Suit Aims to Bar Tax Collection in Budget Impasse

A group that cares for 5,000 of San Diego County’s developmentally disabled people Wednesday challenged the state’s authority to collect taxes during the budget impasse, which has frozen 80% of its funding.

The Assn. for Retarded Citizens of San Diego filed a lawsuit against the state in Sacramento Superior Court.

The association, the largest organization of its kind in the country, has had to borrow $1 million since the start of the fiscal year on July 1 to meet expenses. The group has an annual budget of $20 million and employs 650 full- and part-time staff members throughout San Diego County.

Like many organizations throughout California that provide services to the mentally and physically disabled, the association has received no money from the state for almost two months and is paying interest on loans to meet its twice-monthly payroll of $500,000.

Richard B. Farmer, executive director of ARC-San Diego, said Wednesday that he was forced to take legal action after a recent U.S. 9th Circuit Court of Appeals ruling stopped Medi-Cal payments, thus ending even the IOUs he was getting.

David Rosenberg, the Sacramento attorney for ARC-San Diego, said the state’s authority to collect tax revenue has never been challenged in the wake of a budget crisis.

“I hate to use the phrase nuclear weapon , but that’s what we’re doing,” he said. “We’re using a nuke to try to break the logjam.”

Rosenberg said the state Constitution mandates that a budget bill be passed before the fiscal year begins.

“We are now in the 50th day of not having a budget,” he said. “The Constitution says the state must have a budget and, further, that legislators cannot spend money, with minor exceptions, unless they do have a budget. Therefore, having no ability to spend, they have no ability to make money either, by collecting it through taxes.”

Rosenberg said it “wasn’t right” that lawmakers continue to receive full salaries and benefits while programs “benefiting the developmentally disabled limp along with an uncertain future.”

“The bottom line is to pry a budget out of the state,” he said. “If this persists, we believe we’re entitled to an injunction, which would stop the state from collecting taxes.”

Rosenberg said the association also seeks damages for “extra interest costs incurred” and hopes for a hearing in Sacramento Superior Court before Labor Day.

A spokeswoman for the state attorney general’s office and a spokesman for the state controller’s office declined comment on the suit Wednesday night, saying they had not had time to review it.

Farmer said San Diego Trust & Savings Bank, which has loaned him the money to maintain operations, has been “very generous, but I don’t know how much longer this can go on.” The money enables the organization to provide services such as job placement, vocational training and residential programs for about 5,000 people daily.

Rosenberg said the association is accruing about $8,000 a month in interest payments, which the state refuses to pay, with or without a budget.

Farmer said he has enough funding to continue operating until Sept. 1, by which time he hopes a budget is passed.

“I’m praying,” he said. “If not, I have to go to the bank again, and plead with them to give me another loan. Then I have to figure out how to pay the interest. The state is causing us a hardship. That hardship should not have to be borne by the handicapped people of California.”

Rosenberg said the association--the only one of its kind to have taken such an action so far--aids “epileptics, cerebral palsy victims, people who suffer from autism, the mentally retarded . . . And all of those will be deprived if this isn’t resolved soon.”

“They’ll be broke, or unemployed or homeless, and the state will be to blame. We’re having a total breakdown of the system, which has to end for the sake of these people alone. Compromise may be an ugly word to Democrats and Republicans, but it’s something they have to do, and soon.”