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ORIGINAL

FREDRIC D. WOOCHER (SBN 96689)GiULiA C. S. GOOD STEFANI (SBN 262228)STRUMWASSER & WOOCHER LLP10940 Wilshire Boulevard, Suite 2000Los Angeles, Califomia 90024Telephone: (310) 576-1233

Facsimile: (310)319-0156E-mail: [email protected]

A R T H U R G. SCOTLAND (SBN 62705)P.O. Box 189206Sacramento, CA 95818-9206Telephone: (916)225-1301E-mail: [email protected]

Attorneys for Plaintiffs

HD/POORSED

By:

MAR - 5 2012

M. PURCELL

DEPUTYCLERK

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF SACRAMENTO

D A R R E L L STEINBERG, in his capacity as

PRESIDENT PRO TEMPORE OF THE CAL IFORNIA

SENATE ; JOHN A . PEREZ, in his capacity as

SPEAKER OF THE CALIFORNIA ASSEMBLY,

Plaintiffs,

JOHN CHIANG, in his capacity as CALIFORNL\

STATE CONTROLLER; DOES I-X,

Defendants.

CASE NO. 34-2012-00117584

Exempt From Filing FeesPursuant to Gov. Code § 6103

PLAINTIFFS' M E M O R A N D U M OFPOINTS AND AUTHORITIES INSUPPORT OF MOTION FORJUDGMENT ON THE PLEADINGS

Date: Apri l 10,2012Time: 2:00 p.m.Dept.: 53Judge: Hon. David I . Brown

Resei-vation#1675296

Action Filed: January 24, 2012

Printed on Recycled Paper

PLAINTIFFS' M E M O OF POINTS & AUTHORITIES iso M O T I O N FOR JUDGMENT ON PLEADINGS



C O N T E N T S

TABLE OF AUTHORITIES ii

INTRODUCTION 1

4 STATEMENT OF FACTS 3

5 A. OVERVIEW OF THE BUDGET PROCESS 3

6 B. PROPOSITION 58 5

7 C. PROPOSITION 25 7

8 D. BUDGET EVENTS OF JUNE 2011 9

9 ARGUMENT 12

10 I . THE LEGISLATURE COMPLIESWITH

ARTICLE IV, SECTION 12,SUBDIVISION (G), OF THE CONSTITUTION WHEN IT SENDS THE

11 GOVERNOR A BUDGET B I L L PROPOSING GENERAL FUNDAPPROPRIATIONS THAT, WHEN COMBINED WITH EXISTING GENERAL

12 FUND APPROPRIATIONS AND ANY TRANSFERS TO THE BUDGETSTABILIZATION ACCOUNT, DO NOT EXCEED THE LEGISLATURE'S

13 ESTIMATE OF GENERAL FUND REVENUES FOR THE FISCAL YEAR 13

14 II. THE CONTROLLER HAS NO AUTHORITY TO SECOND-GUESS THELEGISLATURE'S BUDGET ESTIMATES AND TO DEEM THE

15 LEGISLATURE'S PAY TOBE FORFEITED BASED UPON HIS OWN ANALYSISOF WHETHER THE BUDGET BILL SATISFIES THE CONSTITUTION'S

16 REQUIREMENTS 20

17 CONCLUSION 25

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PLAINTIFFS' M E M O OF POINTS & AUTHORITIES ISO M O T I O N FOR JUDGMENT ON PLEADINGS



1 T A B L E O F A U T H O R I T I E S

2 Cases

3 Associationf o r Retarded Citizens v. Department of Developmental Services(1985) 38 Cal.3d 384 ' 3

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Carmel Valley Fire Protection Dist. v. State ofCalifornia (2001) 25 Cal.4th 287 24

Gilb V. Chiang (2010) 186 Cal.App.4th 444 22, 23

Knof fv . City etc. of San Francisco (1969) 1 Cal.App.3d 184 13

McCauley v. Brooks (1860) 16 Cal. 11 22

Pacific Legal Foundation v. Brown (1981) 29 Cal.3d 168 17

Planned Parenthood Affiliates v. Swocip (1985) 173 Cal.App.3d 1187 3

Rankin v. Colgan (1891) 92 Cal. 605 23

Schabarum v. CaUfornia Legislature (1998) 60 Cal.App.4th 1205 . . . . 12, 13, 17, 18, 19, 23-24

Stevenson v. Colgan (1891) 91 Cal. 649 19,23

Stratton v. Green (1872) 45 Cal. 149 3

Tirapelle v. Davis (1993) 20 Cal.App.4th 1317 21 , 22, 23

Constitution

Cal. Const.,

art. I l l , §3 24

art. IV , §9 3,4, 15

art IV , § 10, subd. (a) 4,5

art. IV, § 10, subd. (b) 5

a r L l V, § 10, subd. (e) 5, 18

art. IV, § 10, subd. (f) 7

art. IV, § 12 21

art. IV, § 12, subd. (a) 3

art. IV, § 12, subd. (c)(1) 3

art. IV, § 12, subd. (c)(2) 4

art. IV , § 12, subd. (c)(3) 4, 7, 9

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art. IV , § 12, subd. (c)(4) 4, 16

art. IV , § 12, subd. (d) 3, 8, 16

art. IV , § 12, subd. (e) 4, 16

art. IV , § 12, subd. (e)(1) 3, 8

art IV , § 12, subd. ( f ) 18

art. IV, § 12, subd. (g) passim

art. IV , § 12, subd. (h) 9,13,14,22

art XIII , §17 21

art. X V I , §1.3 6

art X V I , §7 21

art. X V I , §8 21

art. X V I , § 8.5 - 21

Statutes

Code Civ. Proc, § 438, subd. (d) 12

Gov. Code,

§ 11200 4

§ 12410 21

§ 12440 21

§ 13070 4

§ 13308 4

§ 13337 3

A B No. 98 (2011-2012 Reg. Sess.) 9-10,14,19

A CA No. 13 19,20

SB 69 (2011-2012 Reg. Sess.) 9, 10

SB 335 (2011-2012 Reg. Sess.) 15

Miscellaneous

Controller Jolin Chiang's Analysis of A CA 13 19-20

Controller John Chiang's Press Release and Proposition 25 Budget Analysis 11-12, 14, 16

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PLAINTIFFS' MEMO OF POINTS & AUTHORITIES ISO MOTION FOR JUDGMENT ON PLEADINGS



1 I N T R O D U C T I O N

2 On June 15, 2011, the California Legislature timely enacted and sent to the Governor its

3 proposed budget bill for the 2011-12 fiscal year. On June 21, 2011, State Controller John Chiang

4 ai-mounced that he had conducted his own review of the Legislature's budget bill and had concluded

5 that, in his view, "the numbers simply did not add up." He therefore declared that the Members of

6 the Legislature had forfeited their pay under Proposition 25, the "On-Time Budget Act of 2010,"

7 from June 16,2011, "until a balanced budget is sent to the Govemor" in accordance with article IV ,

8 section 12, subdivision (g), of the Califomia Constitution.

9 The Controller misinterpreted and incorrectly applied the constitutional requirements in

10 question: Article IV , section 12, subdivision (g), requires only that designated appropriations and

11 transfers from the General Fund as of the date of budget bill 's passage cannot exceed "General Fund

12 revenues for that fiscal year estimated as of the date of the budget bill 's passage . . . [and] set forth

13 in the budget bill passed by the Legislature" — a criterion that was undeniably satisfied in the budget

14 bill passed by the Legislature on June 15, 2011. The Legislature estimated that General Fund

15 revenues for the 2011-12 fiscal year would be $87,803 billion, and the amount of General Fund

16 appropriations proposed by the budget bill , when combined with General Fund appropriations

17 previously made for the 2011-12 fiscal year as of the date of the budget bill 's passage, totaled

18 approximately $86,550 billion, leaving a budgetary "reserve" of more than $1,252 billion. The

19 Controller nevertheless asserted that components of the Legislature's budget were "incomplete"

20 because in some instances the Legislature's revenue estimates anticipated the passage of "trailer

21 bills" that had not yet been enacted, and in other instances the budget did not include appropriations

22 that, in the Controller's view, would have to be made in the future. None of the Controller's

23 objections, however, finds any support in the veiy specific language and requirements of article IV ,

24 section 12, subdivision (g). The Controller therefore went beyond the limited terms and restrictions

25 imposed by the Constitution by adding into his own budget calculation hundreds of millions of

26 dollars in "appropriations" that were not proposed in the budget bill nor had been made at the time

27 of its passage, and by reducing the Legislature's estimate of future revenues based upon his own

28 assessment that several hundred million dollars were projected for the coming fiscal year as a result

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of pending, but not yet enacted, legislation.

