*291 Opinion

Defendant Sacramento Municipal Utility District (SMUD) discriminates on the basis of race in some of its public contracting activities. This case presents the question of whether this discrimination is permissible under section 31 of article I of the California Constitution (hereafter section 31).

Plaintiff C&C Construction (C&C) moved for summary judgment on its complaint for declaratory and injunctive relief in which it alleged that SMUD’s affirmative action program, the 1998 Equal Business Opportunity Program, violates section 31, adopted by the voters on November 5, 1996, as the California Civil Rights Initiative (Proposition 209.) The relevant provision of section 31 declares: “The state shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.” (§31, subd. (a).) A municipal contracting scheme that requires preferential treatment on the basis of race or gender violates this provision. (Hi-Voltage Wire Works, Inc. v. City of San Jose (2000) 24 Cal.4th 537, 565 [ 101 Cal.Rptr.2d 653 , 12 P.3d 1068 ] (Hi-Voltage).)

Conceding its affirmative action program applies race-based “participation goals” and in some cases “evaluation credits” in its public contracting, SMUD opposed C&C’s motion and moved for summary judgment. It contended that the affirmative action program fell within the exception of subdivision (e) of section 31, which states: “Nothing in this section shall be interpreted as prohibiting action which must be taken to establish or maintain eligibility for any federal program, where ineligibility would result in a loss of federal funds to the State.”

The trial court granted C&C’s motion and denied SMUD’s motion. SMUD appeals the ensuing judgment and permanent injunction.

We conclude SMUD failed to proffer substantial evidence that its race-based discrimination is necessary to maintain federal funding. 1 We therefore affirm the judgment.

*292 BACKGROUND

In 1988, SMUD’s Board of Directors (Board) declared a policy of providing national leadership in affirmative action programs: “[T]his Board intends that SMUD shall continue to provide leadership on affirmative action in this community and in the utility industry nationally . . . .” Prior to 1989, SMUD undertook activities to have minority-owned businesses 2 perform more of its work and provide more of its goods and services. These activities included, among other things, (1) engaging in outreach activities directed at the small and minority business communities, (2) advertising contracting opportunities through minority media, (3) providing training and technical assistance, through one-on-one conferences with potential contractors, and various conferences sponsored by California State University, Sacramento, local governmental entities, trade groups, and minority chambers of commerce, (4) providing assistance in matters of financing, (5) easing some bonding and insurance requirements, and (6) offering training and technical assistance to foster prime contracting and subcontracting relationships.

In 1989, the United States Supreme Court decided City of Richmond v. Croson Co. (1989) 488 U.S. 469 [ 102 L.Ed.2d 854 , 109 S.Ct. 706 ] (Croson). The court held that remedial affirmative action programs that incorporate race-based classifications are subject to the strict scrutiny standard of judicial review under the equal protection clause of the Fourteenth Amendment. (Id. at pp. 487-488.)

SMUD conducted a disparity study in 1993 that assessed whether the requisite factual conditions existed within SMUD’s geographic market area to justify remedial discrimination in the form of a race-based affirmative action program, applying Croson. As reflected in the study’s report, “[a]t the request of [SMUD], the study did not incorporate examination of race-neutral methods and techniques that were in place or that might be used to increase opportunities for minority and women-owned businesses in the area of public contracting. In addition, [SMUD] did not wish to have the consultant make proposals or recommendations for changes or improvements to its existing [race-neutral] program.” The study found there were significant statistical disparities in the number of minority businesses awarded contracts, when analyzed in terms of the percent of contract dollars awarded, and concluded: “Based upon the evidence amassed in this study, [SMUD] would have justification for undertaking and implementing an active program aimed at eliminating historical, systemic barriers to equal opportunity in the area of *293 public contracting.” The Board accepted the study, found that its outreach and other race-neutral programs had not increased participation by minority businesses as much as the Board desired, and concluded that race-based remedial action should be used to remedy past discrimination against the groups identified in the study. SMUD therefore implemented an affirmative action program that set race-based goals for utilization of minority businesses.

In November 1996, the California electorate approved Proposition 209, which amended the state Constitution to prohibit the state and its political subdivisions from “discriminat[ing] against, or granting] preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of . . . public contracting.” (§31, subd. (a); Hi-Voltage, supra, 24 Cal.4th at p. 541 .) Subdivision (f) of section 31 provides that, “[f]or the purposes of this section, ‘State’ shall include, but not necessarily be limited to, the State itself, any city, county, city and county, public university system, including the University of California, community college district, school district, special district, or any other political subdivision or governmental instrumentality of or within the State.”

Section 31 is similar to, but not synonymous with, the equal protection clause of the federal Constitution. Under equal protection principles, state actions that rely upon suspect classifications must be tested under strict scrutiny to determine whether there is a compelling governmental interest. Section 31 allows no compelling state interest exception. (Hi-Voltage, supra, 24 Cal.4th at p. 567 .) Subdivision (a) of Section 31 “prohibits discrimination against or preferential treatment to individuals or groups regardless of whether the governmental action could be justified under strict scrutiny.” (Connerly v. State Personnel Bd. (2001) 92 Cal.App.4th 16, 42 [ 112 Cal.Rptr.2d 5 ].)

Section 31 does not imply that racial discrimination and barriers do not exist. “States and their local subdivisions have many legislative weapons at their disposal both to punish and prevent present discrimination and to remove arbitrary barriers to minority advancement.” (Croson, supra, 488 U.S. at p. 494 .)

As noted, section 31 contains an exception to its prohibition against race-based discrimination. Subdivision (e) authorizes race-based governmental action “which must be taken to establish or maintain eligibility for any federal program, where ineligibility would result in a loss of federal funds to the State.”

