County Plans for Possible Fight With Hospital

As Community Memorial Hospital forges ahead with a November ballot initiative that would wrest control of Ventura County’s $260-million tobacco settlement, county government is gearing up for a potential legal fight that may ultimately decide the issue.

County officials have yet to authorize a lawsuit to block the Community Memorial initiative, but they have declared the measure unconstitutional and vowed to take their fight all the way to the state Supreme Court.

While county officials have declined to outline their plans publicly, the strategy being developed is to delay launching a legal challenge against the Community Memorial initiative until after the issue is decided by voters.

Some county officials already concede privately that Community Memorial will very likely win at the polls, in part because the county is prohibited from spending any money opposing the initiative, while Community Memorial can dole out as much as it desires.

In 1996, Ventura-based Community Memorial spent $1.6 million to successfully campaign against plans by the neighboring Ventura County Medical Center, long considered a rival, to build a $56-million outpatient center. It remains the costliest campaign in county history.

Although the county is barred from financing its own political campaign, it is free to spend virtually unlimited amounts in pursuing a battle in the courts.

Sources have told The Times that county officials have consulted with legal experts who have advised them to delay filing a challenge until after the election.

At that time, the county has been told, it will have its best chance of winning a legal test.

County officials have confirmed they have retained Fred Woocher, a Santa Monica legal expert on initiative law, as an advisor on the matter. Woocher declined to discuss his views on the legality of the proposal, citing attorney-client privilege.

In addition to preparing for a possible legal battle, the county is trying to position itself in the best public relations light possible prior to the election by offering what might strike voters as reasonable compromises to the Community Memorial initiative.

Community Memorial wants to transfer control of the county’s $260-million tobacco settlement to seven local private hospitals, including Community Memorial. Backers of the initiative argue that county officials cannot be trusted to spend the tobacco money on health care, noting the county has yet to commit any funds for this purpose.

Chief Administrative Officer Harry Hufford and other county officials recently met with representatives of each hospital to try and hammer out a compromise agreement. Negotiations are ongoing, but county officials anticipate Community Memorial would reject any deal that would involve less than all of the tobacco money.

If Community Memorial’s ballot initiative is successful, officials warn it would be precedent-setting, an invitation for other private groups to seek subsidies from counties’ tobacco money, other financial awards or even general taxpayer funds.

“It would put government across California in jeopardy,” Ventura County Supervisor John Flynn said. “Think about it. Any money that goes into a county treasury or a city treasury could be lifted out through initiative.”

“There’d be no end to it,” Flynn said. “Any private group could come in and say, ‘Give us all of it.’ It would create a precedent that there’s no telling how far it would go.”

Erwin Chemerinsky, a constitutional law expert at the University of Southern California, underscored Flynn’s argument, saying all counties have a stake in the fight.

“It opens the door for other initiatives to say that money goes to private hands for other purposes,” Chemerinsky said. “Think of gun lawsuits that cities are bringing. If this money can be earmarked by initiative, why can’t almost any other money be earmarked by initiative? What happens here could really influence what happens elsewhere in the country.”

At the center of the legal debate is whether a private business can use the initiative process to dip into a county’s general fund--the budget account where annual installments of the county’s share of a statewide tobacco settlement is to be deposited over the next 25 years. The county is expected to receive between $9 million and $10 million a year during this period.

Hufford, the county manager, said lawyers and state government experts around the state have told him they believe the Community Memorial initiative contradicts a state law that tells counties how to administer their budgets.

Chemerinsky said he also believes county supervisors have the exclusive right to decide how general fund money is spent.

“I think the government code requires the county to have discretionary control over its funds, and this initiative would be taking that away,” he said.

But lawyers for Community Memorial say their proposal is valid. While not disputing the supervisors’ budgetary powers, they argue the electorate also has the right to have a say in how county money is spent.

“People have the right in California to set their own priorities via the initiative process,” said Steve Merksamer, chief of staff to former Gov. George Deukmejian and a partner in the Mill Valley law firm advising the hospital. “The courts give great deference and respect to that power unless it’s patently unconstitutional.

“This is not the kingdom of Ventura. They’re saying they’re a kingdom, is what they’re saying.”

Another Community Memorial lawyer argues the tobacco settlement money--revenue received from tobacco companies, not taxpayers--is a special source of money and not part of the county’s regular general fund. For this reason, he said, those laws that govern how county money is spent do not apply.

“It’s a new source of money, not money from the state, not money from the taxpayers,” said Richard Martland, a former assistant chief attorney general and another lawyer on the hospital’s team.

“What I’m saying is this money doesn’t have a statute that governs it. Period. It’s just sitting out there, and there’s no control over it by state law, period.”

Michael Bakst, executive director of Community Memorial, has said his hospital would not have pursued the initiative if county leaders had dedicated the tobacco money to health care, one of the promises made by states when they sued tobacco companies in the 1990s.

Instead, the county has spent early installments on paying off a federal fine and plugging a shortfall in its overall budget. Although they pledge to allocate money for expanding public health care, supervisors have yet to formally commit any of the settlement funds for this purpose.

Sam Roth, vice president of the California Medical Assn., said his group opposes the Community Memorial initiative because it prevents the county hospital--which cares for most of the county’s indigent--from accessing any of the settlement funds. Community Memorial officials argue the public hospital already gets taxpayer funds to care for the indigent.

Roth said Community Memorial is a financial backer of a similar ballot proposal in Orange County, where there is no county hospital and where supervisors were poised to spend the settlement on jail construction and other uses not related to health.

“If the question is: Can voters encumber public funds, our position is: Absolutely,” Roth said. “We think obviously the public has that right to decide . . . despite how we feel about this particular measure.”

Last week the Community Memorial campaign submitted to the county registrar 38,000 voter signatures--nearly twice the number required to place its measure on the ballot. The signatures must now be validated, a process that could take several weeks.

While awaiting the outcome of Community Memorial’s efforts, the county can spend the tobacco settlement installments on whatever supervisors choose--including public health care programs.

But Hufford said the county must now be prudent about such spending.

“If this stuff is clouded with a major lawsuit, the county has to be real careful not to dig itself a big financial hole,” he said.

“We have to think about the risk of losing as well as the advent of winning.”

Times librarian John Jackson contributed to this report.