Even more troubling, the Controller's interjection of his executive office into the legislative

budget process and his assertion of a unilateral right to withhold the Legislature's pay based upon

his own analysis of the budget's compliance with the Constitution's requirements exceeded his

authority and violated the separation of powers doctrine that underlies our tripartite system of

government Article IV , section 12, of the Constitution assigns the exclusive responsibility for

adopting a budget in compliance with its provisions to the Legislature and the Govemor, and neither

the Constitution nor any statute grants the Controller any role in that process. The Controller's

assertion of the right to pass judgment on the validity of the budget bill adopted by the Legislature

— and to enforce his opinion by unilaterally deeming legislators' pay to be forfeited — not only

arrogates to his executive branch office one of the core functions of the legislative branch, but does

so in a manner that severely disrupts the constitutional balance of powers by holding the legislative

budget process hostage to the v/hims and demands of the Controller. By insinuating himself into a

process in which he constitutionallydoes not belong—the budget deliberations and decisionmaking

of the legislative branch — the Controller violated the separation of powers clause of the state

Constitution.

This lawsuit and these cross-motions for judgment on the pleadings therefore seek the

Court's resolution of an important, ongoing dispute between the Legislature and the Controller over

both the proper interpretation of the constitutional provisions goveming the Legislature's adoption

of the budget and the legal authority of the Controller — or, more accurately, his lack of any such

authority — to make his own assessment of whether the budget bill passed by the Legislature

properly complies with those constitutional provisions and to unilaterally enforce his opinion by

deeming the salaries and expenses of the Members of the Legislature to have been forfeited.

Plaintiffs do not request any monetary relief with respect to the Controller's unauthorized

withholding of legislators' salaries and expenses in 2011, but seek to have these critical

constitutional questions judicially resolved as expeditiously as possible so that this recurring

controversy does not disrupt and interfere with the timely enactment of a budget for the 2012-13

fiscal year or any subsequent fiscal year.

'LAINTIFFS' M E M O OF POINTS & AUTHORITIES ISO MOTION FOR JUDGMENT ON PLEADINGS



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STATEMENT OF FACTS

A. OVERVIEW OFTHE BUDGET PROCESS

Article IV , section 12, of the Constitution requires the Governor to submit a proposed budget

to the Legislature on or before January 10th of each year. (Cal. Const., art. IV, § 12, subd. (a); see

also Gov. Code, § 13337.)' The Govemor's budget is accompanied by a budget bill that includes

an itemized statement of all recommended state expenditures and an estimate of state revenues for

the ensuing fiscal year. (Art. IV, § 12, subds. (a) & (c)(1).) Each expenditure reflects the allotment

of an appropriation f rom a particular fiind,^ and a budget bill is the only bill that can contain more

than one item of appropriation. (Art. IV, § 12, subd. (d); see generally Planned Parenthood

A ffiliates v. Swoap(1985) 173 Cal.App.3d 1187,1197-98; Stratton v. Green (1872) 45 Cal. 149,151

[defining an "appropriation"as a "named sum of money [that] has been set apart in the treasury and

devoted to the payment of a particular claim or demand"].) I f the total appropriations proposed in

the Governor's budget bill exceed estimated revenues, the Governor is required to identify the

sources f rom which the additional revenues necessary to cover any shortfall should be provided.

(Art. IV, § 12, subd. (a).)

Because the "single-subject rule" set forth in article IV , section 9, requires all bills, including

a budget bill , to "embrace but one subject" — and the one subject of the budget bill is the

appropriation of funds for the annual state budget — any substantive statutoiy changes necessary to

implement the Govemor's proposed budget generally must be addressed in separate legislation. (See

Associationf or Retarded Citizens v. Department of Developmental Services (1985) 38 Cal.3d 384,

394 [describing the singular puipose of the budget bill as providing "appropriations to support the

annual budget'].) The attendant budget-implementing bills are referred to as "budget trailer bills."

By law, the Govemor's proposed budget trailer bills must be provided to the Legislature by

'Al l citations to article IV herein refer to article IV of the California Constitution.

"According to the Department ofFinance (DOF), there are more than 1,100 different "fiinds"

in California state govemment. For budgetary purposes, these funds are classified according to the

fol low ing f ive categories: the General Fund; special funds; nongoveriunental funds; federal funds;

or bonds. (See DOF, "Fund Conditions and Transfers/Loans," available at:

<http://www.dofca.gov/budgeting/budget_faqs/information/> [last visited March 2, 2012].)

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February 1st of each year. (Gov. Code, § 13308.) In addition, the Director of the Department of

Finance, w ho serves as the Governor's chief fiscal policy advisor, must provide the Legislature with

any proposed adjustments to the Govemor's budget by April 1 and with a revised estimate of

General Fund revenues, along with any related proposals to reduce expenditures, no later than May

14. (Gov. Code, §§ 13308, 11200, 13070.)

Once submitted, the Govemor's proposed budget bill is introduced immediately in both

houses of the Legislature, and the Legislature must pass a final budget bill by midnight on June 15th.

(Art. IV, § 12, subds. (c)(2) & (c)(3).) Until the budget bill is enacted, the Legislature is prohibited

from sending to the Governor for consideration any other bill that would appropriate funds for

expenditure during the upcoming fiscal year, except for emergency bills recommended by the

Govemor or appropriations fo r the salaries and expenses of the Legislature. (Art. IV, § 12, subd.

(c)(4).) Again, any substantive changes in law or revisions to existing govemment programs that

might be needed in order to implement the spending priorities reflected in the budget bill , as well

as any tax increases or other revenue enhancements that are necessary to flind the appropriations

made in the budget bill, must be addressed by the Legislature in separate legislation. (See art. IV,

§ 9.) Since many of these bills "provid[e] for appropriations related to the budget bil l" (see art. IV,

§ 12, subd. (e)), pursuant to section 12, subdivision (c)(4)'s constitutional mandate, the Legislature

cannot, on its ow n authority, send them to the Govemor until after the budget bill has been enacted

(hence the appellation "trailer bills"). Many trailer bills are heard concurrently vvith the budget bill ,

but they need not be, and any such trailer bills that are not passed at the time of the budget continue

to be considered and are subject to amendment by the Legislature until they are either enrolled and

presented to the Governor or abandoned. (See generally DOF, "California's Budget Process,"

available at: <http://www.dofca.gov/fisa/bag/process.htm> [last visited March 2, 2012].)

Once the Legislature's budget bill has been passed by each house, the bill is sent, or

"presented," to the Govemor. (Art. IV, § 10, subd. (a).) As w ith any other legislation, the Governor

•'The comprehensive state spending plan for a fiscal year is frequently set forth in multiple

bills. In recent years, this has involved one bill originating in one house of the Legislature that

contains the bulk of the appropriations and an initial revenue estimate, and a second bill originating

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then either may sign the budget bill as enacted by the Legislature, may allow it to become law

without his signature, or may veto it by returning it to the Legislature with his objections (where the

veto can be oven idden by a tv/o-thirds vote). (Art. IV, § 10, subds. (a) & (b).) The Governor also

has the authority to "reduce or eliminate one or more items of appropriation while approving other

portions ofa bil l ," commonly referred to as a "line-item" veto. (Art. IV, § 10, subd. (e).) The budget

bill officially becomes theBudget Act when it is signed by the Governor and filed w ith the Secretary

of State. (Art. IV, § 10, subd. (a).)

B. PROPOSITION 58

After a period of high grovv h in revenues and expenditures in the late 1990's, state tax

revenues plunged in 2001 and the budget fell badlyout of balance, with the state cariying over large

deficits from year to year and engaging in a significant amount of borrowing. In an effort to address

these issues, the voters passed Proposition 58 at the March 2,2004, primary election, making three

sets of amendments to the Constitution.

First, addressing a perceived infirmity in the budget process in which the Governor was

required to propose a balanced budget but the state was not actually required to enact a budget bill

that was balanced, the Constitution was amended so that the budget bill ultimately passed by the

Legislatureand signed by the Govemor would have to be balanced in accordance with the measure's

prescribed formula. Proposition 58 also added a provision to the Constitution to address the need for

mid-year budget adjustments in special session in the event the state found itself facing substantial

revenue shortfalls or spending increases. (See Supplemental Official Voter Information Guide,

Primary Election (Mar. 2, 2004), Legislative Analyst's Analysis, pp. 11-13 [attached as Exh. 4 to

Plaintiffs' Request for Judicial Notice ("RJN")].) Second, in order to cushion the impact on the

budget from ftiture downturns. Proposition 58 created a special reserve within the General Fund —

called the Budget Stabilization Account — and required that a portion of annual General Fund

revenues be transferred into that account each year until the balance in the account reached the

greater of $8 billion or 5% of General Fund revenues; the Govemor, however, was authorized to

in the other house that amends the first bill to increase, reduce, or modify the initial bill 's

appropriations and revenue estimate. Together, the bills are referred to as "the budget bil l ."