*294 In 1998, after the adoption of section 31, SMUD conducted another disparity study to update the earlier study. The 1998 study included an evaluation of SMUD’s progress in eliminating the contracting disparities identified in the 1993 study. The 1998 study showed improvement in the utilization of certain groups but concluded that a statistically significant disparity continued to exist among certain subsets of minority contractors in identified categories of SMUD’s contracting.

After a public comment process, the Board accepted the updated results of the 1998 Disparity Study and found that a significant disparity existed in SMUD’s utilization of minority businesses when compared to the number of available qualified minority businesses with respect to dollar expenditure participation in identified areas. Based upon this and other findings, the Board authorized SMUD’s General Manager to implement an “Action Plan” to revise the affirmative action program.

The revised affirmative action program has several components applicable to certain certified minority businesses. 3 First, it has a 5 percent price advantage for prime contractors, capped at $50,000, in all proposals up to $1 million that are submitted by certified businesses owned by African-Americans or Hispanic-Americans. It has the same capped price advantage on all proposals over $50,000 for subcontracts less than $1 million submitted by certified businesses owned by Asian-Pacific-Americans or African-Americans.

Second, the affirmative action program extends evaluation credits to all prime contractors who obtain the subcontractor participation goal of 8 percent each for Asian-Pacific-American and African-American subcontractors on proposals over $50,000 for subcontracts less than $1 million.

*295 Third, the affirmative action program specifies broad outreach procedures to provide notification of the request for proposals. For contracts over $50,000, each contractor is required to provide written evidence of the steps it has taken to achieve the specified outreach requirements and to identify and include minority businesses. Included in these requirements is written evidence the contractor has (1) attended a SMUD affirmative action program briefing so that the contractor may fully understand the program requirements, (2) requested assistance from SMUD’s affirmative action program office, (3) identified specified units of work that improve the likelihood of subcontracting, (4) contacted potential minority subcontractors not less than 10 days prior to the proposal due date, and (5) contacted interested minority subcontractors subsequent to the initial contact to determine with certainty whether they were interested in performing the specific work on the project.

Fourth, the affirmative action program requires contractors to document sufficient good faith efforts to meet the affirmative action program requirements and minority subcontractor participation goal requirements with respect to African-American and Asian-Pacific-American firms. This includes (1) efforts to comply with the notification procedures, (2) advertisements at least 10 days prior to the opening of proposals in at least one trade association and two minority focused media, one of them targeting African-American firms, (3) provision of information to the firms on the plans, specifications, and requirements for the subcontracts and assistance in reviewing those plans and specifications, (4) written proposals received from the firms seeking subcontract work and, if rejected, reasons why the proposals were rejected, and (5) efforts to assist the firms contacted in obtaining bonding, insurance and lines of credit, if required.

Contractors not meeting the goals for subcontracting with African-American and Asian-Pacific-American subcontractors and not complying with the good faith requirements of the program are deemed nonresponsive and their bids rejected.

The affirmative action program provides for bonuses and recognition for SMUD employees who meet the minority participation goals. In addition, the SMUD department “which performs the best against their annual targets will be entitled to receive an award celebration in their honor.” SMUD’s written affirmative action program cites no federal law or regulation and does not assert that any part of the program is needed to meet federal requirements.

*296 The Board approved the revisions to the affirmative action program based upon the 1998 Disparity Study and directed the General Manager to implement the revisions. In so doing, the Board found: “At all material times and at the present [SMUD] receives federal grant funds in connection with: 1) the Rancho Seco Fuel Storage Project; 2) the Climate Change Fuel Cell Program; 3) the PVUSA Project; 4) the Utility Photovoltaic Team-up Program; 5) the Renewable Energy Production Incentive Program; and 6) the Electric and Hybrid Vehicle Technology Develop Program. . . .” The Board concluded “that significant disparity exists in [SMUD’s] utilization of [minority businesses] when compared to the number of available qualified [minority businesses], with respect to dollar expenditure participation in the [areas identified].” All of SMUD’s construction contracts under $1 million are subject to the affirmative action program provisions, not just those projects that are federally funded.

The Board resolution approving the 1998 Disparity Study and instructing the general manager to make adjustments to the race-based affirmative action program declared: “The race-conscious [affirmative action program] has been effective in remedying much of the past disparity, and it reasonably may be anticipated that, over time, the continued implementation of the [affirmative action program] will further reduce and eventually eliminate all contracting disparity.” It continued: “As has been demonstrated, utilizing only race-neutral programs has not produced satisfactory results. Therefore, reverting to a race-neutral contracting program at this time would not produce the progressive and measurable results that have been enjoyed under the current [affirmative action program].”

The 1998 resolution stated that, because of its receipt of federal funding, SMUD is obligated to comply with “Title VI of the Civil Rights Act of 1964 [Title VI] ( 42 U.S.C. § 2000 (d) et seq.), and all relevant implementing regulations.” The resolution does not, however, state that the race-based affirmative action program is necessary to comply with Title VI and the implementing regulations. It also does not cite any specific federal regulation.

C&C, which does not meet the definition of a “Minority-Owned Business Enterprise” under the affirmative action program, entered bids on SMUD contracts. Therefore, C&C was not allowed to benefit from the measures that favored minority businesses and was required to comply with the affirmative action program to be considered a responsive bidder.

*297 C&C brought suit against SMUD, seeking declaratory and injunctive relief. The complaint alleged that SMUD’s affirmative action program violates section 31 because it gives preferential treatment to contractors on the basis of race. By answer, SMUD denied the allegations and alleged the affirmative action program comes within subdivision (e) of section 31 because it was “required to maintain [SMUD’s] eligibility for the receipt of certain federal funds in connection with [SMUD’s] ongoing operations.”

