California cities and counties will be banned from creating taxes on soda and other sugary drinks for more than a decade under a measure signed Thursday by Gov. Jerry Brown.
Assembly Bill 1838, which prohibits new local taxes on "groceries" through 2030, was the linchpin of a complex political deal between the beverage industry and organized labor that emerged over the past week. Proponents of a separate initiative, primarily funded by soda companies like Coca-Cola and Pepsi, that would make it harder to raise state and local taxes agreed to remove their measure from the ballot in exchange for the moratorium.
"Mayors from countless cities have called to voice their alarm and to strongly support the compromise which this bill represents," Brown wrote in his signing message. He also expressed concern that the initiative would have placed restrictions on the ability of state regulatory agencies to create new charges: "This would be an abomination."
"For these reasons, I believe Assembly Bill 1838 is in the public interest and must be signed," Brown wrote.
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Earlier in the day, both the Senate and the Assembly passed the measure, reflecting the blazing speed with which the deal came together just last weekend. Democrats, who comprise a majority of the Legislature and provided most of the votes for AB 1838, said they had been put in an impossible bind by the initiative.
Sen. Scott Wiener, a San Francisco Democrat who was among a handful of no votes, compared it to a "nuclear weapon" aimed at local government budgets. He urged public health advocates to direct their anger at soda companies who forced the Legislature's hand, rather than the lawmakers who approved the deal.
"We find ourselves truly between the biggest rock and the smallest hard space," Senate Pro Tem Toni Atkins said, before asking her colleagues to support the bill.
The beverage industry, which contributed more than $7 million to the initiative campaign, has been seeking relief from a growing wave of city soda taxes. Frustrated by the industry's tremendous influence at the Capitol, where it has blocked bills to tax and label sugary drinks for years, public health advocates are now turning to the local ballot box.
Over the past two election cycles, four California cities, led by Berkeley, have approved fees on sugary drinks intended to discourage consumption and raise money for public health programs. The campaigns are expensive for the industry — it spent $30 million in 2016 to unsuccessfully fight tax proposals in San Francisco and Oakland — and early results in Berkeley suggest its one-cent-per-ounce tax has led to a significant decline in sales.
AB 1838 is retroactive to the beginning of 2018, meaning any new soda taxes that cities may have planned to pursue this year would be voided. Sacramento, Santa Cruz and Richmond were among the communities considering local tax measures on sugary drinks.
The initiative would have raised the threshold for all new taxes and tax increases to two-thirds. Opponents, including public employee unions and cities, argued that the change would devastate communities still recovering from the economic recession by preventing them from raising new revenues to balance their budgets.
Eager to avoid a contentious campaign that could have run into the tens of millions of dollars, particularly in the wake of the U.S. Supreme Court's decision on union fees this week, the Service Employees International Union California led negotiations with the beverage industry over the soda tax ban.
"While this compromise protects the communities where SEIU California members live and work by ensuring continued services in our parks, libraries, roads, transit and emergency services — we remain fully committed to the taxation of soda and other sugary drinks beverages that are causing a public health crisis of diabetes through a comprehensive state tax," Roxanne Sanchez, president of SEIU California, said in a statement.
The American Beverage Association said in a statement that its "aim is to help working families by preventing unfair increases to their grocery bills. At the same time, we’re working with the public health community and government officials to help Californians reduce sugar consumption in ways that don’t cost jobs or hurt the small businesses that are so important to local communities."
Public health groups and other soda tax supporters decried the deal as a cynical ploy to protect beverage companies' profits and further evidence of their political power in Sacramento. Coca-Cola, Pepsi and their trade association annually donate hundreds of thousands of dollars to lawmakers of both parties, political organizations tied to legislative caucuses, and the California Democratic and Republican parties.
Earlier this month, representatives for the industry, including lobbyists for Coca-Cola and Pepsi, met with Brown for a private dinner at the governor's mansion. (Brown's office said the proposed soda tax ban was not discussed.) In response, the American Heart Association extended their own dinner invitation to Brown to talk about the "negative health impacts" of sugary drinks.
Two dozen teenagers behind a campaign for a soda tax in Stockton traveled to the Capitol on Thursday to oppose the bill. At a committee hearing, they shared emotional stories of their struggles with diabetes and other health problems in their low-income communities.
Lawmakers, in fiery floor speeches, echoed their outrage over how the deal came together, though most ultimately chose to support the bill as the better of two bad options. Assemblyman Jim Wood, a Healdsburg Democrat and dentist who voted for AB 1838, called it "extortion."
"What on Earth has happened here?" Assemblyman Richard Bloom, a Santa Monica Democrat who has carried unsuccessful legislation for a statewide soda tax, said before voting for the bill. "If I sound like I am frustrated, angry and disgusted, I am."
Several Republicans who liked the tax restrictions in the initiative and wanted it on the November ballot voted against AB 1838. Others slammed the Democrats' rhetoric, noting that in 2016, they struck a similar deal with labor unions pursuing an initiative to raise the minimum wage.
"Don't cry your crocodile tears at me," said Assemblyman Matthew Harper, R-Huntington Beach, who told his colleagues to oppose the bill if they hated it so much. As he sat listening to the floor debate, Harper drank a can of Coca-Cola.