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PLAINTIFFS' MEMO OF POINTS & AUTHORITIES ISO MOTION FOR JUDGMENTON PLEADINGS



1 issue an executive order suspending or reducing the required transfers into the Budget Stabilization

2 Account for any fiscal year. (Ibid.) Third, together with a companion bond measure approved by

3 the voters at the same election (Proposition 57), Proposition 58 authorized the issuance of a $15

4 billion deficit-financing bond to "wipe the slate clean" and help eliminate the existing cumulative

5 budget deficit, while simultaneously adding language to the Constitufion that would prohibit most

6 borrowing to cover budget deficits in the future. (Ibid. ; see Cal. Const., art. X V I , § 1.3.)

7 The so-called "balanced budget' provision of Proposifion 58 is specifically at issue in the

8 instant litigation. It provides:

9 "For the 2004-05 fiscal year, or any subsequent fiscal year, the Legislature may notsend to the Govemor for consideration, nor may the Governor sign into law, a budget

10 bill that would appropriate from the General Fund, for that fiscal year, a total amountthat, when combined with all appropriations from the General Fund for that fiscal

11 year made as of the date of the budget bill 's passage, and the amount of any GeneralFund moneys transferred to the Budget Stabilization Account for that fiscal year

12 pursuant to Section 20 of Article X V I , exceeds General Fund revenues for that fiscalyear estimated as of the date of the budget bill 's passage. That estimate of General

13 Fund revenues shall be set forth in the budget bill passed by the Legislature." (Art.IV, §12, subd. (g).)

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Under Proposition 58's fomiula, then, the Legislature must set forth in the budget bill an

estimate of General Fund revenues for the coming fiscal year, and that estimate must exceed or equal

the sum of three amounts: (1) appropriations from the General Fund for the fiscal year as proposed

in the budget bill; (2) other appropriations "from the General Fund for that fiscal year made as of the

date of the budget bill 's passage," and (3) any moneys transferred from the General Fund to the

Budget Stabilization Account for that fiscal year. Significantly, Proposition 58 does not require that

the Legislature's estimate of General Fund revenues be based solely upon the law already in effect

at the time of the budget bill's passage. Further, the measure's formula considers only General Fund

appropriations that either have been "made" under the laws in existence as of the date of the budget

bill 's passage or have been proposed in the budget bill itself; it gives no consideration to other

General Fund appropriations that may be contained in or result from the subsequent passage of one

or more trailer bills.

As mentioned above. Proposition 58 also recognized that the estimates and projecfions that

are used in formulating the budget before the fiscal year even begins are necessarily just that —

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1 estimates and projections that might not, in fact, turn out as predicted. Accordingly, the measure

2 also provided that if , after the budget bill is enacted, the Governor determines that over the course

3 of the fiscal year General Fund revenues wil l fall substanfially below the estimate of General Fund

4 revenues upon which the budget bill was based, or that General Fund expenditures wil l increase

5 substantially above that estimate of revenues, he may declare a fiscal emergency and call the

6 Legislature into special session. If the Legislature fails to pass legislation to address the fiscal

7 emergency by the 45th day following the Govemor's proclamation, it may not adjourn until it does

8 so, and it may not act on any other bill in the meanfime. (Art. IV, § 10, subd. (f).)

9 C. PROPOSITION 25

10 The voters amended article IV, section 12, again at the November 2,2010, general election,

11 when they passed Proposifion 25, the "On-Time Budget Act of 2010." As its fifie reflects, the

12 principal problem addressed by Proposition 25 was not that the amual budgets were not balanced

13 —Proposition 58 dealt with that issue — but that the Legislature was clironically late in passing and

14 presenting the budget bill to the Govemor. Since 1972, the Constitution had contained a requirement

15 that the Legislature "shall pass the budget bill by midnight on June 15 of each year" (art. IV , § 12,

16 subd. (c)(3)), but the Legislature had routinely been unable to muster the two-thirds supermajority

17 vote needed to enact a budget bill by this consfitufional deadline. The result, as set forth in the

18 "Findings and Declarations" of Proposition 25, was that "[l]ate budget passage can have a sudden

19 and devastating effect on individual Califomians and Califomia businesses. Individuals and families

20 can be deprived of essential governmental services and businesses are subject to protracted delays

21 in payments for services rendered to the State." (Proposition 25, § 2, subd. (2), reprinted in Official

22 Voter Information Guide, General Elecfion (Nov. 2, 2010), p. 113 [attached as Exh. 5 to Plaintiffs'

23 RJN]; see also id.. Legislative Analyst's Analysis, p. 53 [Legislature had met the June 15 deadline

24 only five times since 1980].)

25 Proposition 25 idenfified two principal causes for the chronically late budgets. One was the

26 two-thirds vote requirement for enactment of the budget. (See Proposition 25, § 2, subd. (3) ["A

27 major cause of the inability of the Legislature to pass a budget in a fimely matter is the supermajority

28 two-thirds vote required to pass a budget."].) The other was that there was no effective penalty

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imposed upon the Legislature for failing to meet the June 15th constitutional deadline. (See id., §

2 2, subd. (5) ["A second major cause of the inability of the Legislature to pass a budget on time is that

3 individual legislators have no incentive for doing so In order to give the Legislature an incentive

4 to pass the annual state budget on time, legislators should not be paid or reimbursed for living

5 expenses i f they fail to enact the budget on time."].) Proposition 25 therefore adopted a "carrot and

6 stick" approach to address the issue of late budgets: The vote required to pass a budget bill would

7 be lowered from two-thirds to a simple majority of each house of the Legislature, but Members of

8 the Legislature v/ould permanenfiy forfeit their salaries and reimbursements for living expenses for

9 each day that the budget was late. (See id , § 3, subd. (1) ["The people enact this measure to end

10 budget delays by changing the legislative vote necessary to pass the budget f rom two-thirds to a

majority vote and by requiring legislators to forfeit their pay i f the Legislature fails to pass the budget

12 on fime."].)

13 To accomplish the first of these objectives, Proposifion 25 amended article IV , section 12,

14 subdivision (d), to exempt General Fund appropriafions in the budget bill and in other bills "related

15 to the budget' from the two-thirds vote requirement.'' Proposition 25 likewise amended section 12

16 to pennit the budget bill /o take effect immediately pursuant to a majority vote of each house ofthe

17 Legislature, so that an urgency clause (which would necessitate a two-thirds vote) would not be

18 required for that purpose. (See art. IV , § 12, subd. (e)(1).) At the same time, Proposifion 25 was

19 careful to emphasize that a two-thirds vote would still be needed for the Legislature to raise taxes,

20 even i f the projected increase in tax revenues was a consideration in the budget bill 's esfimate of

21 General Fund revenues forthe coming year. (See Proposition 25, § 3, subd. (2) ["This measure wil l

22 not change the two-thirds vote requirement for the Legislature to raise taxes."].)

••As amended, article IV , section 12, subdivision (d), provides:

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"N o bill except the budget bill may contain more than one item of

appropriation, and that for one certain, expressed purpose. Appropriations from the

General Fund of the State, except appropriafions for the public schools, and

appropriations in the budget bill and in olher bills providing for appropriaiions

27 relaled to the budgel bill, are void unless passed in each house by rollcall vote entered

in the journal, two-thirds of the membership concurring." (Art. IV, § 12, subd. (d)

28 [language added by Proposition 25's amendment in italics].)

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1 The "stick" portion of Proposition 25 was set forth in the addition of subdivision (h) to article

2 IV , secfion 12, which calls for the forfeiture of legislators' pay i f the budget bill is not passed by

3 midnight on June 15, effective from that date until the day that the budget bill is presented to the

4 Governor. Article IV , section 12, subdivision (h), provides:

5 "Notwithstanding any other provision of lavv or ofthis Constitution,... in any yearin vvhich the budget bill is not passed by the Legislature by midnight on June 15,

6 there shall be no appropriation from the current budget or future budget to pay anysalaiy or reimbursement for travel or living expenses for Members of the Legislature

7 during any regular or special session for the period from midnight on June 15 untilthe day that the budget bill ispresented to the Govemor. No salary or reimbursement

8 for travel or living expenses forfeited pursuant to this subdivision shall be paidretroactively."

