A round in the federalism bout between the United States and the State of California went to the feds the week before last, when a federal district judge in Sacramento held that California could not enforce a 2018 law, SB 50, that, according to the California legislature, is designed to “discourage conveyances that transfer ownership of federal public lands [located within the boundaries of] California from the federal government.” Ostensibly intended to reduce the ability of the federal government to sell federal lands or federal mineral rights to various private parties who might degrade the environment of these lands – many of which have great cultural and aesthetic value – the California measure requires any transaction in which federal lands may be purchased to first be approved by the California State Lands Commission before it can be recorded in the state land ownership system. While the Lands Commission is instructed to confer approval more or less automatically in several classes of federal transactions, in others the Commission is given the right of first refusal to purchase the land interest itself, or to find a substitute purchaser other than the one to whom the federal government is planning to sell. Although the measure it well intentioned, the federal district court was right in ruling that the measure violates principles of federal supremacy under the Constitution.
The granddaddy of federal supremacy rulings is McCulloch v. Maryland, where the John Marshall Supreme Court in 1819 ruled, first, that Congress had the constitutional power to create and charter the Bank of the United States, and, second, that the State of Maryland could not impose a discriminatory tax on the federal bank. The reasoning of the second part of McCulloch was simple but powerful; although the Constitution nowhere says explicitly that states cannot tax valid federal government operations, the principle of taxation without representation that runs through the Constitution compels the result. The people of the United States, who through Congress have adopted and operate the Bank of the United States, are not represented in Maryland, and for that reason the part cannot tax the whole. Even if one small tax might not by itself bring the Bank of the U.S. to its knees, the “power to tax involves the power to destroy,” and so states are forbidden from imposing taxes on federal entities.
What is true for taxation, the Supreme Court has since held, is also largely true for regulation. Like taxation, regulation by states of federal entities has the potential to impede the federal government from accomplishing its legally permissible – if politically controversial – objectives. For that reason, the Court has been very reluctant to permit a state to single out the federal government and regulate its operations directly.
And yet that is what SB 50 purports to do. Had the statute not targeted federal land sales – and instead subjected all land sales to Lands Commission approval and rights of first refusal – there still would have been a question whether, in practice, the state law was imposing too much of a burden on federal operations. But when a state discriminates against the federal government, it is almost a certainty that the federal courts will find the state law violative of supremacy principles.
According to the district judge’s ruling, California advanced two counterarguments, neither of which convinced him or (in my view) are likely to convince appellate courts should the state appeal. First, California said it had a valid reason for singling out federal land sales: the federally owned lands subject to State Lands Commission jurisdiction are distinctively important—“especially sensitive”—to use the court’s words. But as the court pointed out, even if the factual case could be made that these lands have qualitatively different cultural, historical, or aesthetic value, federal assets and operations are always going to be distinctive, because the federal government is granted many exclusive powers and tasked with many exclusive objectives. As the district court put it, the quality of federal lands “is directly linked to their federal status,” and thus cannot be a basis on which the states can regulate them, lest the supremacy principle dissolve.
Second, California apparently argued that it was not regulating the federal government itself, but people and entities who purchase from the federal government. Putting aside the fact that the federal government might have a preference about whom it sells federal lands to (such that the Lands Commission’s rights of first refusal really do operate directly to constrain the choice of the feds), the distinction between the federal government and the people it uses to accomplish its objectives does not hold up in most circumstances. The federal government is itself an abstraction, and it operates through people. In McCulloch, for example, if Maryland had not imposed a targeted tax on the Bank of the United States, but instead had targeted employees or patrons of the Bank with a special tax, does anyone think the result would be any different?
States cannot single out federal entities for discriminatory regulatory treatment, nor can they single out employees or contractors of the federal government for discriminatory treatment. (That is why Alabama could not impose tax or regulatory burdens on people who chose to provide services to the federal civil rights agencies, and also why the City of Berkeley cannot punish entities that assist the federal government in building a border wall by disqualifying them from doing business with the City.) And if a state cannot try to punish employees or contractors of the federal government, neither can it try to punish other individuals who decide to voluntarily partner with the federal government in the accomplishment of legally allowable federal objectives, however wrongheaded California or I may feel those objectives are. (As an aside, this was the same ground on which another federal judge in Sacramento earlier this year invalidated a California law that sought to impose penalties on private employers who voluntarily opened up their workplaces to inspection by federal Homeland Security and Immigration authorities.)
The states (including, perhaps especially, California) have many winning arguments in many of the battles they are waging with the federal government (as in the sanctuary disputes over 8 U.S.C. § 1373), but state attempts to regulate federal land sales are not likely to succeed.