The parties each filed motions for summary judgment. C&C asserted that SMUD’s affirmative action program violates section 31 because it grants preferential treatment and discriminates on the basis of race in the operation of public contracting. C&C also asserted that SMUD cannot demonstrate that it must discriminate as a condition of establishing or maintaining eligibility for federal funding. In its opposition to C&C’s motion for summary judgment, SMUD conceded the affirmative action program violates the general prohibition against race-based discrimination in subdivision (a) of section 31, but sought to establish that its affirmative action program comes within the exception of subdivision (e). The parties agreed that application of subdivision (e) to the affirmative action program is a question of law that may be determined from the undisputed facts in the record.

The trial court granted C&C’s motion and denied SMUD’s motion. The court held that the affirmative action program violates subdivision (a) of section 31. It reasoned that SMUD failed to establish an affirmative defense under subdivision (e) because it produced no evidence of express federal contractual conditions, laws, or regulations that made approval of federal funds contingent upon race-based discrimination. Nor did SMUD offer federal legal authority to support the conclusion that failure to use the affirmative action program would result in the loss of federal funds because federal agencies may not terminate funding without an administrative hearing and judicial review.

The judgment and permanent injunction declared SMUD’s 1998 affirmative action program unconstitutional under section 31 “to the extent that it purports to or does grant preferential treatment to any individual or group on the basis of race, sex, color, ethnicity or national origin in the operation of public contracting.” In its minute order, the court clarified that “[w]hile [C&C] may have attacked the entire plan, the only legal challenge ultimately litigated was that it violated Proposition 209.” The injunction “permanently enjoined and restrained [SMUD] from enforcing or attempting to enforce, directly or indirectly, the 1998 Equal Business Opportunity Plan, or any other *298 similar program, to the extent that it purports to or does grant preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public contracting now and in the future . . . .”

The parties agree that SMUD’s race-based affirmative action program violates section 31, subdivision (a). The question in dispute on appeal is whether SMUD’s race-based measures are necessary to maintain federal funding. Because the facts are undisputed and the parties agree that the issues can be decided based on the facts contained in the record, our task is to apply the law to the facts to determine whether the trial court properly entered judgment in favor of C&C. (See Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348 [ 1 Cal.Rptr.3d 32 , 71 P.3d 296 ] [reviewing court to determine whether undisputed facts warrant judgment as matter of law].)

DISCUSSION

I

Application of Section 31, Subdivision (e)

As a threshold question, we must determine the nature of the showing necessary to justify race-based discrimination pursuant to subdivision (e) of section 31. We conclude that the state governmental agency, before imposing race-based measures, need not obtain a federal adjudication that race-based discrimination is necessary to maintain federal funding. We further conclude, however, that in order to discriminate based on race, the governmental agency must have substantial evidence that it will lose federal funding if it does not use race-based measures and must narrowly tailor those measures to minimize race-based discrimination.

SMUD takes the position that under the federal regulatory scheme it is required to (1) self-evaluate whether it discriminates, (2) refrain from discriminating, and (3) self-report its nondiscrimination by assuring its compliance with Title VI and its implementing regulations. The assurance includes compliance with regulations that mandate implementation of affirmative action programs to remedy the effects of any past discrimination.

C&C asserts that to establish a race-based affirmative action program, SMUD is required under federal law to (1) exhaust federal administrative procedures, (2) obtain a final federal agency determination that it cannot establish or maintain eligibility for federal funding without a race-based affirmative action program, and (3) suffer actual loss of or threatened loss of federal funds.

*299 The language of section 31, subdivision (e) does not support C&C’s position. “ ‘A constitutional amendment should be construed in accordance with the natural and ordinary meaning of its words.’ [Citation.]” (Hi-Voltage, supra, 24 Cal.4th at p. 559 , quoting Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 245 [ 149 Cal.Rptr. 239 , 583 P.2d 1281 ].) Considering the plain meaning of the text, we find the language in subdivision (e) does not require SMUD to obtain a final administrative or judicial determination that its race-based affirmative action program is required as a condition of eligibility for federal funding before it uses race-based measures. The trigger point of subdivision (e) is “eligibility” to participate in a federally funded program, “where ineligibility would result in a loss of federal funds to the State.” A construction that would require a state entity to become ineligible for federal funds before it can lawfully implement a race-based affirmative action program required by federal law would interfere with the entity’s ability to establish eligibility for federal money. Such a result is inconsistent with the language and purpose of subdivision (e).

To be lawful under section 31, subdivision (e), SMUD’s action “must be taken to establish or maintain eligibility for any federal program, where ineligibility would result in a loss of federal funds to the State.” (Italics added.) The conditional phrase does not state “does result” or “has been determined to result.” Rather, “would” connotes a contingency or likelihood of loss, not the actuality of loss. Subdivision (e) does not require SMUD to render itself ineligible for participation in a federal program before it may implement a race-based affirmative action program. It is sufficient to show that, under the federal laws and regulations, the failure to implement a race-based affirmative action program would subject SMUD to the loss of the funds.

Self-evaluation and self-reporting, however, do not give a state agency unfettered latitude to discriminate. An agency’s determination that race-based discrimination is necessary to maintain federal funding must be supported by substantial evidence. For example, if a federal regulation expressly requires a state agency to use race-based measures to remedy past discrimination, the state agency must have substantial evidence of the type of past discrimination that triggers the federal regulation’s requirement for current race-based measures. What facts, if present, require race-based remedial measures—the factual predicate for race-based measures—must be defined in the federal law or regulation, not by the state agency. (See Croson, supra, 488 U.S. at pp. 505-506 [requiring factual predicate of past racial discrimination to justify race-based affirmative action in context of constitutional equal protection analysis].)

