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One thing is clear…

Nevada is one of 24 states with some form of popular initiative and referendum provision in its constitution. Since its adoption in 1912, the initiative process in Nevada, both for the proposal of statutory and constitutional enactments and amendments, has been fraught with much litigation and uncertainty. This legislative session and the general election in 2014 are looking to prove unexceptional in that respect.

This session, the Legislature is considering Initiative Petition 1, which proposes to enact a margin tax. The initiative is backed by the teachers’ union and other organized labor. Most experts agreed the 40-day limit on the Legislature taking action would expire, automatically placing the measure on the ballot. See Nev. Const. art. 19, § 2.

But early last week, Senate Republicans did the unthinkable: they proposed a mining tax package as an alternative to the margin tax. This set the pundits ablaze, wondering whether the Legislature would act in 40 days (by my count, the deadline is Friday, March 15), whether an alternate would even pass the Legislature, and whether the governor could successfully block such an alternate. Jon Ralston, in particular, focused on language in Article 19, Section 2, that seems to allow the Governor a veto over initiatives. I largely agree with Ralston’s conclusion, that should an alternate make it out of the Legislature and the Governor exercise a veto, the Nevada Supreme Court will ultimately be called upon to resolve the legislative-executive squabble over the Constitution’s meaning. But as I will discuss below, there are several other concerns that would need to be resolved first before the Court could address Ralston’s veto concern. This post will not discuss the wisdom of either the margin tax or the alternate on mining.

Background on Statutory Initiatives in Nevada

Article 19 of the Nevada Constitution sets out the power of the people to propose, by initiative, adoption or amendments to statutes or amendments to the state constitution. Because IP 1 propose to enact a statute, only the provisions relating to statutory initiatives are discussed.

Once a petition has qualified and been transmitted to the Legislature, Nev. Const. art. 19, § 2(2)-(3), the petition “shall be enacted or rejected by the Legislature without change or amendment within 40 days.” Nev. Const. art. 19, § 2(3). “If the proposed statute or amendment to a statute is enacted by the Legislature and approved by the Governor in the same manner as other statutes are enacted, such statute or amendment to a statute shall become law, but shall be subject to referendum petition.” Id. “If the statute or amendment to a statute is rejected by the Legislature, or if no action is taken thereon within 40 days,” the petition is submitted to the voters at the next general election. Id.

Recapping, the language sets out that (1) the Legislature has 40 days to act on a petition before it is automatically submitted to the voters at the next general election and (2) if the Legislature enacts the petition within 40 days, and if the Governor approves it “in the same manner as other statutes are enacted,” then the petition becomes law. Thus, it seems absolutely clear that, at least in the case of enactment, the governor is allowed a similar veto as the one he has over other legislation. See Nev. Const. art. 4, § 35 (discussing the Governor’s qualified veto power over legislation). There is some ambiguity, however, whether the veto over enacted petitions is absolute or qualified, as in the case of regular legislation under Article 4, Section 35. This is essentially Ralston’s concern.

Additionally, the Legislature can propose an alternate measure that will be placed on the ballot alongside the original petition. “If the Legislature rejects such proposed statute or amendment, the Governor may recommend to the Legislature and the Legislature may propose a different measure on the same subject, in which event, after such different measure has been approved by the Governor,” both measures are submitted to the voters at the next general election. Nev. Const. art. 19, § 2(3).

Whereas Ralston sees one problem with that part of Article 19, Section 2, (namely, what does “approved by the Governor” mean?), I see other problems: (1) may the Legislature propose an alternate measure after the 40-day consideration period on the petition has expired without expressly rejecting it; (2) must the  Governor recommend an alternate before the Legislature may enact one; (3) would the Governor have an absolute (or even a qualified) veto over an alternate; and (4) what constitutes “a different measure on the same subject”?