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D. B U D G E T E V E N T S OF J U N E 2011

On January 10, 2011, the Govemor submitted his proposed budget for fiscal year 2011-12

to the Legislature. That same day, the Senate Budget & Fiscal Review Con-unittee Chair introduced

the Governor's budget bill in the Senate, denominated Senate Bill No. 69 ("SB 69"), and the Chair

of the Assembly Committee on Budget introduced the Governor's budget bill in the Assembly,

denominated Assembly Bill No. 98 ("AB 98").

The Legislature's primary budget bill, SB 69, itemized proposed state expenditures, identified

a fund for each appropriation, and utilized a coding scheme and general organizational structure

compatible with the Governor's Budget. (SB 69 (2011-12 Reg. Sess.) [attached as Exh. 1 to

Plaintiffs' RJN].) SB 69's subject, per its title, was: "A n act making appropriations for support of

the govemment of the State of California and for several public purposes in accordance with the

provisions ofSection 12 of Article IV of the Constitution of the State of California, to take effect

immediately. Budget Bil l . " (Ibid.) In addition to making these appropriafions, SB 69 set forth that

" [ f ]o r purposes of subdivision (g) of Section 12 o f Ar t i c l e IV of the Califomia Constitution, the

esfimate of General Fund revenues for the 2011-12 fiscal year pursuant to this act, as passed by the

Legislature, is $86,842,200,000." (Id., § 35.50, subd. (c).) SB 69 passed the Assembly and Senate

by majorityvote in each house on March 17, 2011.

AB 98 amended SB 69. Collectively, the two bills constituted the Legislature's budget bill




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for the 2011-12 fiscal year.' (See AB 98 (2011-12 Reg. Sess.) [attached as Exh. 2 to Plainfif fs '

RJN].) Among other revisions, AB 98 a m e n d e d the Legislature's estima te of General Fund reven ues

for the f iscal year, setfing the esfimate at $87,803,300,000. (M, §426.) AB 98 a lso idenf i f ied a l is t

o f a pproximately one hundre d Sen ate and Assembly bills "providing for appropriations related to

the Budge t Bill within the m e a n i n g of subdivision (e) ofSection 12 of Article IV of the Califomia

Con stitution ." (Id., § 427.) AB 98 passed the Assembly an d Senate bymajority votes on June 15,

2011. (Assem. J. (2011-12 Reg. Sess.), pp. 1946-1948; Sen. J. (2011-12 Reg. Sess.), pp. 1433-

1436.) At approximately 5:00 p.m. that same day, the Legislature presented its budge t bill, as set

forth in SB 6 9 a s a m e n d e d by AB 9 8 , to the Go vemo r. (Ibid.)

On June 16, 2011, the Go vemo r re tumed SB 69 a n d AB 9 8 to the Le gislature without his

signature, thereby vetoing the Legislature's budget bill. In the accompanying message, th e Governor

commen ded Demo crats in the Legislature for "their tremen do us e f forts to balance the budget in the

absence of Republican cooperation," specif ically re ferencing their "valiant e f forts to a d d r e s s

Califom ia's budge t crisis by en acting $11 bill ion in pain ful cuts and other solufions." (Governo r 's

Veto Message to Assembly on AB 98 (June 16, 2011), Assem. J. (2011-12 Reg. Sess.), p. 1984

[attached as Exh. 6 to Plaintif fs ' RJN].) The Go vemo r expressed his concern, however, that the

budget submitted to him did not contain an equitable mixture of both spending cuts and re venue

increases — what he referred to as " a balanced solution " to the state's structural deficit — and that,

a s a result, "[i]t con tinues big de ficits for years to come and adds billion s of dollars of new debt. .. .

[Tl] We ca n — a n d must — do better." (Ibid.f

' A B 98 'S subject, as declared in its fitle, was: "A n act to amend and supplement the Budget

Act of 2011 . . . to take effect immediately. Budget Bil l . " The Legislative Counsel's Digest for

AB 98 explained that "SB 69 . . . would make appropriations for support of state govemment for the

2011-12 fiscal year," and "[AB 98] would make revisions to those appropriations." (AB 98 (2011 -12

Reg. Sess.).)

^Contrary to the Controller's characterization, the Govemor's veto message d id not indicate

that he believed that the Legislature's June 15 budget bill was not "balanced" in accordance vvithProposition 58's formula. Rather, using the same terminology that he had consistently employed in

describing the "budget solutions" he proposed for addressing the state's ongoing deficits, the

Governor bemoaned that due to the Republicans' continuing refusal to allow the electorate to vote

on extending certain temporaiy taxes, the Legislature's budget bill d id not include an appropriately

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Five days later, on June 21, 2011, Defendant State Controller John Chiang issued his own

press release in vvhich he announced that, pursuant to his office's "review of the recently-passed

budget," he supposedly "found components that were miscalculated, miscounted or unfinished.The

numbers simply did not add up, and the Legislature vvill forfeit their pay until a balanced budget is

sent to the Governor." (Press Release of State Controller .lohn Chiang (June 21, 2011), p. 1

[attached as Exh. 10 to Plaintiffs' RJN].) Despite acknowledging that "[njothing in the Consfitution

or state law gives the State Controller the authority to judge the honesty, legitimacy, or viability of

a budget," the Controller contradicted that principle in the very next sentence by asserting the right

to "determine vvhether the expected revenues wi l l equal or exceed plarmed expenditures in the

budget, as required by Article 4, Section 12(g) of the Constitution." (Ibid.) Controller Chiang

opined that "the recenfiy-vetoed budget committed the State to $89.75 billion in spending, but only

provided $87.9 billion in revenues, leavingan imbalance of $1.85 billion." (Ibid.) In particular, the

Controller objected that "[t]he June 15 budget underftinded education by more than $1.3 billion,"^

and he faulted the budget for "count[ing] on $320 million in hospital fees, $103 million in taxes on

managed-care plans, and $300 million in vehicle registrationcharges," even though "the Legislature

never passed the bills necessary to collect or spend those funds as part of the State budget." (Id.,

p. 2.)

The Controller did not provide any detailed analysis as to how he had reached his

conclusions, but his press release referenced and attached the "Controller's Proposition 25 Budget

Analysis," vvhich identified four specific revenue-generating bills that were considered by the

"balanced" combination of spending cuts and revenue increases, which would result in renewed

deficits in future years owing to a chronic revenue shortage. (See, e.g.. Governor's Budget Summary

- 2011-12, p. 5 ["the Governor proposes a balanced approach to close the budget gap," including

"$26.4 billion in spending cuts, revenues and other solutions to balance the budget this year and into

the future"], attached as Exh. 7 to Plaintiffs' RJN; Governor's 2011-12 Budget Presentation Slides,

pp. 5-6 ["Budget Takes a Balanced Approach" with "Proposed Budget Solutions" divided into 47%

"expenditure reductions" and 46% "revenues"], attached as Exh. 8 to Plaintiffs' RJN; Governor's

Budget, 2011 -12 May Revision, p. 2 ["The Govemor's Budget identified a $35.4 billion gap between

revenues and spending and proposed to bridge the gap through a balanced combination of spending

cuts and tax extensions."], attached as Exh. 9 to Plaintiffs' RJN.)

The Controller conceded that such "underfunding" would be permissible i f Proposifion 98

were suspended, but noted that the suspension would require a tvvo-thirds vote ofthe Legislature.

PLAINTIFFS' M E M O OFPOINTS & AUTHORITIES ISOMOTION FOR JUDGMENT ON PLEADINGS



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Legislature in der iving its reve nue e stima te, but which ha d n o t ye t been en a cted as of the date of the

budget bill's passage.^ (Id., p. 3.) The Controller a lso a d d e d in a n additional $1,478 billion to the

Legislature's "expenditures" to account for the supposed "unde rfunding" o f education. Finally, th e

Controller added $770.1 mill ion in "expenditures" for something he enf i t led "Liquidaf ion of

Encumbran ces," w ithout explaining what that f igure wa s supposed to represent. The Controller

relied on these alleged "miscalculations" to con clude tha t the Legislature's June 15, 2011, budget

bill d id not mee t the requiremen ts of Proposition 58 . (Id., p. 1.) The Con troller then d eclared the

legislators' payand l iving expenses to have been for fe i ted f rom June 16 until "the day that the

budget bil l is presented to the Govern or." (Ibid .)

In the meantime, the Legislature was busy reconsidering the budget bill fol lowing its return

from the Govemor. On June 28, 2011, the Senate and Assembly enrolled and presented to the

Governor SB 87 — a new budget bill fo r the 2011-12 fiscal year. On June 30, 2011, the Govemor

signed the Legislature's budget bill and enacted the 2011-12 Budget Act into law.

