Court Says Furloughs, Budget Cuts OK

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Two nasty legal fights over Governor Arnold Schwarzenegger's 2008 and 2009 budget actions are now history, with the governor winning both battles today in the California Supreme Court.

But on the furloughs, future governors should be careful not to read too much into this victory, as there's good reason to see it as a one-time deal.

The state's highest court sided with Schwarzenegger in two separate questions related to the bitter battle that erupted during the height of the recession: the furlough of state workers and the line-item vetoes contained inside an almost unprecedented budget modification bill.

The furlough fight has received the most attention here, and probably rightfully so. The tens of thousands of affected workers spent some 18 months in what amounted to a work slowdown, in the process seeing their take home pay cut by almost 15%. Many, but not all, of those workers are back on a similar furlough plan now (more on that in a moment).

Attorneys representing various bargaining units of employees made a singular argument: while Schwarzenegger had legal authority to lay off workers, he had no power to furlough -- because furloughs are a de facto reduction in pay, and salaries are the province of collective bargaining with legislative approval.

The state's high court ruling (PDF) essentially comes down to this: whatever gray area exists in the theoretical power of the governor to furlough was cleared up, in this instance, when the Legislature took action.

To wit:

In mid-February 2009 -- shortly after the furlough program went into effect -- the Legislature enacted, and the Governor signed, legislation that revised the Budget Act of 2008 (2008 Budget Act) by, among other means, reducing the appropriations for employee compensation contained in the original 2008 Budget Act...

The February 2009 legislation further provided that the specified reduction in the appropriations for employee compensation could be achieved either through the collective bargaining process or through "existing administration authority." That phrase, in the context in which the revised budget act was adopted and in light of the provision's legislative history, reasonably included the furlough program that was then in existence and that had been authorized by the current gubernatorial administration...

Accordingly, we conclude that the 2009 budget legislation validated the Governor's furlough program here at issue.

That seems to be a relatively narrow window for a governor to act. Had the Legislature rejected his 2008 furlough plan... and he nonetheless insisted on keeping that plan in place... we might be reading a different decision from the court.

Now, fast forward to today -- which, by the way, is 'Budget +96' in our ongoing coverage -- and questions surrounding both the current furloughs and the budget deal struck last Friday. The current furlough order, signed by Schwarzenegger back on July 28, reimposes the thrice monthly furloughs until "a 2010-11 budget is in place and the director of the Department of Finance determines that there is sufficient cash" to pay the bills.

Representatives of two of the worker groups that sued over the original furloughs told reporters this morning that today's ruling doesn't seem to cover the new order, and that another round in court might be in order.

"That's a question we're looking at right now," said Bruce Blanning of the Professional Engineers in California Government.

But today's ruling also seems to increase the pressure on the exact wording of the not-yet-made-public budget agreement struck behind closed doors. Sources have said, on background, that the agreement not only assumes big bucks in state employee savings, but that it also affirms that the governor must get those savings through the collective bargaining process.

Meantime, the Supreme Court also upheld Schwarzenegger's line-by-line actions in a summer 2009 budget 'modification' -- actions that both social services advocates and even the leader of the state Senate challenged with lawsuits.

This was a fight over what is, and isn't, an appropriation. The plaintiffs said that the word cannot apply to spending reductions, which is what the budget-related bill had in it. Schwarzenegger and his attorneys insisted that just as the governor can veto a spending increase, he can also (as he did in this case) expand a spending reduction, thus cutting even more money out of the original budget.

(Confused? Welcome to my world.)

The court flatly rejected the plaintiffs position about halfway through their 36 page ruling (PDF):

There is no substantive difference between a Governor's reduction of an item of appropriation in the original 2009 Budget Act, to which interveners and petitioners raise no objection, and a Governor's reduction of that same item in a subsequent amendment to the 2009 Budget Act — that is, Assembly Bill 4X 1. Both actions involve changes in authorized spending.

While this issue is likely to color future budget debates, don't expect to see it come up very often. That's because the 2009 budget saga was pretty much without any historical precedent. The Legislature and Schwarzenegger passed a budget much, much earlier than required -- in February rather than June -- and then had to find even more solutions in July. The resolution of that unusual budget revision is what triggered this legal and constitutional fight, not the kind of thing anyone hopes to see again anytime soon. Nonetheless, the ruling does seem to strengthen the hand of the governor in making unilateral changes to a legislatively ratified budget... something future governors and legislators will no doubt take into consideration when they sit down and negotiate a fiscal blueprint for California.

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About John Myers

John Myers is senior editor of KQED's new multimedia California Politics & Government Desk.  He has covered California politics for most of the past two decades -- serving previously as Sacramento bureau chief for KQED News and, most recently, as political editor for KXTV News10 (ABC) in Sacramento. He moderated the only gubernatorial debate of 2014, and was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • Jana Busby

    Do you know if the furloughs will continue on this Friday, 10/8, if a budget agreement is not yet signed? What about a signed budget?

    I cannot find this information anywhere.

    Love your article!

  • John Myers

    Jana, I don’t have any solid answer. But my hunch is that this Friday’s furlough would not be cancelled. At this point, we’re told a budget vote in the Legislature will come Thursday. If that happens, it would still take a few days for the governor and his staff to go through the document and make any line-item vetoes before signing it.

    However, keep in mind that the current furloughs, per the executive order mentioned above, seem to be completely at Schwarzenegger’s discretion. Could he cancel this week’s if the budget was sent to his desk? I guess so. But I still doubt it.

  • D. Gilson

    Since when does not paying your bills count as saving money. Boy I wish I could use that one.

  • Andy

    I think the fight in the second case will be a bigger deal for future governors. Since any mid-year reduction act by the Legislature is now subject to a line-item veto, there is no incentive toward making a mid-year reduction. This is very bad, because it encourages more gridlock and makes it difficult to undo what turn out to be bad budgets in mid-year.

    Schwarzenegger, for reasons that completely escape me, has completely destroyed trust in Sacramento, and it was the fundamental currency in this town.

  • zurda

    To Andy: It’s just a guess, but I’d say the reason is ego…. and because he can.