Express rejection must occur before the expiration of the 40-day consideration period

In my view, if the Legislature does not affirmatively reject the petition within 40 days of its submission, the Legislature loses power to propose an alternate measure. Remember, the Constitution requires that the petition “shall be enacted or rejected by the Legislature . . . within 40 days.” Nev. Const. art. 19, § 2(3). If the Legislature does not enact the petition, the Constitution instructs “If [the petition] is rejected by the Legislature, or if no action is taken thereon within 40 days, the Secretary of State shall submit the [petition]” to the voters at the next general election. Id. (emphasis added). Thus, there is an operational distinction between rejection and rejection by default. In both cases, the petition goes to the voters. But in the case of rejection by default (i.e. the Legislature failing to act within 40 days), the Legislature loses power to propose an alternate.

The Legislature’s power to propose an alternate measure is limited to where “the Legislature rejects such proposed statute or amendment.” Id. (emphasis added). In reading Article 19, Section 2(3), as a whole, it is clear the section’s drafters knew the difference between rejection and no action taken within 40 days. Thus, because there is no ambiguity in the Constitution’s language, its plain meaning must be upheld: if the Legislature does not reject the petition by March 15, it will lose the power to propose an alternate.

My argument comports with legislative practice. See S. Con. Res. 4, 76th Leg., Reg. Sess. (2011); S. B. 495 § 4, 76th Leg., Reg. Sess., 2011 Nev. Stat. 921, 923. The Legislature rejected the petition on the last day of the 40-day deadline, adopting a concurrent resolution on March 18, 2011, thereby preserving its power to later propose an alternate measure. The alternate, S. B. 495, ultimately passed the Legislature on May 23, 2011, and was signed by the Governor on June 1.  However, the petition in 2011, Building an Arena for a Stronger Future, ended up being invalidated by the courts in Taxpayers for the Protection of Nevada Jobs v. Arena Initiative Committee, Nos. 57157 & 58350See Order Granting Petition for Rehearing, Vacating Previous Order, and Reversing, Taxpayers for the Protection of Nevada Jobs v. Arena Initiative Committee, Nos. 57157 & 58350 (Aug. 1, 2012) (invalidating petition because signatures gathered before description of effect was amended were invalid). Thus many of the challenges I lay out below were never brought or considered in the courts. My conclusion also comports with a 1951 Attorney General’s opinion, which found that the “40-day period set forth in [Article 19, Section 2] is jurisdictional.” Nev. Op. Att’y Gen. 18, at 36  (Feb. 19, 1951).

Therefore, given the plan language of the constitution and recent legislative practice, it appears clear that the Legislature must reject IP 1 in order to preserve its power to propose an alternate.

Must the Governor Propose an Alternate Before the Legislature May Consider One?

Untested in 2011 when the Legislature enacted S.B. 495 (or at any other time so far as I am aware) is whether the Governor must initially propose an alternate before the Legislature may consider and act on one. There is no reported Nevada case on point, and my brief research uncovered only one example of the argument being raised to block an alternate measure. During testimony on S.B. 495, Caesars Entertainment opposed the bill. Caesars’ lobbyist, John Sande III, said the Constitution

says if the Legislature rejects such proposed statute or amendment, then the Governor may recommend to the Legislature and the Legislature may propose a different measure on the same subject. It specifically says the Governor and the Legislature have to be involved initially, and the Governor has to make the recommendation. That is very important. Since the Governor has not recommended this measure to the Legislature, we believe that it is not in compliance with the Constitution and would not pass court scrutiny.

Hearing on S.B. 495 Before the S. Comm. on Revenue, 76th Leg., Reg. Sess. 9 (Nev. 2011) (testimony in opposition). Caesars dropped this reason from its opposition by the time the bill was heard in the Assembly. See Hearing on S.B. 495 Before the Assemb. Comm on Taxation, 76th Leg, Reg. Sess. 49-60 (Nev. 2011). Caesars also raised a single-subject argument against the bill, which is discussed further below.

Caesars submitted that unless the Governor proposes an alternate measure, the Legislature is without power to consider one. That is a plausible reading based on the text of the Constitution:

If the Legislature rejects such proposed statute or amendment, the Governor may recommend to the Legislature and the Legislature may propose a different measure on the same subject, in which event, after such different measure has been approved by the Governor,

both measures are submitted to the voters at the next general election. Nev. Const. art. 19, § 2(3). But as I discuss in this part, I do not think that is the best reading of the clause.