A R G U M E N T

In a declaratory relief action, a motion for judgment on the pleadings is an appropriate means

of obtaining an adjudication of the rights of the parties when those rights can be determined as a

matter of law from the face of the pleadings and judicially noticeable matters. (Code Civ. Proc, §

438, subd. (d); see Schabarum v. California Legislaiure (1998) 60 Cal.App.4th 1205, 1216 ["The

standard for granting a motion for judgment on the pleadings is essentially the same as that

applicable to a general demun-er, that is, under the state of the pleadings, together with matters that

The four such bills singled out by the Controller included tw o pending Senate bills, one of

vvhich was a budget trailer bill, and two pending Assembly bills, both of which were related to the

budget. Although the Controller added the estimated revenue impact of these bills to the"expenditures" column in his analysis of the budget, the basis for his objection vvas that the addifional

revenues that they were projected to produce could not reliablybe counted on, so the amounts should

actually have been subtracted from the "revenues" column instead. Doing so, however, would have

blatantly exposed the fact that the Controller vvas doing nothing more than second-guessing the

Legislature's estimate of General Fund revenues fo r the upcoming fiscal year.

The Controller a lso identi f ied one additional Sena te bil l that would, w hen passed, cost the

state $94 million. The Con troller s imilarty e rron eously categorized this ad dif ion al projected

"savings" as additional "revenues" in his analysis. (Ibid.)

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may be judicially noticed, it appears that a party is enfitled to judgment as a matter of law."]. ) Where

the answer raises no material issues of fact and states no valid defense to the acfion, the plain t i f f i s

entified tojudgment on the pleadings. (Knoffv. Cityelc. ofSan Francisco (1969) 1 Cal.App.3d 184,

200.)

In this case, the pleadings establish the existence of an important and ongoing legal dispute

between the Legislature and the Controller regarding their respective rights and duties under the state

Constitution. As exemplified by his actions with respect to the FY 2011-12 budget, the Controller

asserts the right to review the Legislattire's estimate of General Fund revenues and appropriations

as set forth in the annual budget bill, to make his own assessment of whether the budget bill passed

by the Legislature complies vvith article IV , section 12, subdivision (g), and to unilaterally enforce

his opinion by deeming the salaries and expenses of the Members of the Legislature to have been

forfeited pursuant to subdivision (h) of that section. As we show below, however, the Controller is

misinteipreting and incorrectly applying these constitutional requirements, and heexceeds his l awful

authority and violates the separation of powers doctrine by interjecting himself in this manner into

the budget process, which the Constitution declares to be the exclusive responsibility of the

Legislature and the Governor.

I . THE L E G I S L A T U R E C O M P L I E S W I T H A R T I C L E IV, S E C T I O N 12,S U B D I V I S I O N (G), OF T H E C O N S T I T U T I O N W H E N IT S E N D S THEG O V E R N O R A B U D G E T B I L L P R O P O S I N G G E N E R A L F U N DA P P R O P R I A T I O N S T H A T , W H E N C O M B I N E D W I T H E X I S T I N GG E N E R A L F U N D A P P R O P R I A T I O N S AND ANY T R A N S F E R S TO T H EB U D G E T S T A B I L I Z A T I O N A C C O U N T , DO NOT E X C E E D THEL E G I S L A T U R E ' S E S T I M A T E O F G E N E R A L F U N D R E V E N U E S F O R T H EF I S C A L Y E A R

As set forth above, article IV , section 12, subdivision (g), of the Constitufion, added by

Proposition 58, provides that the Legislature may not send to the Govemor a budget bill that would

appropriate from the General Fund a total amount that, when combined with (1) all previous General

Fund appropriations already made for that fiscal year as of the date of the budget bill 's passage and

(2) the amount of any General Fund moneys transferred to the Budget Stabilization Account for that

fiscal year, exceeds the Legislature's estimate of General Fund revenues for that fiscal year as ofthe

date of the budget bill 's passage. (See pp. 5-7, supra.) Proposition 58 thus imposes a very specific

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limitation on the Legislature's budgetary prerogative: The Legislature must make and set forth in the

budget an estimate of General Fund revenues for the coming fiscal year, and the General Fund

appropriations proposed by the budget bill , when combined with the two amounts noted above,

cannot exceed that estimate. Pursuant to the plain meaning of the Constitution, when the Legislature

passes and sends to the Govemor a budget bill that complies with this specific condifion, the

requirements of article IV , secfion 12, subdivision (g), are satisfied.

The Controller does not dispute that, on its face, the 2011-12 Budget Bill enacted by the

Legislature on June 15, 2011, complied with Proposition 58's requirement. The Legislature

estimated that General Fund revenues for the 2011-12 fiscal year would be $87,803 billion (see

AB 98 (2011-12 Reg. Sess.), § 426 [amending SB 69, § 35.50]), and the amount of General Fund

appropriations proposed by the budget bill , when combined with General Fund appropriations made

by existing law for that fiscal year as of the date ofthe budget bill 's passage, totaled approximately

$86,550 billion — leaving a budgetary "reserve" of more than $1,252 billion. (See Controller's

Proposition 25 Budget Analysis [comparing estimated "expenditures" of $86,550,700,000 with

"revenues" of $87,803,000,000].) Yet the Controller took it upon himself to go beyond the

Legislature's calculations and conducted his own analysis of both the budget and the Constitution's

requirements, "adjusting" the Legislature's estimated revenues and expenditures by some $3 billion

and concluding that the Legislature's pay must be forfeited because this revised budget allegedly did

not satisfy article IV , secfion 12, subdivision (g). In doing so, the Controller both misinterpreted the

consfitutional requirements and unlavvfully interfered with a function exclusively assigned to the

Legislature.'

'The provision upon which the Controller relied to deem the Legislature's pay to be forfeited— article IV , section 12, subdivision (h) — provides for the forfeiture of legislators' salary and

expense reimbursements "in any year in which the budget bill is not passed by the Legislature by

midnight on June 15." That provision, which was added to the Constitufion by Proposition 25

specifically in order "to end budget delays . . . by requiring legislators to forfeit their pay i f the

Legislature fails to pass the budget on time" (Proposition 25, § 3, subd. (1) [Purpose and Intent]),

contains no statement that its forfeiture penalty also applies to an asserted violation of article IV ,

section 12, subdivision (g)'s separate requirement that the budget bill be "balanced" in accordance

vvith its prescribed formula. The Court need not resolve the issue of vvhether the Controller

incorrectly applied Proposifion 25's forfeiture penalty to an asserted violation of section 12,

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Under the express terms of article IV, section 12, subdivision (g), the "balancing"

requirement of that constitutional provision is satisfied vvhen the Legislature's estimate of General

Fund revenues for the coming fiscal year exceeds the combined total of three specific amounts:

(1) the appropriations from the General Fund for that fiscal year proposed in the budget bill itself;

(2) "all appropriations from the General Fund for that fiscal year made as of the date of the budget

bill 's passage"; and (3) "the amount of any General Fund moneys transferred to the Budget

StabilizafionAccount for that fiscal year."'" The Legislature's June 15th budget was indisputably

"balanced" according to this fonnula. The Controller nevertheless asserted that components of the

Legislature's budget were "incomplete" because in some instances the Legislature's revenue

estimates anticipated the passage of "trailer bills" that had not yet been enacted, and in other

instances the budget did not include appropriations that, in the Controller's view, would have to be

made in the future. None of the Controller's objections, however, finds any support in the very

specific language and requirements of the Constitution.

For example, the Controller faulted the Legislature for including$320 million in anticipated

revenues from a newhospital fee proposed in SB 335, even though that legislation had not yet been

enacted as of the date of the budget's adoption." But nothing in secfion 12, subdivision (g),

prohibits the Legislature from including in its estimate of General Fund revenues for the coming

fiscal year moneys that it believes wil l be generated as a result of the enactment of "trailer bills" like

SB 335. Indeed, it could hardly be otherwise, for under the single-subject rule of article IV,

secfion 9, the Legislature is constitutionally prohibited from including in the budget bill itself tax

subdivision (g), under the present circumstances, however, because — for the reasons discussed

herein — the Legislature unquestionably complied with the requirements of section 12,

subdivision (g), in timely enacting the June 15, 2011, budget bill .

'"For the 2011-12 fiscal year, the amount transferred to the Budget Stabilization Account was

zero, for the Governor had suspended the transfer requirement by executive order, in accordance witharticle X V I , section 20, subdivision (e). (See Executive Order B-07-11 (May 31,2011) [attached as

Exh. 11 to Plainfiffs' RJN].)

"SB 335, introduced on Februaiy 15, 2011, imposed a "quality assurance fee" on certain

hospitals. The Legislaturepassed the bill on August 29,2011, in a form structured to generate $320

million in revenues, and it was signed into lavv by the Governor on September 16, 2011. (See

Plaintiffs' RJN, Exh. 3.)

