal, two-thirds of the membership concurring, if the statute is consistent with, and furthers the purposes of, this section." (Ballot Pamphlet, supra, text of proposition, § 2, p. 73 [italics indicate language added by Prop. 116].)
Proposition 116 also amended section 7102, in pertinent part, as follows:
"The money in the fund [Retail Sales Tax Fund] shall, upon order of the Controller,... be transferred in the following manner:
"(a)(1) [Spillover gas tax revenue], shall be estimated by the State Board of Equalization, with the concurrence of the Department of Finance, and shall be transferred during each fiscal year quarterly to the [PTA], a trust fund in the State Transportation Fund for appropriation pursuant to Section 99312 of the Public Utilities Code.
"(2) All revenues, less refunds, due to derived under this part from the imposition of sales and use taxes on fuel, as defined for purposes of the Use Fuel Tax Law (Part 3 (commencing with Section 8601)) at the 4 3/4 percent rate shall be transferred during each fiscal year to the Transportation Planning and Development Account for appropriation pursuant to Section 99312 of the Public Utilities Code.
"(b) All revenues, less refunds, derived under this part at the 4 3/4 percent rate, resulting from increasing, after December 31, 1989, the rate of the tax imposed pursuant to the Motor Vehicle Fuel License Tax Law on motor vehicle fuel, as defined for purposes of that law, shall be transferred during each fiscal year to the Transportation Planning and Development Account for appropriation pursuant to Section 99312 of the Public Utilities Code.
"(c) All revenues, less refunds, derived under this part from a rate of more than 4 3/4 percent pursuant to Sections 6051.1 and 6201.1 shall be transferred to the Disaster Relief Fund created by Section 16419 of the Government Code, shall be estimated by the State Board of Equalization, with the concurrence of the Department of Finance, and shall be transferred quarterly to the [PTA], a trust fund in the State Transportation Fund.
"(d)(b) The balance shall be transferred to the General Fund.
"(e)(c) The estimate estimates required by subdivisions subdivision (a) and (b) shall be based on taxable transactions occurring during a calendar year, and the transfers required by subdivision (a) shall be made during the fiscal year that commences during that same calendar year. Transfers required by paragraphs (1) and (2) of subdivisions (a) and (b) shall be made quarterly. "(d) The Legislature may amend this section, by statute passed in each house of the Legislature by rollcall vote entered in the journal, two-thirds of the membership concurring, if the statute is consistent with, and furthers the purposes of, this section." (Ballot Pamphlet, supra, text of proposition, § 4, p. 74 [italics indicate language added by Prop. 116 while strikeouts indicate language deleted by Prop. 116].)
In 1998, voters approved Proposition 2, a legislative constitutional amendment, adding article XIX A to the California Constitution. (Cal. Const., art. XIX A (Article XIX A); Ballot Pamphlet, Gen. Elec. (Nov. 3, 1998) official title and summary prepared by the Attorney General, p. 10.) As relevant here, Article XIX A requires loans of state transportation funds from the PTA to the state General Fund to be repaid in full generally within the fiscal year in which the loan is made or within three fiscal years from the date on which the loan was made if the Governor proclaims a fiscal emergency or if the estimated General Fund revenues for the current year are less than the General Fund revenues for the prior year. (Cal. Const., art. XIX A, § 1.)
In 2002, voters approved Proposition 42, another legislative constitutional amendment, adding article XIX B to the California Constitution. (Cal. Const., art. XIX B (Article XIX B); Ballot Pamphlet, Primary Elec. (March 5, 2002) official title and summary, p. 14.) Article XIX B requires the portion of gas sales and use tax revenue formerly deposited in the state General Fund (nonspillover gas tax revenue) to be transferred instead to a new fund in the State Treasury called the Transportation Investment Fund. (Article XIX B, § 1, subd. (a).) Article XIX B specifies how the gas sales and use tax revenue in the Transportation Investment Fund is to be allocated, directing specific amounts and percentages of revenue to state and local entities for street and highway maintenance, general transportation and public/mass transportation purposes. (Article XIX B, § 1, subd. (b); former Rev. & Tax. Code, § 7104, Stats. 2001, ch. 113, § 9, pp. 11-15.)
Article XIX B allows the transfer of revenue from the General Fund to the Transportation Investment Fund to be suspended in whole or in part in times of severe state fiscal hardship if particular conditions are met. (Article XIX B, § 1, subd. (d); Ballot Pamphlet, Primary Elec. (March 5, 2002) text of Prop. 42, p. 66.) The State partially suspended the transfer in 2003-04 and wholly suspended the transfer in 2004-05.
