JBC asks staff to draft law clarifying Prop. 123 'supplement, not supplant' language

The Joint Budget Committee directed staff to draft statutory clarifications of Proposition 123’s maintenance/supplanting language after Department of Local Affairs analysts told the panel they could not confidently measure whether the state has met the ballot measure’s funding requirements.

JBC staffer Rebecca Bickel told the committee she and DOLA analysts had compiled a baseline for the 2022–23 fiscal year and concluded the statute’s current wording leaves room for differing interpretations about whether tax credits, one‑time federal funds and other sources should count toward the state’s affordable‑housing effort. “I think fundamentally, when voters adopted Prop. 123, that included some specific language … Money appropriated … shall not supplant the level of general fund and cash fund appropriations for affordable housing programs for the state fiscal year ’22–’23,” Bickel said while walking members through a memo and baseline table.

Why it matters: Prop. 123 established a dedicated revenue stream for affordable housing and included language intended to prevent the state from replacing existing general‑fund and cash‑fund housing spending with the new source. If lawmakers and the executive branch disagree about which dollars count toward the baseline, the state could face legal challenge or be unable to allocate Prop. 123 funds with predictable rules.

The committee heard several specific concerns. Analysts told members that excluding one‑time federal and other short‑term funds from the 2022–23 baseline shrinks the baseline by roughly $412.6 million; including tax credits can materially change whether the totals look higher or lower than the 2022–23 baseline. “If you don’t exclude that one‑time funding, you would need to add well over $400,000,000 in DOLA,” Bickel told members.

Office of Legislative Legal Services attorney Pierce Lively warned of litigation risk if the General Assembly does not clarify the statute. “I think the most realistic concern would be that a housing group or housing advocacy group would sue, saying that statute says you need to have spent x million number of dollars … there is more risk in that argument succeeding without clarifying language,” Lively said.

Lawmakers debated options. Some members favored a program‑by‑program approach focused on whether a given program is an eligible use of Prop. 123 money; others preferred a sources‑of‑funds approach that would exclude federal one‑time funds, tax credits and revenue streams dedicated by other ballot measures (members cited marijuana cash‑fund transfers as an example). Bickel told the committee staff would work with the governor’s office and legal services to draft statutory language that preserves legislative flexibility while producing a usable year‑to‑year method for computing the baseline.

The committee voted to give staff drafting authority to prepare a bill to clarify how the statute should be applied and to avoid using the phrase “maintenance of effort” in the drafting language. The motion — to authorize staff‑initiated legislation to clarify the Prop. 123 requirement — passed 5–0 with Representative Sirota excused.

Next steps: JBC staff will draft statutory language and coordinate with the governor’s office (OSPB) and legal services. The committee signaled it wants exclusions for one‑time federal funds and a way to handle tax credits, but it did not settle on exact statutory text. The draft will return for committee consideration and possible inclusion in the JBC’s staff bill package.