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increases, revenue enliancements, or other substantive changes to law that might be needed to fund

the bill 's appropriations or to implement the spending prionties refiected in the budget.' Thus, in

arrivingat its estimate of General Fund revenues for the fiscal year, the Legislature must necessarily

take into account the existence of "trailer bills" that have not yet been enacted at the time of the

budget's adoption. And as section 12, subdivision (g), recognizes, only the Legislature is

empowered to assess the likelihood that these pending bills wil l be passed and to project the impact

of their adoption on ftiture revenues.'

In short, pursuant to the plain meaning of the Constitution, the Controller's conclusion that

the June 15th budget bill violated article IV , section 12, subdivision (g), vvas erroneous as a matter

of law. The only constraint imposed by that consfitufional provision on the Legislature's discretion

in adopting the budget bill is that the amount of appropriations from the General Fund proposed in

the budget bill , vvhen combined with the appropriations already made from the General Fund for that

' Likewise, until the budget bill has been enacted into law, the Legislature is generally

prohibited from sending to the Governor for consideration "any bill appropriating ftinds for

expenditure during the fiscal year for which the budget bill is to be enacted." (Art. IV, § 12,

subd. (c)(4).) The "trailer bills" that enhance revenues, adjust program benefits, or make other

substanfive changes in lavv to implement the budget bill , as expressly addressed in article IV by

Proposifion 25, are "bills providing for appropriafions related to the budget bil l ," and thus aregenerally subject to this restriction. (See art. IV , § 12, subds. (d) & (e).)

'•'Conversely, the Controller also took the Legislature's budget bill to task for allegedly not

appropriating enough money from the General Fund to cover certain state spending needs or

obligations that he believed would arise in the future. (See Controller's Proposition 25 Budget

Analysis, supra [June 15 budget underftinded Proposifion 98 requirement by more than $ 1.3 billion;

June 15 budget assumes $209 million savings from more-efficient correcfional administration at the

local level].) By its explicit temis, however, section 12, subdivision (g)'s "balanced budget' formula

does not include consideration of General Fund appropriations for the fiscal year that are neither

proposed in the budget bill nor "made as of the date of the budget bill 's passage." Again, this is for

good reason: Whether the supposedly "underfunded" spending obligations identified by theController would in fact require that General Fund appropriations be made in the future is entirely

speculative, as it hinges upon what trailer bills may yet be passed by the Legislature (e.g., a statutory

reduction of benefits under an existing state spending program) or upon any of myriad other actions

that the Legislature might take to address the alleged shortfall (such as suspension of the

Proposition 98 spending obligation). The critical point is that Proposition 58's formula is concemed

with the amount of General Fund appropriations that the Legislature has either proposed in the budget

bill or has already authorized by law to be spent on the enumerated programs as ofthe date of the

budget bill 's passage, not vvith vvhether the Controller or anyone else believes that additional funds

should be appropriated in the future to meet the state's needs.

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fiscal year as of the date of the budget bill's passage, must not exceed the Legislature's estimate of

revenues for the coming fiscal year. Such a limitation on the Legislature's law-making authority

under the Constitution must be strictly construed. As the Court emphasized in Pacific Legal

Foundation v. Brown (1981) 29 Cal.3d 168:

" I f there is any doubt as to the Legislature's povver to act in any given case, the doubtshould be resolved in favor of the Legislature's action. Such restrictions andlimitations [imposed by the Constitution] are to be construed strictly, and are not tobe extended to include matters not covered by the language used." (Id. at p. 180[citations omitted; emphasis in original].) ' ' '

When the General Fund appropriation amounts specified by section 12, subdivision (g), do

not exceed the Legislature's estimate of General Fund revenues set forth in the budget bill — as was

the case with the Legislature's June 15, 2011, budget — that constitutional requirement has been

satisfied, plain and simple. The Controller therefore went beyond the limited terms and restrictions

imposed by the Constitution by adding into his budget calculation hundreds of millions of dollars

in "appropriations" that had not been made by the Legislature at the time ofthe budget bill 's passage,

and by removing from the Legislature's estimate of future revenues hundreds of millions of dollars

of funding that was projected for the coming fiscal year as a result of pending, but not yet enacted,

legislafion.

More fundamentally, section 12, subdivision (g), grants the exclusive authority for

determining the estimate of General Fund revenues to the Legislature, and it neither sets forth any

criteria that could be said to restrict the Legislature's discretion in the preparation of that revenue

estimate, nor does it assign to any other officer or agency any role in reviewing the validity of the

Legislature's projection. It has long been established that "[t]he enactment of a budget bill is a

legislative function; it is both a right and a duty that is expressly placed upon the Legislature and the

'''This rule of strict construcfion applies fully to constitutional inifiatives such as

Proposition 58:

"The rule has so long been such an integral part of our system of constitutional

adjudication that anyone drafting a proposed constitutional amendment must be

presumed to act in light of it. For such a person the rule can be simply stated: To the

extent you intend to restrict the Legislature's exercise ofthe legislative prerogative,

you must do so by clear and unequivocal language." (Schabarum v. California

Legislature, supra, 60 Cal.App.4th at p. 1218 fn. 6.)

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Governor by our state Constitution." (Schabarum v. California Legislature, supra, 60 Cal.App.4th

at p. 1214; see, e.g., art. IV , § 12, subd. (f) ["The Legislature may control the submission, approval,

and enforcement of budgets . . . ."].) The Legislature's exclusive constitutional responsibility for

adopting the budget is refiected in section 12, subdivision (g)'s explicit declarafion that the "estimate

of General Fund revenues shall be set forth in the budget bill passed by the Legislature." Notably

absent in that subdivision or elsewhere in the Consfitution is any provision empowering the

Controller to review the Legislature's exercise of its constitutional authority and to substitute his

own judgment for that of the Legislature with respect to the budget bill 's estimate of General Fund

revenues.'

To the contrary, the courts have steadfastly held that when the policymaking role of the

Legislature necessitates that it engage in certain fact-finding processes as "an indispensable incident

and auxiliary to the proper exercise of the legislative power," it is not the function of any other

branch of government — includingeven the judiciaiy — to reweigh or to question the validity of the

Legislature's detenninations. (Schabarum v. California Legislature, supra, 60 Cal.App.4th at

p. 1219.) As the Supreme Court admonished more than a century ago:

"When the right to enact a law depends upon the existence of facts, it is the duty of

the legislature, before passing the bill, and of the govemor before approving it , tobecome satisfied in some appropriate way that the facts exist, and no authority isconfeiTed upon the courts to hear evidence, and detemiine, as a question of fact,whether these co-ordinate departments of the state government have properlydischarged such duty. The authority and duty to ascertain the facts which ought tocontrol legislative action are, from the necessity of the case, devolved by theconstitution upon those to whom it has given the power to legislate, and theirdecision that the facts exist is conclusive upon the courts, in the absence of anexplicit provision in the constitution giving the judiciary the right to review suchaction." (Steven.son v. Colgan (1891) 91 Cal. 649, 652.)

Pursuant to article IV , section 12, subdivision (g), it is the constitutional responsibility of the

Legislature, before passing the budget bill, to estimate General Fund revenues for the coming fiscal

year and to satisf)' itself that the aniount of the budget bill's appropriations from the General Fund,

when combined with all previous appropriations made from the General Fund for that fiscal year as

' Indeed, even the Governor, who has the authority under the Constitution to veto a budget

bill in its entirety or to "reduce or eliminate one or more iteins of appropriation''' (art. IV, § 10,

subd. (e) [emphasis added]), has no power to increase, reduce or eliminate the Legislature's estimate

of General Fund revenues set forth in the budget bill.

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1 of the date of the budget bill's passage, as well as any General Fund moneys transferred to the

2 Budget Stabilization Account, do not exceed those projected revenues. This is precisely the type of

3 "legislative factfinding" that has been held to be immune from review by one of the other branches

4 of government. If , on its face, the budget bill complies with the requirements of article IV , section

5 12, subdivision (g), "the court wil l not go behind it, and, by a resort to evidence, undertake to

6 ascertain vvhether the legislature, in its enactment, observed the restrictions which the constitution

7 imposed upon it as a duty to do, and to the perfomiance of which its members were bound by their

8 oaths of office." (Stevenson v. Colgan, supra, 91 Cal. at pp. 652-653.) I f the courts have no povver

9 to consider addifional evidence or to go behind the Legislature's determinafion that the budget bill

10 is "balanced" in accordance with Proposifion 58's terms, a fo r t io r i the Controller has no authority

11 to do so, either. (See Schabarum v. California Legislature, supra, 60 Cal.App.4th at p. 1219 ["It is

12 not the judiciary's funcfion, however, to reweigh the 'legislative facts' underlying a legislative

13 enactment."] [citation omitted].)