Provision Adopted in 1912; Amended in 1962

The Constitutional language at issue, Article 19, Section 2, was originally adopted in 1912. Since then, it has been amended six times, making it one of the most amended sections of the Constitution (only Article 10, Section 1, regarding property taxation, has been amended more–13 times). As originally adopted, the language that now appears at Article 19, Section 2, is quoted at in the AG opinion at page 34. Breaking that huge chunk of text down, we can see some critical, though subtle, differences between the section as originally adopted in 1912 and as it exists today.

As originally adopted, the relevant language read “If any such initiative measure so proposed by petition as aforesaid, shall be enacted by the legislature and approved by the governor in the same manner as other laws are enacted, same shall become a law.” So far pretty much the same as I explored above. The Governor has some sort of veto over petitions that are enacted by the legislature.

The original 1912 language continues, “In case the legislature shall reject such initiative measure, said body may, with the approval of the governor, propose a different measure on the same subject, in which event both measures shall be submitted by the secretary of state to the qualified electors for approval or rejection at the next ensuing general election.” Ah ha! Our first critical difference. I have combined the language below to more clearly show the differences.

In caseIf the legislature shall rejectLegislature rejects such initiative measure, said body may, withproposed statute or amendment, the approval ofGovernor may recommend to the governor,Legislature and the Legislature may propose a different measure on the same subject, in which event, after such different measure has been approved by the Governor,. . . .

In 1962, the whole original 1912 section (as amended in 1958) was struck out and replaced with

If the proposed statute or amendment to a statute is enacted by the Legislature and approved by the Governor in the same manner as other statutes are enacted, such statute or amendment to a statute shall become law. . . . If the Legislature rejects such proposed statute or amendment, the Governor may recommend to the Legislature and the Legislature may propose a different measure on the same subject, in which event, after such different measure has been approved by the Governor, the question of approval or disapproval of each measure shall be submitted by the Secretary of State to a vote of the voters at the next succeeding general election.

The most critical difference between the two is the 1912 language made no mention of the Governor recommending an alternate measure to the Legislature before the Legislature could act on one.

Legislative History on 1962 Amendment

The legislative history on the 1962 amendment  is somewhat lacking (it was before legislative committees were required to keep records of their proceedings), but there is a contemporaneous letter from the Legislative Counsel stating the intent of re-adopting the article with revisions was to clarify language, not change it substantively.

“The joint resolution attempts to clarify the provisions on initiative and referendum as contained in Article XIX by re-writing the entire article. . . . The primary purpose of Assembly Joint Resolution No. 11 is to clarify wording, to eliminate uncertainties  and to re-affirm and substantiate the decision of the Supreme Court in the case of Wilson v. Koontz.”

Wilson v. Koontz, 76 Nev. 33, 348 P.2d 231 (1960) related to the 1958 amendment and isn’t relevant here.

The explanation for the ballot said much the same. “Although entirely rewritten to clarify its provisions, the proposed amendment leaves Article 19 substantially unchanged, except that the method of amending the Constitution by the people is different.” Compiled Legislative History on Assemb. J. Res. 11, 50th Leg., Reg. Sess. (1960), at 45. Quite the assertion! Only in a legislature can something be intended to clarify and eliminate uncertainties yet do exactly the opposite.

In the original 1912 language, I think the answer is clear: the rules for enacting other laws govern. That means presentment to and approval of the governor of the measure, return by the governor and enactment of the measure by two-thirds of both houses over his veto, or default approval because the governor neither approves nor returns the measure within the constitutional deadline (there is no pocket veto in Nevada).

But the amended language in 1962 confused that: “[T]he Governor may recommend to the Legislature and the Legislature may propose a different measure on the same subject, in which event, after such different measure has been approved by the Governor, the question of approval or disapproval of each measure shall be submitted. . . .”

