Sacramento Bee: California budget battles are in the courtroom, not Capitol

California's budget battles are now playing out in court

By Kevin Yamamura

The Sacramento Bee

Published: Tuesday, Oct. 25, 2011 - 12:00 am | Page 1A

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In any California budget fight, there are winners and losers.

And then there are lawyers.

Interest groups that lose in the Capitol now head straight for the courthouse as a matter of routine, asking judges to block budget actions under state and federal laws.

Gov. Jerry Brown and lawmakers approved an $85.9 billion budget in June. Their plan now faces at least six legal challenges worth more than $4 billion combined.

"Not unexpected, and I'm going to fight them every step of the way," Brown, who previously served as attorney general, said in a news conference last month. "But I realize that given the funding complexity in California – and the number of lawyers we have in the state – we will get a lot of lawsuits. I don't think we've heard the last of them."

In some instances, the groups themselves wrote those laws into the constitution through the initiative process. If the state loses in court, it must make up the money through other cuts or future repayment, adding to deficit problems. State leaders already backed off a plan to take $1 billion from First 5 childhood development programs after facing a lawsuit in May.

The 2009-10 budget may have set a record for litigation, as the Department of Finance counted 42 lawsuits against the spending plan approved by lawmakers and then-Gov. Arnold Schwarzenegger. Most challenged Schwarzenegger's furlough of state workers.

The state spends millions of dollars defending those cases, but it is difficult to calculate a comprehensive price tag for past budget lawsuits because the state Department of Justice has not separated those costs from the overall expense of defending general fund agencies in non-budget matters. Lynda Gledhill, spokeswoman for the department, said it has begun assigning case-by-case costs to general fund agencies this year.
The Department of Personnel Administration, which keeps its own records, estimates that the state spent $1.7 million on the furlough disputes.

Budget lawsuits have long been a routine occurrence, but they are generally more plentiful in deficit years when cuts are necessary, according to attorneys who have followed the process.

"When you're losing money that goes to your program, when cuts are deep, you're going to have every incentive to use every possible way to fight them, including lawsuits," said Vikram Amar, law professor at the University of California, Davis School of Law.

No group knows the value of budget litigation more than the California Redevelopment Association. For the past three years, the organization's website has functioned as a makeshift litigation blog, posting court documents and a timeline of court actions. The group has filed three suits since 2008 to protect $1.7 billion in annual property tax revenues for 400 redevelopment agencies.

The association won its first court case in 2009 against the state. In response, however, lawmakers and then-Gov. Arnold Schwarzenegger refashioned the maneuver in the next budget, which a court found legal.
Frustrated, redevelopment agencies joined cities and local governments in placing an initiative on the November 2010 ballot to restrict the state from taking those funds in future budgets. Or so they thought.

Voters approved that initiative, Proposition 22, but Brown and lawmakers found another work-around this year. They eliminated the agencies in one bill and reconstituted them in another, taking $1.7 billion in tax revenue in the process. Redevelopment agencies, joined by cities, filed another lawsuit. The California Supreme Court plans to hear arguments next month in that case.

"It's unfortunate for both the state and those of us in redevelopment that we've had to resort to a litigation strategy to ultimately achieve what the people have indicated they want," said Jim Kennedy, interim executive director of the California Redevelopment Association.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, opposed Proposition 22 and negotiated two of the budgets relying on redevelopment funds. He said it isn't fair in lean times for cities and redevelopment agencies to "set yourself off as an island and pretend that the balancing of priorities of the taxpayers' money is not your concern."

In other cases, Steinberg feels more conflicted about the role courts play.

On one hand, he sympathizes with advocates for low-income residents and unions who have filed suit to block cuts to Medi-Cal and social services, groups that are typically Steinberg allies. On the other hand, he knows that if courts rule against the state on cuts, his job balancing future budgets will be more difficult.

"When the court overturns a cut, we have to find that money somewhere, and often from an equally compelling need," he said, noting that additional revenue isn't an option as long as Republicans block tax increases.

Lawmakers and governors also have incentive to take greater legal risks to avoid the most politically unpalatable cuts. Knowing the court system will take months, if not years, to resolve a budget dispute, a legally risky solution can push part of the budget problem into the next year.

"This might be a function of term limits," said Rick Pratt, assistant executive director with the California School Boards Association. "A lot of members may not be around, and so it may be a question of expediency. Go ahead and sue, and someone else will deal with it later."

The state budget has become increasingly complex as voters have approved measures that dictate funding formulas. Brown said it would take years to unravel the various restrictions inserted into the constitution.
Pratt's organization and other school groups sued the state this month over $2.1 billion they believe they are owed under Proposition 98.

Such lawsuits can serve as leverage in negotiations. If school groups win their case, they will have more bargaining power in the next budget fight.

As for the ongoing battle between redevelopment agencies and the state, even a state Supreme Court decision may not be enough to settle matters.

"Our operating premise is that this Supreme Court decision will not end the discussion," Kennedy said. "There will still be an ongoing desire to have redevelopment be part of the (budget) solution, and I think we're willing to have those discussions. But not with a gun to our head."