14 Significantly, although the Controller apparently found it politically expedient in June 2011

15 to challenge the Legislature's revenue projections and to make his own assessment of the budget

16 bill's compliance with the Constitution's requirements, barely four months earlier his office had

17 insisted that he had neither the competence nor the legal responsibility to undertake such tasks. In

18 December 2010, Assembly Member Nestande introduced Assembly Constitutional Amendment

19 No. 13 ("ACA 13"), which proposed to amend article IV , secfion 12, subdivision (g), to require that

20 the estimate of General Fund revenues set forth in the annual budget bill be made by the Controller,

21 rather than by the Legislature, and to require the Controller to certify, within tliree days after a budget

22 bill was sent to the Governor for consideration, whether the bill safisfied the requirements of that

23 subsection. (See ACA 13 [attached as Exh. 12 to Plaintiffs' RJN].) The very fact that Assembly

24 Member Nestande recognized that a constitutional amendment was needed in order to provide the

25 Controller with this authorityonly confirms, of course, that the Controller lacks such authorityunder

26 existing lavv. But even more telling vvas the Controller's response to the proposal: In a February 7,

27 2011, transmittal to Assembly Member Nestande's office, the Controller objected that "[t jhis bill

28 requires the State Controller's Office (Controller) to perform functions fo r which no expertise exists

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within cuirent staffing levels, and these functions are not current responsibilities of the

Controller.'" (Controller's Analysis of ACA 13, p. 1 [emphasis added] [attached as Exh. 13 to

Plaintiffs' RJN, p. 1].) The Controller went on to explain that his office did not have sufficient

historical data to be able to provide accurate estimates of General Fund revenues for each fiscal year,

that representafives of the Controller's office would need to be included in all legislative meetings

discussing bills that might have an impact on the General Fund in order to gauge their impacts on

the current or upcoming budget bill , and that "[t]o accomplish these tasks, 34 full-t ime and 10 three-

year limited-temi positions would be required," at an estimated cost of more than $6 million per

year. ( M , pp. 2-3.)'

In short, the Controller had it right in February 2011, and he got it wrong four months later

in June: As demonstrated by the Controller's erroneous interpretation and application of section 12,

subdivision (g), to the FY 2011-12 budget bill , he does not have either the factual basis or the

necessary expertise to determine whether the budget bill passed by the Legislature complies with that

section's requirements. More importantly, he does not have the legal authority to do so — at least

in the absence of a constitutional amendment that would give that responsibility to the Controller.

II . T H E C O N T R O L L E R HAS NO A U T H O R I T Y TO S E C O N D - G U E S S T H E

L E G I S L A T U R E ' S B U D G E T E S T I M A T E S AND TO D E E M THEL E G I S L A T U R E ' S PAY TO BE F O R F E I T E D B A S E D U P O N HIS OWNA N A L Y S I S OF W H E T H E R THE B U D G E T B I L L S A T I S F I E S THEC O N S T I T U T I O N ' S R E Q U I R E M E N T S

In addition to having misinterpreted the specific requirements imposed on the Legislature's

enactment of the budget bill by the Constitution, the Controller exceeded his authority by interjecting

himself into the budget-making process at all , and he violated the separation of powers doctrine by

deeming the Legislature's pay to be forfeited based upon his own analysis and adjustment of the

Legislature's budget calculations. As noted above, article IV , section 12, of the Constitufion assigns

the responsibility for adopfing a budget in compliance vvith its provisions to the Legislature and the

Governor, and neither the Consfitufion nor any statute grants the Controller's office any role in that

process, much less the power to declare the Legislature's pay to be forfeited based upon the

'*ACA 13 was referred to the Assembly Committee on Budget in April 2011, but has not been

scheduled for hearing by the Committee.

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Controller's unilateral determination that section 12, subdivision (g)'s requireinents allegedly were

not satisfied.

The Controller, like other state officers and agencies, has only those powers that have been

conferred on him by the Constitution or statute, either expressly or by implication. The Constitution

follows what has been characterized as "a minimalist approach" in defining the Controller's powers,

that is, "i t provides for the office but primarily leaves it to the Legislature to define the duties and

funcfions ofthe Controller." (Tirapelle v. Davis (1993) 20 Cal.App.4th 1317, 1327.) The only

explicit mention of the Controller's general dufies in the Constitufion is found in article X V I ,

section 7, vvhich provides: "Money may be drawn from the Treasury only through an appropriation

made by law and upon a Controller's duly drawn warrant."' The Govemment Code declares that

the Controller "shall superintend the fiscal concems of the State . . . and may audit the disbursement

of any state money, for correctness, legality, and for sufficient provisions of law for payment." (Gov.

Code, § 12410.) Govemment Code section 12440 also provides that "[t]he Controller shall draw

warrants on the Treasurer for the paynient of money directed by law to be paid out of the State

Treasury; but a warrant shall not be drawn unless authorized by law, and unless . . . unexhausted

specific appropriafions provided by law are available to meet it."

Significanfiy, neither the Constitufion nor any statute expressly assigns the Controller any

role in the budget process. In particular, the Controller is given no authority to review the

Legislature's estimate of General Fund revenues for the coining fiscal year as set forth in the budget

bill, to make his own determination as to vvhether the budget bill passed by the Legislature complies

with article IV , section 12, subdivision (g), or to unilaterally deem the salaries and expenses of the

Members of the Legislature to have been forfeited pursuant to subdivision (h) of that section. Nor

can any of these powers be inferred from the Controller's general constitutional and statutory

authority to "superintend the fiscal concerns of the State" and to "draw warrants on the Treasurer for

"The Constitution also provides that the Controller is a member of the Board of Equalization

(art. XIII , § 17), and it assigns him certain duties regarding the transfer and allocation of revenues

to the State School Fund (art. X V l , §§ 8, 8.5.) Beyond that, however, all of the Controller's

responsibilities are set by statute, and "[t]he Legislature has wide discretion in defining the duties and

functions of the office." (Tirapelle v. Davis, supra, 20 Cal.App.4th at p. 1327 [citations omitted].)

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PLAINTIFFS' M E M O OF POIN TS & AUTHORITIES ISO M O T I O N FOR JUDGMENT ON PLEADINGS



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the paynient of money directed by law to be paid out of the State Treasury."

To the contrary, it has long been held that the Controller's responsibility to draw vvaiTants

fo r the expenditure of state ftinds does not include the authority to ascertain the validity of the

payment. Rather, "[t]he Controller's authority is generally said to be ministerial when the ainount

of an expenditure is set by lavv or entrusted to the discretion of another agency or branch of

government." (Tirapelle v. Davis, supra, 20 Cai.App.4th at p. 1329 ; accord, Gilb v. Chiang (20\0)

186 Cal.App.4th 444, 464.) In one of its earliest decisions examining the scope of the Controller's

authority, McCauley v. Brooks (1860) 16 Cal. 11 , the Supreme Court held that a writ of mandate

should issue compelling the Controller to issue certain warrants to a lessee who had entered into a

contract vvith the state pursuant to a stattite that gave the lessee the right to demand and receive

warrants from the Controller for the monthly payments named in the contract. Th e court in Tirapelle

V. Dcjvis described what happened next in the McCauley case:

"On petition fo r rehearing the Controller claimed an independent right which couldnot be controlled by mandate to determine the propriety of expenditures. The courtissued a lengthy opinion denying the petition for rehearing in order to rejectarguments of the Controller that the court regarded as 'preposterous' and'pernicious.' (16 Cal. at pp . 57, 64.) In its discussion the court pointed out that i f theController is vested with such independent authority then so also must be otherofficers such as the Treasurer, Secretary of State and the Govemor. (Id. at pp. 60-61.)

There would be nothing that would preclude the Treasurer from insisting upon theright to independently review and refuse to honor the warrants of the Controller, orthat would preclude the Secretary of State from reftising to perform the duties of thatoffice, such as certifying appointments and/or elections. (16 Cal. at pp . 60-61.) . . .I f this doctrine can be maintained, the government must cease to be one of law, andmust sink into merited contempt for its weakness and inefficiency. (Id. at p. 61.)"(Tirapelle v. Davis, supra, 20 Cal.App.4th at pp . 1330-1331.)'