*300 Here, SMUD’s disparity studies concluded that there had been past discrimination. As will be discussed, however, SMUD made no attempt in its disparity studies to identify federal laws and regulations and to test factual findings against those laws and regulations. Nor did it study whether race-neutral programs would suffice.

Once a factual predicate for current race-based measures is established, the state agency must narrowly tailor its remedy to conform to the federal requirement in the least discriminatory manner. Because the California Constitution allows race-based discrimination for no reason other than to maintain federal funding (see Connerly v. State Personnel Bd., supra, 92 Cal.App.4th at p. 42 [section 31 prohibits discrimination even if justified under strict scrutiny standard]), discrimination beyond that necessary to maintain federal funding is prohibited by section 31, subdivision (a), and is not excepted from that prohibition by subdivision (e).

II

The Definition of “Discrimination"

Before we can resolve the issues presented in the trial court, we must consider a law enacted during the pendency of this appeal which purports to define the word “discrimination,” as it is used in section 31. The California Supreme Court has interpreted “discrimination” in section 31 as having a fixed definition. “ ‘A constitutional amendment should be construed in accordance with the natural and ordinary meaning of its words. [Citation.]’ [Citations.] Nothing in the [Proposition 209] ballot arguments or in the Legislative Analyst’s analysis suggests that a different rule should apply with respect to ‘discriminate’ and ‘preferential treatment’ as used in section 31, or that the voters intended them to have any specialized meaning. [Citations.] ‘[Discriminate’ means ‘to make distinctions in treatment; show partiality (in favor of) or prejudice (against)’ [citation]; ‘preferential’ means giving ‘preference,’ which is ‘a giving of priority or advantage to one person . . . over others.’ [Citation.]” ( Hi-Voltage, supra, 24 Cal.4th at pp. 559-560, italics in original, fn. omitted.)

“ ‘Rather than classifying individuals by race or gender, Proposition 209 prohibits the State from classifying individuals by race or gender.’ [Citations.] The ballot arguments—from which we draw our historical perspective—make clear that in approving Proposition 209, the voters intended section 31, like the Civil Rights Act as originally construed, ‘to achieve equality of [public employment, education, and contracting] opportunities’ [citation] and to remove ‘barriers [that] operate invidiously to discriminate on the basis of racial or other impermissible classification.’ [Citation.] In short, the electorate *301 desired to restore the force of constitutional law to the principle articulated by President Carter on Law Day 1979: ‘ “Basing present discrimination on past discrimination is obviously not right.” ’ [Citation.]” ( Hi-Voltage, supra, 24 Cal.4th at pp. 561-562, italics in original.)

SMUD recognized this definition of “discrimination” when it acknowledged, during summary judgment proceedings, that its race-based affirmative action program violates subdivision (a) of section 31. While this appeal was pending, however, the Legislature passed and the Governor signed a bill attempting to change the definition of discrimination. Signed by the Governor in August 2003, nearly three years after Hi-Voltage was decided, Assembly Bill No. 703 declared that the term “racial discrimination” is not defined in section 31 and continued: “The lack of a legal definition for that term has led to confusion and conflict over implementation of Section 31 of Article I of the California Constitution.” (Stats. 2003, ch. 211, § 1(b).) Therefore, the bill, purporting “[t]o clarify confusion,” attempted to define “racial discrimination” in section 31 to be consistent with the definition of “racial discrimination” found in the International Convention on the Elimination of All Forms of Racial Discrimination (Convention), which was adopted by the United Nations in 1965 and ratified by the United States Senate in 1994. (Stats. 2003, ch. 211, § 1(f).) 4

The Convention defines “racial discrimination” as follows:

*302 Noting the enactment of this new statute, we requested supplemental briefing from the parties concerning its effect on this case. In response, SMUD frankly acknowledged that “the rules of construction set forth in California Government Code section 8315 appear to directly contravene the judicial construction upon the terms ‘discriminate’ and ‘preference’ in [Hi-Voltage].” SMUD concludes: “To the extent that [Hi-Voltage] correctly interpreted the intention of the voters regarding the meaning of the terms ‘discriminate’ and ‘preference’ in Proposition 209, contrary legislative interpretations would be required to yield.” (Fn. omitted.) We agree.

The California Supreme Court determined that the word “discriminate” in section 31 is to be interpreted according to its plain meaning. The definition of “racial discrimination” in the Convention conflicts with the Supreme Court’s interpretation because the Convention’s definition allows for exceptions to the plain meaning definition of “discrimination.” The Supreme Court is the final authority on interpretation of the state Constitution. (Sands v. Morongo Unified School Dist. (1991) 53 Cal.3d 863, 902-903 [ 281 Cal.Rptr. 34 , 809 P.2d 809 ].) Therefore, its definition is controlling.

“[I]t is well settled that when the Legislature is charged with implementing an unclear constitutional provision, the Legislature’s interpretation of the measure deserves great deference. [Citations.]” (People v. Birkett (1999) 21 Cal.4th 226, 244 [ 87 Cal.Rptr.2d 205 , 980 P.2d 912 ].) Section 31, however, contains no ambiguity concerning the term “discrimination.” Section 31 does not charge the Legislature with its implementation; it is self-executing. (§31, subd. (h).) Furthermore, there can be no doubt concerning the meaning of “discrimination” as it relates to the Civil Rights Act of 1964 and, by extension, the implementing federal regulations. “ ‘There is no sound basis for uncertainty about the meaning of discrimination in the context of the civil rights bill. It means a distinction in treatment given to different individuals because of their different race, religion, or national origin.’ ” (Steelworkers v. Weber (1979) 443 U.S. 193, 236 [ 61 L.Ed.2d 480, 509 , 99 S.Ct. 2721 ], fn. 16 (dis. opn. of Rehnquist, L), quoting 110 Cong. Rec. 7477 (1964).)