Given the stated intent of the 1962 amendment, I would argue the rules governing enactment of laws in the regular course still apply, and that the new language stating “the Governor may recommend to the Legislature” merely states what was always the case: the Governor may propose laws, but such language is not intended to be a condition on the Legislature’s power to propose an alternate initiative measure.

Of course it is an equally reasonable reading to argue the specific language in Article 19, Section 2, is unambiguous and must control: the Governor must propose a measure before the Legislature can act on it, giving the Governor sort of an absolute “pre-veto” rather than the qualified veto he has over typical legislation. The most analogous constitutional provision is the provision limiting the Legislature to subjects the Governor proposes in special sessions. See Nev. Const. art. 5, § 9(2) (“At a special session convened pursuant to this section, the Legislature shall not introduce, consider or pass any bills except those related to the business for which the Legislature has been specially convened.”). But in that case, the language expressly limits the Legislature’s power to act on business that is outside the scope of the Governor’s call of a special session, whereas the language in Article 19, Section 2, is better read as permissive, simply stating what the Governor may do, and not limiting what the Legislature can do. (More on vetoes below.)

I think reading Article 19, Section 2, as giving the Governor a “pre-veto” is antithetical to the initiative process. The popular initiative is designed to allow the people to pass direct judgment on legislation, especially in the face of a recalcitrant legislature. It seems absurd that the people would simultaneously reserve to themselves the power to bypass the Legislature, to enact laws, yet also give the Governor an absolute pre-veto over the legislature’s power to propose alternative measures.

What Kind of Veto Does the Governor Have over an Alternate Measure?

In both the case of enacting a petition and proposing an alternate, the measure must receive the Governor’s approval. “If the proposed statute or amendment to a statute is enacted by the Legislature and approved by the Governor in the same manner as other statutes are enacted, such statute or amendment to a statute shall become law. . . .” And, with respect to an alternate measure, “the Legislature may propose a different measure on the same subject, in which event, after such different measure has been approved by the Governor, the question” is submitted to the voters. Nev. Const. art. 19, § 2 (emphasis added). In the case of enactment by the Legislature of a petition, the language seems clear: approval by the Governor as like other statutes, which implicitly refers to Article 4, Section 35, of the Constitution. Under that section, bills are presented to the Governor for approval. Then, a bill can become law in one of three ways. First, if the Governor approves the bill, he signs it and it becomes a law. If he disapproves of the bill, he returns it with his objections to the House of origin, thereby vetoing the bill (note the word “veto” does not appear in the Constitution). But, second, if the Legislature passes the vetoed bill by a two-thirds margin in both Houses, the bill becomes law, notwithstanding the objections of the Governor. Finally, third, if the Governor fails to act on the bill within 5 days during session or 10 days after the session adjourns–which means either sign it or return it to the House of origin, if the Legislature is in session, or file it with the Secretary of State, if the Legislature is out of session–the bill becomes law as if he had signed it. Note that there is no pocket veto in Nevada, unlike the U.S. Constitution. If the Governor fails to act by the deadline when the Legislature is not in session, the bill becomes law, whereas with the Congress and the President, if the President fails to act and the Congress has adjourned, the bill dies (is pocket vetoed).

As Ralston pointed out in his post, what approval of the Governor means in the context of an alternate measure is less clear. The Constitution doesn’t say “after such different measure has been approved by the Governor in the same manner as other statutes are enacted.” So does that mean the Governor has an unqualified veto over alternate measures? I don’t know; there is a good argument either way. Certainly the Legislature could’ve written it that way. Or perhaps it thought that meaning was presumed since it already said it once in the same section.

It would be helpful to research other states’ constitutions to see if they might shed light on Nevada’s provision. Short of doing that, my brief research uncovered Washington’s constitution contains similar language to Nevada’s, but Washington expressly denies any gubernatorial involvement in that state’s initiative process. See Wash. Const. art. 2, § 1(d) (“The veto power of the governor shall not extend to measures initiated by or referred to the people.”).

