Ruling Could Block Issuance of State Checks

In a move that could jolt stalled state budget talks, a Los Angeles judge waded into the debate Thursday, handing down an order that threatens to block Controller Kathleen Connell from issuing checks after July 21.

Superior Court Judge Robert H. O’Brien, acting in a suit brought by taxpayer groups, allowed the controller to pay state workers and retired state employees for now, although there is no state budget in place.

But it was unclear whether his three-page order permits Connell to issue about $300 million in monthly checks to 2.1 million people, including 1.5 million children, on the main state welfare program known as CalWorks. The next CalWorks payment is scheduled July 14.

O’Brien’s order also left unclear whether certain health care payments for the poor in the Medi-Cal program can be made, a controller’s official said. “There are some gray areas and we are discussing them,” Connell said after the ruling, which puts new pressure on Gov. Pete Wilson and the Legislature to agree on a budget.

California’s Constitution requires that a budget be in place by July 1, the start of a new fiscal year.

State lawyers were considering asking O’Brien for clarification on whether Connell can make the welfare payments without a budget, said a Wilson administration source.

In his order, O’Brien said most recipients of state checks--including 250,000 state workers and 500,000 retired employees--are protected by past state and federal court orders requiring that they get paid, regardless of the budget’s status.

“People are going to continue working and will continue to get paid,” said Floyd Shimomura, an attorney for the state Department of Finance. “They are going to get paid on their normal payday.”

But after enumerating several groups that must be paid whether or not the budget is signed, O’Brien said: “Warrants issued for any other purpose are not allowed.” The CalWorks program, created in last year’s welfare overhaul, is not covered by any prior court order.

O’Brien scheduled another hearing July 21, a day before Connell is scheduled to issue 210,000 checks amounting to almost $900 million to the bulk of state workers.

“We’ve gotten a timeout until the 21st, when we have to appear in court and argue the merits of these issues,” Connell said, urging that lawmakers and Wilson reach an accord before the July 21 hearing.

Connell said she was “gratified” by the order, and believes that it grants her authority to make most payments.

The judge did say, however, that the controller must withhold lawmakers’ paychecks, although their next check is not scheduled until July 31. They would be paid retroactively once the budget for the 1998-99 fiscal year is signed.

Meanwhile, Wilson and the leaders of the state Senate and Assembly agreed to confer Saturday in what would be the summer’s first leadership meeting on the budget impasse.

Talks have been proceeding at an almost lackadaisical pace. Over the years, lawmakers have become accustomed to protracted budget fights, which now are almost an expected part of the Sacramento summer. Wilson has signed a budget by the constitutional deadline only once during his eight-year tenure.

No Penalty for Missed Deadline

One reason talks move so slowly is that, for the most part, state government functions with or without a budget. State parks remain open. Employees get their checks and remain on the job. The public is not inconvenienced.

The state Constitution imposes no penalty for failure to meet the July 1 deadline. However, the taxpayers suit is based on a section of the Constitution that says: “Money may be drawn from the treasury only through an appropriation made by law.”

Since the state has been without a budget since July 1, the Legislature has made no “appropriation” authorizing Connell to issue payments.

Santa Monica attorney Richard Fine, who brought the current suit on behalf of taxpayers and was joined by the Howard Jarvis Taxpayers Assn., cited that provision in a similar suit last year. But a budget deal was struck before the case was heard.

This year, he brought the action as the impasse continues.

“This is really putting the government on notice that they’ve got to pass that budget,” said Fine. “The bottom line is this is a tremendous victory. [The judge is] basically telling the Legislature that it has until the 21st.”

Fine said he interprets the judge’s order as saying that state workers who have completed their work through Wednesday will be paid, probably through July 21, when the lawyers return to court. The federal Fair Labor Standards Act requires that workers be paid when they work.

“The way I see it,” Fine said, “he’s saying that state workers who work between now and that day will probably get paid. But he is not guaranteeing that if you work on the 22nd, that you will get paid.”

Federal court rulings issued during budget impasses during the early 1990s compel the state to pay its workers as long as they remain on the job. If they work without pay, the state is subject to fines amounting to twice their pay plus interest.

Fine argued that the state placed itself in a bind by not laying off workers as the federal government does when it lacks a budget.

“The state should place all of its employees on leave, just like the federal government does,” he said.