AB 2690 amends Code of Civil Procedure section 526a to broaden a longstanding taxpayer cause of action that previously applied to local governments so that it can be brought against the state and state agencies. The bill preserves the current eligibility rules — residents and corporations who are assessed for or recently paid a tax that funds the defendant — and keeps the statutory examples of taxes that confer standing.
This change makes state expenditures subject to the same injunction remedy used to restrain illegal or wasteful spending at the local level. That could increase litigation risk for state programs, raise questions about sovereign immunity and separation of powers, and force agencies to defend the legality of expenditures in court to avoid court-ordered restraints on payments or projects.
At a Glance
What It Does
The bill expands section 526a to authorize the same taxpayer injunction action against the state or a state agency, not just local governmental entities. It retains the existing eligibility test tied to having been assessed for or having paid, within one year, a tax that funds the defendant agency and the statutory examples of qualifying taxes.
Who It Affects
State agencies and departments that administer or receive public funds, taxpayers who pay state-funded taxes (individuals and corporations), and courts that adjudicate injunctions over public spending. Parties challenging public improvements or other state spending will be able to seek expedited injunctive relief under the existing precedence rule.
Why It Matters
Extending this remedy to the state changes the litigation landscape for state budgets and programs: it gives taxpayers a direct, court-ordered check on alleged illegal state expenditures but also risks increased suits that could disrupt ongoing projects or programs and raise novel constitutional questions.
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What This Bill Actually Does
Section 526a currently allows people who live, work, own property in, or attend school in a local agency’s jurisdiction — and corporations who pay taxes that fund that local agency — to sue officers or agents of the local government to enjoin illegal expenditures, waste, or other injury to the agency’s estate or funds. AB 2690 revises the statute’s operative language and its definitions so that the same cause of action can be directed at the state or a state agency alongside cities, counties, districts, and other political subdivisions.
Under the bill, plaintiffs still must be either a resident of the defendant’s jurisdiction or a person or corporation who is assessed for and liable to pay, or who has paid within one year, a tax that funds the defendant governmental agency. The bill explicitly lists the same example taxes that currently support local standing — income tax, sales and use or transaction and use taxes, property tax (including pass-through lease payments), and business license taxes — signaling that the legislature intends the standing threshold to remain fact-driven and tax-funded rather than purely residency-based.The bill leaves intact two important operational rules in the existing statute.
First, it preserves the exception that prohibits injunctions restraining the offering, sale, or issuance of municipal bonds for public improvements or utilities. Second, it keeps the special calendar precedence for actions that seek to enjoin public improvement projects, meaning such cases remain prioritized in court dockets.Practically, the amendment converts what was a tool mainly for challenging local spending decisions into one that can reach state-level appropriations and agency expenditures.
That opens new pathways for taxpayers to challenge alleged illegal use of state funds, but it also raises implementation questions that the statute does not resolve directly — for example, how plaintiffs must trace which taxes ‘‘fund’’ a particular state agency, whether injunctions will target agencies, officers, or both, and how longstanding doctrines like sovereign immunity and separation of powers will interact with this expanded remedy.
The Five Things You Need to Know
The bill amends CCP §526a to let the same taxpayer injunction action be maintained against the state or a state agency as currently exists for local entities.
A plaintiff still must be a resident of the defendant’s jurisdiction or be assessed for and liable to pay, or have paid within one year, a tax that funds the defendant governmental agency.
The statute retains its list of example taxes (income tax, sales and use/transaction and use tax, property tax including tenant-paid under lease, and business license tax) as sufficient bases for standing.
The existing prohibition on injunctions that would restrain the offering, sale, or issuance of municipal bonds remains unchanged.
Actions to enjoin public improvement projects continue to receive special precedence on the court calendar under the statute.
Section-by-Section Breakdown
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Expands who may be sued and who may sue
Subsection (a) keeps the core remedy — a taxpayer may seek an injunction to prevent illegal expenditure, waste, or injury to an agency’s estate or funds — but alters the target language so the action can be maintained against the state or a state agency in addition to officers or agents of local governments. Practically, plaintiffs can seek injunctive relief that affects state programs in the same way they could seek to halt local projects, though the bill does not itself spell out any different procedural or evidentiary standards for state defendants.