Assembly Bill No. 703 amounted to an attempt by the Legislature and the Governor to amend the California Constitution without complying with the procedures for amendment. This attempt was manifestly beyond their constitutional authority. By a vote of two-thirds of the membership of each house, the Legislature may propose to the electorate an amendment to the state Constitution. (Cal. Const., art. XVIII, § 1.) Assembly Bill No. 703 was approved by a simple majority of each house and, in any event, did not submit the question to the electorate. The Legislature cannot amend the Constitution by a simple majority vote, as it attempted to do here.

*303 Even though it concedes the definition of “discrimination” in Government Code section 8315 is ineffective, SMUD asserts we must nevertheless apply that definition, including its exception for “special measures,” because the United States Senate ratified the Convention, using its treaty power. The United States Senate ratified the Convention in 1994, but SMUD raised this argument for the first time in its supplemental briefing on appeal. Since the argument could have been raised in the trial court and in the original briefing in this court, it is forfeited. (People v. Freeman (1994) 8 Cal.4th 450, 487, fn. 3 [ 34 Cal.Rptr.2d 558 , 882 P.2d 249 ].)

Furthermore, the Convention does not allow these “special measures” unless there are “certain racial or ethnic groups or individuals requiring such protection as may be necessary in order to ensure such groups or individuals equal enjoyment or exercise of human rights and fundamental freedoms . . . .” (Internat. Convention on the Elimination of All Forms of Racial Discrimination, art. I, § 4; [as of Sept. 14, 2004].) In California, the people are sovereign, whose power may be exercised by initiative. (Raven v. Deukmejian (1990) 52 Cal.3d 336, 341 [ 276 Cal.Rptr. 326 , 801 P.2d 1077 ].) By adopting section 31, the people have determined, by implication, that special measures are not only unnecessary to ensure human rights and fundamental freedoms in California, but inimical to those principles. Therefore, “special measures,” in the form of exceptions to the plain meaning of “discrimination,” are not permitted in California, even under the Convention. Certainly, SMUD does not have the authority to determine otherwise, contrary to the sovereign’s will.

in

Federal Laws and Regulations Concerning Discrimination and Affirmative Action

As noted above, SMUD receives funding, either directly or indirectly, from three federal agencies; the Departments of Energy, Defense, and Transportation. To determine whether SMUD’s affirmative action program, which uses remedial race-based discrimination, is necessary to maintain eligibility for federal funding, we start with an analysis of the history of federal laws concerning discrimination and affirmative action.

On March 6, 1961, President John F. Kennedy issued Executive Order No. 10925, establishing the President’s Committee on Equal Employment Opportunity. He declared that discrimination is contrary to the constitutional principles and policies of this nation, the federal government has a “plain and positive obligation ... to promote and ensure equal opportunity for all *304 qualified persons,” and it is “the policy of the executive branch ... to encourage by positive measures equal opportunity for all qualified persons . . . .” (Exec. Order No. 10925, 26 Fed. Reg. 1977 (Mar. 6, 1961), opening declarations.) The executive order required government contractors, as a contractual term, to “take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, creed, color, or national origin.” (Exec. Order No. 10925, supra, § 301, italics added.)

Three years later, Congress passed, and President Lyndon B. Johnson signed, the Civil Rights Act of 1964. Included in that act was Title VI, which prohibited discrimination on the basis of race in all programs or activities receiving federal financial assistance. (42 U.S.C. § 2000d.) Federal agencies that extend federal financial assistance to any program or activity, by way of grant, loan, or contract, are authorized to promulgate regulations that give effect to the provisions of section 2000d. Title VI is based upon a policy of voluntary compliance, and funding cannot be terminated without following formal agency procedures. (42 U.S.C. § 2000d-l.)

In a concurring opinion filed in 1987, Justice John Paul Stevens summarized the United States Supreme Court’s treatment of the Civil Rights Act of 1964 in the context of employment, which is governed by Title VII of the act:

While the cases interpreting the Civil Rights Act of 1964 may allow race-based remedies, they have not required them. The act cannot be said to “require what it barely permits.” (Coalition for Economic Equality v. Wilson (9th Cir. 1997) 122 F.3d 692 , 709 [discussing the Fourteenth Amendment].)

IV

SMUD’s Rationale for Discriminating

SMUD asserts its affirmative action program complies with the requirements of regulations promulgated by the federal Departments of Energy, Defense, and Transportation to implement Title VI. We must consider each regulation to determine (1) whether it establishes a factual predicate for requiring race-based affirmative action and (2), if it does, to what extent race-based measures are required.