At the very least, I think the language is clear the Governor has some sort of veto on both enacted petitions and alternate measures to a petition. Whether that veto is absolute or qualified depends on whether the Legislature is empowered to override a veto. In any event, if a measure is expressly rejected, fails of enactment because of veto, or no action is taken, the language of Article 19, Section 2, seems to be clear that the petition will go on the ballot at the next general election. But whether the Legislature gets a second bite at the apple after the Governor’s veto in either the case of an enacted petition or a proposed alternate is another question, and the language is ambiguous on that point, and the legislative history isn’t much help either.

Like so many other times when it comes to interpreting Nevada’s Constitution, we are hardly a model of clarity.

Single-subject fun nightmare

Assuming the Legislature properly preserves its power to propose an alternate to IP 1 this session, it may then propose “a different measure on the same subject.” Nev. Const. art 19, § 2. Generally speaking, this is the same single-subject rule that is imposed on the Legislature when enacting bills. See Nev. Const. art. 4, § 17. IP 1 is entitled, in part, “AN ACT relating to taxation; imposing a margin tax on business entities engaged in business in this State.” So what is the single subject? Taxation or margin tax? If the subject is the former, then the Legislature would have very broad latitude indeed to propose a mining taxation measure as an alternate. But if the subject is margin tax, then any alternate taxation measure on mining would be in serious jeopardy of running afoul of the single-subject rule in Article 19, Section 2.

As discussed above, in 2011, opponents to the Legislature’s alternate measure to Initiative Petition 1 raised single-subject arguments against S.B. 495. See Hearing on S.B. 495 Before the S. Comm. on Revenue, 76th Leg., Reg. Sess. 9-10 (Nev. 2011) (testimony in opposition). Given the fact the Legislature enacted S.B. 495 (by 38-3, and 21-0 margins in the Assembly and Senate, respectively), it implicitly felt comfortable it had at least a defensible argument that the bill was on the same subject as IP 1 in 2011. The titles of both IP 1 and S.B. 495 stated, in part, “AN ACT relating to taxation.”

There is much case law on the single-subject rule in Nevada, which I will not go into here. But suffice it to say, so long as both measures relate to taxation, a court would likely hold an alternate can propose a different tax measure from a margin tax and still be an appropriate alternate under Article 19, Section 2.

Can a Mining Tax Be an Alternate to the Margin Tax?

The last issue I want to briefly (ha!) discuss is whether a mining tax measure could be an alternate to IP 1. Steve Sebelius is of the opinion that yes, a mining tax could be the legislative alternate to the margin tax in IP 1. The Senate Republicans who proposed a mining tax measure as an alternate seem to agree. I don’t think that’s correct, at least not without some creative drafting. Senate Joint Resolution 15 of the 75th Session proposes to repeal the constitutional limitations on mining taxation. That measure, should it pass this legislative session, will go on the ballot in 2014. It cannot be the alternate to IP 1 primarily because they are separate measures, one proposing a change to law, the other a change to the Constitution. Both could be enacted as they are not mutually exclusive options, unlike a true alternate under Article 19, Section 2. The only way I see a new mining tax (or a higher tax rate) being a proper alternate to IP 1 is it must be conditioned on S. J. Res. 15’s ratification by the voters, or it must propose changes to law that do not implicate S. J. Res. 15 or the underlying provisions in the Constitution.

…This is Destined for Supreme Court Review

Assuming the Legislature timely rejects IP 1 this session, it will preserve its power to propose an alternate measure. Should the Legislature propose an alternate relating to mining, I’d expect nothing less of a full on legal onslaught to prevent the alternate from appearing on the ballot, whether it be through a gubernatorial assist (with a veto) or through legal challenges, on constitutional and procedural grounds, should the Legislature find itself caught up in a dispute with the executive branch over the scope of the veto power in the case of initiative measures. And with most of these tax issues decided in the 11th hour of a session as part of the endgame, I agree with Ralston: 2013 could be 2003 all over again.

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4 Comments

  1. […] Governor’s and Secretary of State’s staffs. The letters essentially adopt my argument first published here that because the Legislature did not reject the margin tax initiative consistently with Article 19, […]

  2. […] was illegal. When the Nevada Legislature declined to even take a vote on IP 1/The Education Initiative (TEI), the Legislature forfeited the […]

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