(Ballot Pamphlet, Gen. Elec. (November 7, 2006) analysis by the Legislative Analyst, background, sales tax, p. 15.) Proposition 1A
In 2006, voters approved Proposition 1A, another legislative constitutional amendment, amending Article XIX B to further limit the conditions under which transfers of the nonspillover gas tax revenue to the Transportation Investment Fund can be suspended. (Article XIX B, § 1, subd. (d); Ballot Pamphlet, Gen. Elec. (November 7, 2006) analysis by the Legislative Analyst, proposal, p. 15.) "Specifically, the measure requires Proposition 42 suspensions to be treated as loans to the General Fund that must be repaid in full, including interest, within three years of suspension. Furthermore, the measure only allows suspension to occur twice in ten consecutive fiscal years. No suspension could occur unless prior suspensions (excluding those made prior to 2007-08) have been repaid in full. [¶] In addition, the measure lays out a new schedule to repay the Proposition 42 suspensions that occurred in 2003-04 and 2004-05." (Ballot Pamphlet, supra, analysis by the Legislative Analyst, proposal, p. 15; Article XIX B, § 1, subd. (f).)*fn6
Unchallenged Legislative Amendments to Section 7102
Starting in 2001, the Legislature began to make annual amendments to subdivision (a)(1) of section 7102, the portion of section 7102 governing spillover gas tax revenue. (§ 7102, subd. (a)(1)(A)-(H).) Evidence was submitted to the trial court in the form of a declaration of a program budget manager for the Department of Finance that the amendments for the budget years 2001-02 and 2002-03 did not result in any change to the amount of money deposited in the PTA. However, starting with budget year 2003-04 through 2006-07, the amendments (§ 7102, subd. (a)(1)(C)-(F)) resulted in a reduction in the transfer of gas tax spillover revenue to the PTA. No legal challenge to this legislative practice was filed.
The challenged Amendments, Statutes and Appropriations; the Mass Transportation Fund and the Transportation Debt Service Fund
In 2007, as relevant here, the Legislature undertook a series of actions which added subparts (G) and (H) to subdivision (a)(1) of section 7102 of the Revenue and Taxation Code (Stats. 2007, ch. 173, § 5), added section 7103 to the same code (Stats. 2007, ch. 313, § 9), and added section 16965 to the Government Code (Stats. 2007, ch. 313, § 6). Essentially these amendments appropriated money that was otherwise directed to the PTA to various other government sources and obligations.
Section 7102, subdivision (a)(1)(G) relates to the budget year 2007-08 and provides for the transfer of $622 million of spillover gas tax revenue to a new fund called the Mass Transportation Fund (MTF). (§ 7102, subd. (a)(1)(G).)
Subdivision (a)(1)(H) of section 7102 relates to the budget year 2008-09 and every fiscal year thereafter. (§ 7102, subd. (a)(1)(H).) As amended in 2008, subdivision (a)(1)(H) calls for the transfer of $940 million of spillover gas tax revenue to the MTF in 2008-09 and 50 percent of the spillover gas tax revenue estimated each quarter in future years. (§ 7102, subd. (a)(1)(H).)
Revenue and Taxation Code section 7103 (section 7103), subdivision (a), creates the MTF in the State Treasury and provides that the funds transferred to the fund "may be used for, but shall not necessarily be limited to" several specified "transportation purposes[.]" The four purposes specified by the statute include (1) payment of debt service on transportation bonds or reimbursement to the General Fund for past debt service on transportation bonds; (2) funding of the Department of Developmental Services for regional center transportation; (3) suspended transfer reimbursements; and (4) funding of home-to-school transportation. (§ 7103, subd. (a).)
For budget year 2007-08, appropriations were made from the MTF as follows.
Section 7103, subdivision (b), takes the money ($622 million) transferred to the MTF by section 7102, subdivision (a)(1)(G), and retransfers $539 million to a new "Transportation Debt Service Fund" and appropriates the remainder ($83 million) to current suspended transfer reimbursements. (§ 7103, subd. (b).)
Government Code section 16965 establishes the Transportation Debt Service Fund and authorizes the Director of Finance for the 2007-08 budget year to use the $539 million transferred to the fund as follows: to reimburse the General Fund in the amount of $339 million for the purpose of reimbursing the cost of current debt service payments on three bond propositions--$124 million for current debt service on Proposition 116 bonds, $71 million for current debt service on Proposition 108 bonds (Prop. 108 is known as the Passenger Rail and Clean Air Bond Act of 1990 and is codified at Sts. & Hy. Code, § 2701 et seq.); and $144 million for current debt service on Proposition 192 bonds (Prop. 192 is known as the Seismic Retrofit Bond Fund of 1996 and is codified at Gov. Code, § 8879 et seq.). (Gov. Code, § 16965, subds. (a) & (b)(1).) Government Code section 16965 also authorizes the Director of Finance for the 2007-08 budget year to transfer $200 million from section 7103, subdivision (b), to the General Fund for the purpose of reimbursing the cost of past debt service payments made by the General ...