A. Department of Energy

The declared purpose of the Department of Energy regulations is “to implement Title VI of the Civil Rights Act of 1964 ... in connection with any program or activity receiving Federal financial assistance from the Department of Energy . . . ,” 6 ( 10 C.F.R. § 1040.1 (a) (2004).) “If the Director [of the Office of Equal Opportunity of the Department of Energy] finds that a recipient has discriminated against persons on the basis of race, color, national origin, sex, handicap, or age in any program or activity receiving Federal financial assistance, the recipient shall take remedial action as the Director considers necessary to overcome the effects of the discrimination.” ( 10 C.F.R. § 1040.7 (a) (2004); see also 10 C.F.R. § 1040.3 (k) (2004) (defining “director”).) According to SMUD, this section “provides that [Department of Energy] grant recipients must take remedial action to overcome the effects *306 of past discrimination.” (Boldface in original.) By not quoting the language of the section, however, SMUD attempts to avoid the language providing that action must be taken only if the Director of the Office of Equal Opportunity (1) finds discrimination and (2) requires the funding recipient to take action “as the Director considers necessary . . . .” (Italics added.) Therefore, SMUD’s citation of this section and claim that the section requires SMUD to take action are misleading because there is no evidence the Director of the Office of Equal Opportunity has found SMUD discriminated or has required SMUD to take any action to remedy discrimination. 7

SMUD then cites and quotes portions of subpart (c) of the same section, which requires recipients of funding from the Department of Energy to evaluate their policies and practices and the effects of those policies and practices and then “[t]ake appropriate remedial steps to eliminate the effects of discrimination which resulted or may have resulted from adherence to . . . questionable policies and practices.” ( 10 C.F.R. § 1040.7 (c)(3) (2004).) 8

This regulation requires “appropriate remedial steps to eliminate effects of discrimination.” This general language includes race-neutral remedies and, therefore, does not, on its face, require race-based remedies. SMUD offers no argument or authority that the Department of Energy requires race-based discrimination, either in general or, specifically, in SMUD’s case, as an “appropriate remedial step[].” It would appear that the Department of Energy, by using the general term “appropriate,” meant for the funding recipient to consider the state laws and regulations relevant to that recipient when determining what action to take. In SMUD’s case, such consideration includes the limitations of section 31.

After citing these two subsections of section 1040.7, SMUD declares, in bold text, “The fact that [SMUD] must comply with the foregoing regulatory requirements to establish and/or maintain its eligibility to participate in [Department of Energy]-funded programs is alone wholly *307 dispositive of the issues posed in this appeal.” As we have noted, these regulations do not require SMUD’s current race-based affirmative action.

In October 2000, an “Assistant General Counsel For Procurement and Financial Assistance” for the Department of Energy sent a letter to SMUD’s general counsel, which stated: “[A] recipient entity is required to take appropriate remedial steps to eliminate the effects of past and ongoing discrimination on the basis of race, color, national origin, sex, handicap or age. 10 CFR § 1040.7 (c)(3). If a recipient entity fails to take appropriate remedial steps, including targeted race and gender conscious remedies, where necessary to eliminate the effects of such discrimination, it may fail to comply with the mandatory directives of the Department’s regulations and, consequently, may fail to meet the requirements for continued receipt of Federal funds under programs administered by [the Department of Energy].” This letter, of course, is not a regulation. Facially, it is the opinion of but a single lawyer. The letter, itself, states that funding is contingent upon complying with “the mandatory directives of the Department’s regulations . . . .” Accordingly, the letter is not an independent source of federal requirements. It also does not attempt to apply the regulation to SMUD’s specific situation. Therefore, it does not impose on SMUD any requirement to use race-based discrimination as a remedy for past discrimination.

The citation of 10 Code of Federal Regulations part 1040.7(c)(3) (2004) in the letter does not provide authority for the declaration that the action must include race-based remedies. As noted above, that subsection does not require race-based remedies.

B. Department of Defense

SMUD cites one Department of Defense regulation as authority for its race-based affirmative action program. The regulation states: “In administering a program regarding which the recipient has previously discriminated against persons on the ground of race, color, or national origin, the recipient must take affirmative action to overcome the effects of prior discrimination.” ( 32 C.F.R. § 195.4 (b)(4)(i) (2003).)

After citing this regulation, SMUD states: “Once again, the fact that the challenged elements of the [race-based affirmative action program] represent actions that must be taken to establish and/or maintain [SMUD’s] eligibility to participate in the [Department of Defense program] reveals the error of the trial court’s ruling.” We have established, above, that affirmative action includes both race-neutral and race-based actions to alleviate or avoid discrimination. Therefore, the fact that the Department of Defense requires SMUD to “take affirmative action to overcome tire effects of prior discrimination” does not, alone, require SMUD to use race-based measures. SMUD’s *308 simplistic citation of the Department of Defense regulation as a justification for the race-based affirmative action program fails to support its contention that the trial court judgment must be reversed. This is a particularly disingenuous citation and argument in light of SMUD’s specific directions to its disparity study consultants in 1993 not to research or discuss changes or improvements in its race-neutral affirmative action initiatives and its failure since then to investigate or consider race-neutral remedies.

C. Department of Transportation

The Department of Transportation has a regulation, although SMUD does not specifically cite and discuss the provision, similar to the Department of Defense regulation just discussed. The Department of Transportation regulation requires funding recipients to “take affirmative action to remove or overcome the effects of the prior discriminatory practice or usage.” ( 49 C.F.R. § 21.5 (b)(7) (2003).) Analysis of the entire subsection, however, reveals that the Department of Transportation does not require race-based affirmative action, even though it allows such action. The subsection states:

“This part does not prohibit the consideration of race, color, or national origin if the purpose and effect are to remove or overcome the consequences of practices or impediments which have restricted the availability of, or participation in, the program or activity receiving Federal financial assistance, on the grounds of race, color, or national origin. Where prior discriminatory practice or usage tends, on the grounds of race, color, or national origin to exclude individuals from participation in, to deny them the benefits of, or to subject them to discrimination under any program or activity to which this part applies, the applicant or recipient must take affirmative action to remove or overcome the effects of the prior discriminatory practice or usage. Even in the absence of prior discriminatory practice or usage, a recipient in administering a program or activity to which this part applies, is expected to take affirmative action to assure that no person is excluded from participation in or denied the benefits of the program or activity on the grounds of race, color, or national origin.”

