California voters and courts consistently support efforts to protect both the environment and taxpayers. These actions often spur changes in policy throughout the nation. For example, California passed comprehensive water quality legislation prior to enactment of the federal Clean Water Act. California also pioneered air quality standards before the federal government enacted its own less stringent standards. In addition, California’s 1978 Proposition 13 voter initiative, which cut property taxes and limited future tax growth, led to similar policies in many other states and preceded the 1981 federal tax cuts. California policy decisions often lead to profound changes, for better or for worse, across the nation.
These deeply entrenched values—environmental protection and taxpayer protection—recently came into tension in the California Supreme Court’s 2016 decision in Department of Finance v. Commission on State Mandates. This is the most recent California Supreme Court decision to weigh in on the longstanding debate over when the state must reimburse local governments for costs mandated by state laws. The court decided that certain conditions in a state stormwater management permit issued to local governments to comply with deliberately ambiguous federal regulations were mandates imposed at the state’s discretion.
While Department of Finance protects local governments from the financial burden of implementing new state law, which affirms the California Constitution’s taxpayer protection initiatives, this decision may expose the state to significant financial liability, threaten its environmental protection programs, and disincentivize the state from pursuing effective and innovative policy in light of federal ambiguity.