Retains tax-based standing test and illustrative tax categories
The subsection restates that standing may rest on having been assessed for or having paid a tax that funds the defendant agency, and it keeps the statutory examples (income, sales and use or transaction and use, property, and business license taxes). That preserves a tax-tracing approach to standing: plaintiffs will need to show a link between the tax they paid and the defendant agency’s funding stream to establish a cause of action.
Municipal bond exception unchanged
Subsection (b) continues to protect the issuance, offering, or sale of municipal bonds from injunctions under this statute, which avoids a direct statutory route to halt municipal bond financings. That protection remains in place even though the state is now a potential defendant, so courts will still be barred from entering injunctions that would stop bond issuances for public improvements or utilities under §526a.
Precedence for public improvement project injunctions remains
The provision that actions seeking to enjoin public improvement projects take special precedence on civil calendars is unchanged. This keeps expedited access to judicial review for challenges to public projects, a procedural advantage that plaintiffs challenging state projects will continue to have.
New definitions and a drafting inconsistency
Subsection (d) introduces the term 'governmental agency' and defines it to include the state or a state agency plus local subdivisions. It also defines 'resident' as someone who lives, works, owns property, or attends school in the jurisdiction of the defendant 'local governmental agency.' That creates a drafting mismatch: the definition of 'governmental agency' is broader than the 'local governmental agency' reference used elsewhere, which could create ambiguity about residency-based standing where the state is the defendant.
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Explore Government in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- State taxpayers and residents who allege illegal state spending: They gain a direct statutory route to seek injunctive relief to stop expenditures, potentially producing faster judicial review than administrative routes.
- Corporations and businesses assessed certain taxes: Entities assessed for or recently paying taxes that fund state agencies can use the statute to challenge how their tax dollars are allocated or spent.
- Public interest and watchdog organizations: Groups focused on fiscal accountability gain a stronger tool to pursue court orders preventing what they view as unlawful or wasteful state expenditures.
- Local governments and taxpayers in limited circumstances: If state actions divert or injure funds used locally, local taxpayers may be able to use the remedy against state actors to protect local estate or funds.
Who Bears the Cost
- State agencies and departments: They will face increased litigation exposure and legal costs defending suits that seek injunctions stopping expenditures or projects.
- California taxpayers generally: If litigation forces delays or court-ordered stops to programs, agencies may incur higher administrative or implementation costs that affect budgets paid from general funds.
- Courts and judicial resources: Trial courts may face a rise in high-priority injunction cases challenging state spending, increasing docket pressure and resource needs for expedited resolution.
- Executive branch officials and officers: Agency leaders and officers named in suits will have to litigate or respond to requests for injunctive relief, with attendant reputational and operational burdens.
Key Issues
The Core Tension
The central dilemma is accountability versus stability: extending a potent injunction remedy to state spending increases taxpayer oversight of potentially unlawful expenditures, but it also risks judicially imposed disruptions to statewide programs and projects and raises constitutional questions about courts second-guessing executive budget and spending decisions.
Although AB 2690 is straightforward in expanding the list of possible defendants to include the state, it leaves several consequential implementation questions unresolved. The statute expects plaintiffs to show that the tax they paid 'funds' the defendant agency, but it provides no standard or burden of proof for tracing tax revenues into specific agency receipts.
At the state level, where funds flow through pooled accounts and general funds, causation and standing inquiries will be more complicated than in locally funded enterprises.
The bill also does not address sovereign immunity or separation-of-powers limits. Section 526a authorizes injunctions against officers or agents acting on behalf of a governmental entity; when the state is the defendant, constitutional doctrines could constrain courts’ ability to enjoin state functions or compel expenditure decisions.
Moreover, the draft contains a drafting inconsistency by defining 'governmental agency' broadly while retaining references to a plaintiff’s 'jurisdiction of the defendant local governmental agency' when defining residency, which could produce litigation over statutory interpretation rather than on the merits of alleged illegal spending.
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