The first sentence of this subsection allows (“does not prohibit”) the recipient of federal funding to use race-based measures to remedy past discrimination. The second sentence imposes a duty on the recipient to “take affirmative action to remove or overcome the effects of the prior discriminatory practice or usage” but does not, on its face, require that those measures be race-based. If the drafters had intended the second sentence to limit remedies for discrimination to race-based measures only, then the first sentence would have been superfluous—permitting what is required in the second sentence.

*309 The third sentence states an expectation that the recipient will “take affirmative action to assure that no person is excluded from participation . . . .” Thus, this three-sentence subsection uses the term “affirmative action” twice, once in the sentence requiring “affirmative action” to remedy past discrimination and then again in the sentence allowing “affirmative action” to avoid discrimination. While the regulation does not define “affirmative action,” there is no indication the term has two different definitions within the same subsection. (See People v. Dillon (1983) 34 Cal.3d 441, 468 [ 194 Cal.Rptr. 390 , 668 P.2d 697 ] [presumption that term has same meaning when used twice in statute].) Furthermore, race-based affirmative action is constitutionally prohibited where there has been no prior discrimination. ( Croson, supra, 488 U.S. at pp. 505-506.) Accordingly, the term “affirmative action,” as used in this subsection must include a race-neutral component.

Although the first sentence allows race-based affirmative action, it does not require it. The second sentence requires “affirmative action,” which may be either race-neutral or race-based. Because in California the electorate has determined that race-based affirmative action is prohibited, an agency in California receiving funding from the Department of Transportation must opt for race-neutral affirmative action to comply with the second sentence of this subsection. In other words, because there is an option to use race-neutral affirmative action to comply with the mandates, as opposed to the permissions of this subsection, race-based affirmative action is not necessary to maintain federal funding and therefore cannot be used in California.

D. Maintaining Federal Funding

To maintain federal funding, SMUD must certify its compliance with federal regulations regarding discrimination. (See, e.g., 49 C.F.R. § 21.7 (a)(1) [the Department of Transportation requires assurance of compliance with regulations].) SMUD asserts that if we affirm the trial court’s judgment it will no longer be able to certify that it complies with the federal regulations and will lose funding. This assertion fails, however, because SMUD has not cited any law or regulation to establish that the race-based measures contained in its current affirmative action program are necessary to maintain federal funding. Furthermore, even though SMUD’s unspecified, race-neutral efforts to remedy past discrimination more than a decade ago were ineffective, nothing in the record establishes that SMUD cannot utilize an affirmative action program that imposes only race-neutral measures and thereby maintain federal funding.

*310 SMUD argues that it “did not. .. procure the [1998] disparity study as part of some master plan to justify a [race-based affirmative action program]. Rather . . . , as a participant in federally funded programs, [SMUD] was obligated to self-evaluate its non-discrimination practices and procedures (long before Proposition 209 was ever proposed).” SMUD provides no record citation to support this statement. In fact, the disparity studies and affirmative action programs imposed did not cite to any particular federal regulation requiring race-based remedies. Indeed, the disparity studies were designed to determine whether the Supreme Court decision in Croson permitted race-based affirmative action, not whether any federal regulation required such action. The 1998 disparity study and SMUD’s use of the study to justify race-based discrimination ignored SMUD’s constitutional burden under section 31 to prefer race-neutral remedies over race-based remedies and avoided a determination of whether there were race-neutral alternatives available to remedy disparities in contracting. 9 Far from showing the program was narrowly tailored to maintain federal funding while complying to the extent it could with section 31, subdivision (a), SMUD simply adopted a race-based affirmative action without regard to section 31, subdivision (a) and, only later, tried to justify its actions.

When SMUD did its disparity studies and drafted its affirmative action program, it did not take into account any federal law or regulation concerning the use of race-based affirmative action to remedy past discrimination. Nor did it consider race-neutral opportunities. Accordingly, it made no effort to determine whether there was a factual predicate for its race-based measures, let alone to determine whether its measures were narrowly tailored to comply with federal regulations in the least discriminatory manner. Finally, its attempt to justify its race-based remedies in this litigation fails. It has identified no federal law or regulation that requires these remedies under the circumstances presented.

*311 On review after summary judgment in favor of a plaintiff, we affirm if there is no triable issue of material fact and the plaintiff is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849 [ 107 Cal.Rptr.2d 841 , 24 P.3d 493 ].) Here, C&C has shown it is entitled to judgment against SMUD because SMUD’s affirmative action program violates section 31 and SMUD has not shown its program is necessary to maintain federal funding. 10

V

Conclusion

Conceding that it discriminates under section 31, subdivision (a), SMUD must argue its discrimination is necessary to maintain federal funding and therefore permissible under section 31, subdivision (e). Because the regulations require affirmative action to remedy past discrimination and affirmative action may be either race-based or race-neutral, SMUD cannot impose race-based affirmative action unless it can establish that it cannot remedy past discrimination with race-neutral measures. The California Constitution requires the state agency to comply with both the federal laws and regulations and section 31, subdivision (a), if possible. Applying these basic principles to the undisputed facts of this case shows why SMUD has failed to provide substantial evidence justifying its discrimination.

