An ambitious effort to dramatically overhaul the way California governments tax their citizens is being funded by the soda industry, kicking off what could become the most expensive political contest in the country this year.
A new campaign committee organized by the California Business Roundtable — and initially funded by the American Beverage Association — is collecting signatures for a constitutional amendment aimed at November’s ballot that would require any new tax or fee levied by the state to win two-thirds supermajorities in the legislature, a difficult hurdle to clear.
The measure would also require local governments to put any tax or fee increase on the ballot, subject to the same two-thirds vote.
Proponents say amending the state constitution is necessary to rein in a liberal legislature that has a penchant for raising taxes, even in one of the best economic situations in years.
“We have constant proposals to raise more taxes, because when you look at our state spending and our local spending, the state is in the red by 2021 under current spending — in a full economy, I might add. And the pressures at the local level in regard to pensions and salaries and other services have created unrelenting needs for new revenue,” said Rob Lapsley, president of the California Business Roundtable.
The amendment has set the well-funded and politically active beverage industry and business community on a collision course with unions and Democratic-backing organizations that are promising an equally robust response. Observers said that because the stakes are so high, the ballot measure could attract hundreds of millions of dollars in campaign spending.
“Every union in the state is going to spend tens of millions against” the proposed amendment, said Thad Kousser, a political scientist at the University of California, San Diego.
The amendment would be the most substantial overhaul to California government since Proposition 13, the 1978 ballot initiative that cut property taxes and spun the state into a years-long budget hole.
Proposition 13 fundamentally reshaped the way California politicians raised revenue for the state. The initiative required a two-thirds vote in the legislature to hike any future taxes, so the legislature began implementing new revenue-raisers it categorized as fees to get around the tax requirements.
Now, the proposed constitutional amendment takes aim at those alternative fees, charges, levies and tolls, for both state and local governments.
“This is a swing at state and local ability to raise taxes and fees. This is everything that’s been on every Christmas wish list for every anti-tax group in California,” Kousser said. “This would make Prop. 13 seem like a minor adjustment.”
The constitutional amendment does not yet have a ballot number because supporters have not yet submitted the necessary signatures. But both proponents and opponents expect the group behind the signature drive, Californians for Accountability and Transparency in Government Spending, to collect the 585,407 valid signatures necessary to qualify.
The effort to get the amendment on the ballot is being funded mainly by major soda manufacturers such as PepsiCo and Coca-Cola, through the political arm of the American Beverage Association (ABA). Since February, the ABA has given the campaign $4.3 million, according to public filings with the California secretary of state’s office.
Most of the rest of the committee’s money, totaling less than $600,000, has come from Chevron, the California Business Roundtable, Anheuser-Busch and the Wine Institute.
In a statement, the ABA pointed to a provision in the proposed amendment that would show voters how money from a proposed tax increase would be spent.
“Importantly, this measure would require that any tax money approved by voters be spent for a specific purpose — lawmakers would not be able to divert the money to other programs or the general fund,” the statement read. “This initiative puts the taxpayer more firmly in control over the affordability and funding priorities of their community.”
The investment from the soda industry comes after years in which the ABA has lobbied and mounted high-cost campaigns against taxes on sugary beverages in cities like San Francisco, Oakland and Albany, a small community on the east side of the bay. And the few million dollars the soda industry has spent so far this year is a pittance compared to what those earlier battles have cost.
Public spending records show the ABA’s California-specific PAC has spent more than $45 million since 2012, including $22.7 million to fight San Francisco’s soda tax. The San Francisco measure passed with 62 percent of the vote — short of the two-thirds that would be required under the proposed constitutional amendment — in 2016.
The sugary drink industry has spent more than $107 million to oppose soda taxes since 2009, in states like Washington and New York and cities from Chicago to Philadelphia to Santa Fe, N.M., according to a 2017 report by the Center for Science in the Public Interest.
That’s far more than proponents of taxes on sugary beverages have had on hand. Since 2016, when former New York City Mayor Michael Bloomberg began funding soda tax measures across the country, the industry has outspent tax proponents by a $49 million to $27 million margin, the report found.
Now, facing the prospect of a city-by-city fight over soda taxes, the industry hopes to raise the bar high enough that those taxes become easier to defeat.
“On the beverage side, you can see why this would be something that they would jump into,” said Gale Kaufman, the veteran Democratic strategist tapped to run the opposition campaign. “For them, it’s actually saving money.”
Kaufman said the proposed constitutional amendment would “wreak havoc with cities and counties” that depend on tax dollars to continue functioning.
But Lapsley, of the California Business Roundtable, said the state’s business community is the one at risk. The legislature in recent years passed a new cap-and-trade tax, and some Democrats are contemplating a single-payer health-care system that would add billions more to the budget.
“Everywhere we turn there’s a requirement for new revenues,” he said.
Ballot initiatives, particularly in California, have become an increasingly popular — and expensive — way for business and citizen-led groups to dictate public policy.
Four propositions that allowed several Native American tribes to open new casinos attracted $172 million in spending in 2008. In 2005, California voters defeated a measure to provide prescription drug discounts to low-income residents after the two sides spent $163 million. More recently, in 2016, California voters rejected a measure to clarify drug prices after a $131 million campaign, and they approved a tobacco tax increase after supporters and opponents combined to spend $107 million.
All told, supporters and opponents of various ballot measures across the country spent more than $1 billion influencing voters in 2016, according to data maintained by Ballotpedia, which tracks political races and spending. Almost half of that amount was spent in California alone.
While Democrats and Republicans are expected to spend several billion dollars on the battle for control of the House and Senate this year, the most expensive race of the year is likely to be a California ballot measure. Along with the constitutional amendment, several other high-priced measures — including an affordable housing measure, a consumer privacy measure and an effort to repeal the recently raised gas tax — are all gathering signatures.
One indication of just how much those measures will cost is the amount supporters are paying contractors to collect signatures to qualify for the ballot in the first place. Supporters of the constitutional amendment began offering $6 for every valid signature collected — an unusually high price that immediately made the amendment a top priority for professional signature-gatherers.
“This is bigger stakes than the governor’s race,” Kousser said. “If this qualifies, I think it automatically becomes the biggest priority.”