Any budget agreement between Democrats and Gov. Arnold Schwarzenegger that skirts the state's two-thirds vote requirement for new taxes will almost certainly be challenged in the courts – and there's a significant chance the state would lose, some legal experts said Monday.

It's not a slam-dunk case for either side, though, law professors say, because the Legislature is largely moving into uncharted territory with its plans to break the budget stalemate by effectively replacing a tax that is tough to increase with a fee that is much simpler to boost.

"The question is, 'What is a tax?' " said Jesse Choper, Earl Warren Professor of Public Law at the University of California, Berkeley. "It may be a simple little question, but like most things, it can be more complicated."

Democrats and the governor are trying to hash out a plan that would eliminate about half of the state's burgeoning $40 million deficit. The foundation of the plan is a measure passed by the Legislature last month that would raise some fees, lower some taxes and come up with an extra $10 billion or so in revenue – all without triggering the Proposition 13 requirement that any tax increase be approved by a two-thirds vote in the Legislature.

The governor threatened to veto the plan, then said he might go along with it if it contained several new provisions. Republicans, who didn't have the votes to kill the plan, nonetheless generally hate it and contend it violates the state constitution.

Daniel Simmons, a law professor at UC Davis who specializes in taxation issues, said it would be tough for Democrats to convince a court that a series of moves that results in a huge increase in revenue from citizens doesn't constitute a tax increase.

"It sounds an awful lot like a tax to me," Simmons said, echoing a similar sentiment from Choper. "If they are not raising revenue (with the proposal), something is very funny. It's very hard to make that claim."

Any court case involving the plan would likely focus on the differences between a fee and a tax, Simmons and others said.

Revenue from a tax can usually be used for lots of things; a fee is more targeted, and its proceeds go to benefit something specific. (A divorce filing fee can't be used, for instance, to help repave a road.) The Legislature often raises fees without a two-thirds majority.

There's currently a sales tax and per-gallon tax on gasoline – about 28 cents a gallon total at current prices. The Democrats' plan, among other things, eliminates the gasoline taxes and raises other types of taxes. The old and new taxes balance out, so the plan is revenue-neutral.

That accomplished, the plan initiates a new gasoline "fee" of 39 cents per gallon.

"It's anyone's guess whether this language will fly," Simmons said, adding that he can't be sure of the outcome of a challenge because no one has ever tried a plan like this before.

In fact, half of the eight Northern California constitutional law and taxation professors contacted by The Bee weren't willing to take a stab at analyzing the plan, pleading its complexity and a lack of case law.

What everyone is certain about, though, is that someone will file a legal challenge to any compromise based on the Democrats' plan. Jon Coupal, president of the Howard Jarvis Taxpayers Association, said Monday his group would likely be at the front of the line.

"The fee issue is unrelated to whether the package in its entirety is a tax increase," Coupal said. "This is a fairly transparent violation of (Proposition 13)."

Should the Legislature and governor agree on a version of the plan, and should the courts deem the plan unconstitutional, Jarvis said his group would ask that all taxes collected under the package be returned to taxpayers. The group and sympathetic lawmakers will hold a news conference today outlining their plans for the lawsuit.

Any challenge to the plan would take anywhere from a few months to several years to work its way through the system – opinions even vary on the exact path such a challenge would need to take.

All of which has likely been considered by proponents of the package. They've got a lengthy 2003 opinion from the Legislative Counsel's office backing the notion that the two-thirds requirement doesn't apply when tax increases are negated by corresponding tax cuts.

And some of the brightest lawmakers in the state have signed off on the plan, noted McGeorge School of Law professor Mary-Beth Moylan. As to the new gas fees, she noted that courts have long maintained that fees can be levied so long as they have a specific, related purpose – for instance, a gas fee that pays for road upkeep.

"I think it is a very creative solution, and they are some really smart people," said Moylan, who specializes in state constitutional law, adding that she nonetheless isn't sure how a court case would turn out.

Call The Bee's Phillip Reese, (916) 321-1137.