'^As is obvious from the quoted passage, the Court in McCauley f imi ly rejected any notion

that the Controller had the independent authority to determine the validity of a legislative act or that

he could refuse to make payments to state officials based on his belief that they had not properlyperformed their duties:

"[The Controller's]duties are enumerated anddefined by the law, and they are, as we

have said, generally ofa purely ministerial character. He has no discretion as to the

issuance of warrants fo r appropriations fo r the public service. He cannot refuse his

warrants for the salaries of the Govemor and Judges, upon any notions that such

matters rest in his discretion, and that in his judgment those officers have not

performed their duties. . . . But ifhe cannot do this in the cases supposed, he cannot

do it in any case where a specific ministerial duty is enjoined." (16 Cal. at p. 55.)

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Similarly, in Stevenson v. Colgan, supra, 91 Cal. 649, and Rankin v. Colgan (1891) 92 Cal.

605, the Court reaffirmed that the Controller could notsecond-guess the validity of the Legislature's

actions and reftise to make paynients for sums appropriated by the Legislature on the asserted ground

that the Legislature had acted unlavvfully in appropriating the ftinds. The Court emphasized that

neither the Controller nor the courts had the authority to determine "vvhether the legislature, in

passing the statute, properly discharged its duty by the preliminary ascertainment of facts which

alone would jusfify such legislafive acfion." (Stevenson v. Colgan, supra, 91 Cal. at p. 652; accord,

Rankin v. Colgan, supra, 92 Cal. at pp. 606-607 ["We must presume that the legislature before

passing the act, and the govemor before approving it , made inquiry as to the nature of the services

for which the petitioner claimed conipensation, and found that the claim was legal and just ."] ; cf

Gilb V. Chang, supra, 186 Cal.App.4th 444 [Controller has no authority to disregard Department of

Personnel Administration's pay directive based upon his belief that it was contrary to law]; Tirapelle

V. Davis, supra, 20 Cal.App.4th 1317 [same].)

So, too, in the presentcontext, the Controller's largely ministerial duties in no way authorize

him to conduct his own review of the budget bill passed by the Legislature, to take issue with the

revenue and appropriation estimates made therein by the Legislature, and to make his own

determinafion that the budget bill is not properly "balanced" in accordance with article IV,

section 12, subdivision (g) — much less to refuse to issue warrants for the Legislature's pay based

upon his belief that it did not properly perform its duties under that constitutional provision. As is

discussed in the previous section, the responsibility for enacting the budget bill is expressly

committed by the Constitution to the Legislature and the Govemor, and vvith that responsibility the

Constitution likewise confers upon them — not upon the Controller — the exclusive responsibility

and duty to engage in the "legislative factfinding" regarding estimated revenues and appropriations

that supports enactment of the budget. (See Schabarum v. California Legislature, supra, 60

Cal.App.4th at p. 1219 ["[t]he povver to determine the facts upon vvhich appropnations are based

rests exclusively in the legislative and executive branches of the govemment' and " [ i ] f the validity

of a statute depends on the existence of a certain state of facts, it w i l l be presumed that the

Legislature has investigated and ascertained the existence of that state of facts before passing the

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law"] [citations omitted].)

Indeed, because the passage of a budget bill is a quintessential legislative function, the

Controller's uninvited intrusion into the budgetary process — asserting a right to review and to

unilaterally decide whether the Legislature's budgetary detenninations are valid — constitutes an

unconsfitutional usurpation of legislafive authority in violafion of the separation of powers clause

of the state Constitution. Article III , section 3, declares: "The powers of state govemment are

legislative, executive, and judicial. Persons charged with the exercise of one power may not exercise

either of the others except as permitted by this Constitution." In its most fundamental application,

"[t]he separation of powers doctrine limits the authority of one of the three branches of government

to an-ogate to itself the core functions of another branch." (Carmel ValleyFire Protection Dist. v.

State of California (2001) 25 Cal.4th 287, 297.) But the doctrine also prohibits the intermeddling

by one branch of govemment in the constitutional responsibilities of another: "usurpation includes

unwan-anted intmsion into the roles of those [other] branches." (Schabarum v. California

Legislature, supra, 60 Cal.App.4th at p. 1213.)

Here, the Controller's assertion ofthe right to pass judgment on the validity of the budget bill

passed by the Legislature — and to enforce his opinion by deeming legislators' pay to be forfeited

— not only arrogates to his executive branch office one of the core functions, if not the core

function, of the legislative branch, but it does so in a manner that severely disrupts the constitutional

balance of povvers by holding the legislative budget process hostage to the whims and demands of

the Controller. A future Controller could threaten to find the budget bill to be "unbalanced" and to

withhold legislators' pay on that basis unless the Legislature agreed to revise its revenue estimate

or to limit appropriations in the budget to a certain aniount demanded by the Controller, or — worse

yet — unless the Legislature agreed to include or exclude an appropriation for a particular prograni

that the Controller either favored or opposed; armed with the asserted authority to impose the drastic

sanction of forfeiting the legislators' salary and expenses until they passed a budget that he found

acceptable, the Controller would wield tremendous leverage in the budget process. Whether

mofivated by partisan or self-serving political interests, or whether acting in a good-faith belief that

the Legislature's budget projections were unduly opfimistic, the bottom line is that the Controller

24




would be insinuating himself into a proces s in which he constitutionally does not belong — the

2 budget deliberations and decisionmaking of the legislative branch. The separation of powers clause

3 ofthe state Constitution flatly prohibits such an unwarranted intrusion into the legislative function.

4 C O N C L U S I O N

5 For the reasons and upon the authorities cited above, this Court should enter judgment in

6 favor of Plaintiffs, declaring that (1) the Legislature complies with article IV, section 12,

7 subdivision (g), of the Constitution when it sends the Govemor a budget bill that, on its face,

8 proposes General Fund appropriations that, in combination with all previous General Fund

9 appropriations made for that fiscal year as of the date of the budget bill 's passage and any General

10 Fund moneys transferred to the Budget Stabilization Account for that fiscal year, do not exceed the

11 Legislature's estimate of General Fund revenues for the fiscal year as of the date of the budget bill 's

12 passage; and (2) the Constitution assigns the responsibility for adopting a budget in compliance with

13 its provisions to the Legislature and the Govemor, and the Controller has no authority to review the

14 Legislature's estimate of General Fund revenues and appropriations for the coming fiscal year as set

15 forth in the budget bill , to make his own assessment of whether the budget bill passed by the

16 Legislature complies vvith article IV, secfion 12, subdivision (g), and to unilaterally enforce his

17 opinion by deeming the salaries and expenses of the Members of the Legislature to have been

18 forfeited pursuant to subdivision (h) of that section.

19

20 Date: March 5, 2012 Respectfully Submitted,

21

22

ARTHUR G. SCOTLAND

23 STRUMWASSER & WOOCHER LLPFredric D. Woocher

24 Giulia C. S. Good Stefani

25

26 By - t . < ^ < ^Fredric D. Woocher

27

Attorneys for Plaintiffs

28

25




P R O O F O F S E R V I C E

STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

Re: Darrell Steinberg, et al. v. John ChiangSacrainento Super. Ct. Case No. 34-2012-00117584

I am employed in the County of Los Angeles, State of Califomia. I am over the age of 18

and not a party to the within action. My business address is 10940 Wilshire Boulevard, Suite

2000, Los Angeles, Califomia 90024.

On March 5, 2012, I served the foregoing document(s) descnbed as PLAINTIFFS'

M E M O R A N D U M OF POINTS AND AUTHORITIES IN SUPPORTOFMOTION FOR JUDGMENTON T H E

PLEADINGS on all appropriate parties in this action, as listed below, by the method stated.

Kamaia D. Harris, Attoiney General of Califomia

Peter A. Krause, Supervising Deputy Attomey General

Ross C. Moody, Deputy Attomey General

455 Golden Gate Avenue, Suite 1100

San Francisco, CA 94102

Tel: (415) 703-1234 Fax: (415) 703-1234

E-mail: [email protected]

Attorneys for Defendant California State Controller John Chiang

IS I f electronic-mail service is indicated, by causing a true copy to be sent via

electronic transmission from Strumwasser & Woocher LLP's computer network in PortableDocument Format (PDF) this date to the e-mail address(es) stated, to the attention of the person(s)

named.

• I f fax service is indicated, by facsiinile transmission this date to the fax nuniber

stated, to the attention of the person named, pursuant to Code o f Ci v i l Procedure section 1013(f).

la I f ovemight service is indicated, by placing this date for collection by sending true

copies in sealed envelopes, addressed to each person as indicated, pursuant to Code of Civil

Procedure, section 1013(d). I am readily familiar with this firm's practice of collecting and

processing correspondence. Under that practice, it would be deposited vvith an overnight service

in Los Angeles County on that same day with an active account number shovvn for paynient, in theordinary course of business.

1 declare under penalty of perjuiy under the laws ofthe State of California that the above

is true and correct. Executed on March 5, 2012, at Los Angeles, California.

Leg is Filing

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