For some period of time until more than a decade ago, SMUD employed some form of race-neutral affirmative action. The 1993 disparity study showed that disparities existed (raising an inference of discrimination), despite the race-neutral affirmative action program. At that point, SMUD could have determined whether there were other race-neutral remedies it could employ. (SMUD has never contended it utilized all permissible race-neutral remedies before the 1993 study.) Instead, SMUD told the consultant not to propose or recommend race-neutral remedies. This is because the 1993 disparity study was undertaken to determine whether race-based remedies *312 could be justified under Croson. Therefore, SMUD abandoned race-neutral remedies, explicitly precluding consideration of new or additional race-neutral remedies. The 1993 disparity study was not a determination that the disparity could not be eliminated with race-neutral remedies. It was merely a determination that past discrimination justified race-based remedies under Croson. 11

After adoption of Proposition 209, SMUD conducted its 1998 disparity study. Again, disparities were found. And again, no thought was given to race-neutral remedies.

Accordingly, while SMUD may have tried some race-neutral remedies to eliminate disparities in contracting more than a decade ago, it did not determine then that there were no other race-neutral remedies it could utilize. And, since then, it has refrained from considering race-neutral remedies, at all.

DISPOSITION

Any remaining requests for judicial notice are denied as unnecessary or irrelevant. The judgment and permanent injunction are affirmed. C&C shall recover its costs on appeal. (Cal. Rules of Court, rule 27(a).)

Raye, J., concurred.

Section 31, subdivision (e) allows race-based discrimination if it is necessary to obtain or maintain federal funding. SMUD presents only circumstances it asserts require race-based discrimination to maintain federal funding. Therefore, we refer only to maintaining federal funding. In any event, the analysis is the same.

SMUD’s preferential treatment program prior to 1989 as well as its original and present affirmative action program extended to women-owned business enterprises. However, because C&C only challenges the race-based preferences, we make no further reference to gender-based classifications.

The affirmative action program defines “Minority-Owned Business Enterprise” to mean “an enterprise that is at least fifty-one (51) percent owned by a minority individual or group; or, in the case of any publicly owned business, at least fifty-one (51) percent of the stock of which is owned by one or more minorities; and whose daily management and daily business operations are controlled by one or more such individuals. []Q ‘African-Americans’ means all persons having origins in any black racial groups of Africa. [][] ‘Hispanic-Americans’ means all persons of Mexican, Puerto Rican, Cuban or Central or South American, or other Spanish or Portuguese culture or origin regardless of race. [|] ‘Asian Pacific Americans’ means all persons having origins in Asia or the Indian subcontinent, including, but not limited to, persons from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam, the U.S. Trust Territories of the Pacific, Northern Marinas, Laos, Cambodia, Taiwan, India, Pakistan, and Bangladesh, [f] ‘Native Americans’ means all persons having origin in any of the original peoples of North American or the Hawaiian Islands, in particular American Indians, Eskimos, Aleut or Native Hawaiians.” We refer to Minority-Owned Business Enterprises simply as minority businesses in this opinion.

C&C requests us to take judicial notice of some of the legislative history of Assembly Bill No. 703. Because the statute is clear, we need not consider the legislative history. Therefore, we deny the request as unnecessary.

SMUD requests us to take judicial notice of the Convention and of the United States Senate’s ratification. We grant this request.

C&C asserts the Department of Energy regulations are irrelevant because SMUD does not receive funds directly from that department; instead, SMUD receives funds as a result of a separate contract with an entity that receives funds from the department. For the purpose of argument, we will assume SMUD is subject to the regulations of the Department of Energy.

While at first blush this may seem at odds with our holding above, that it is unnecessary for SMUD to render itself ineligible for federal funding by means of a federal adjudication, this specific regulation, on its face, requires no action unless the Department of Energy has found that remedial action is necessary. Presumably, the state agency, without losing its federal funding eligibility, would be allowed to comply with any requirements imposed by the Department of Energy.

“Self-evaluation. Each recipient shall, within one year of the effective date of this part: [f]

A statistical disparity in the proportion of contracts or contract dollars awarded to a particular group may raise an inference of prejudice but it does not, standing alone, demonstrate that actual prejudice exists. (Associated General Contractors of Ohio, Inc. v. Drabik (6th Cir. 2000) 214 F.3d 730, 734-735 .) Because SMUD has failed to identify or cite any federal law or regulation that requires it to impose race-based measures in its affirmative action program, we need not determine whether the statistical disparities found in SMUD’s studies were sufficient to show past discrimination. As noted above, the factual predicate for imposing a race-based program is defined by the federal law or regulation. Without a federal law or regulation that requires a race-based program, there is no way to determine whether a simple showing of a disparity, which normally only raises an inference of discrimination, is a sufficient factual predicate to justify a race-based program.

Although the parties never broached the issue and the court did not raise it during oral argument, our dissenting colleague contends the result we reach is preempted by federal regulations. He asserts that C&C cannot challenge SMUD’s affirmative action program in state court as a violation of section 31, subdivision (a) because the federal regulations provide for a federal challenge to the affirmative action program as a violation of Title VI and the implementing regulations. We need not address the issue because the parties did not raise it, and for good reason. C&C alleges a violation of section 31, subdivision (a), not of Title VI and the implementing regulations. The dissent’s approach, therefore, would effectively insulate SMUD from any challenge to the affirmative action program based on section 31, subdivision (a). Furthermore, SMUD’s compliance with section 31, subdivision (a) is not preempted by the federal regulations if SMUD can comply with both section 31, subdivision (a) and the federal regulations. That is the question we decide.

We do not question the validity of the disparity studies. Indeed, for the purpose of this appeal, we accept them for what they purport to be: justifications for race-based affirmative action for the purpose of complying with Croson. Nothing more. They make no attempt to evaluate the ability of SMUD to maintain federal funding using only race-neutral remedies.