Metropolitan News-Enterprise


Friday, December 12, 2003


Page 1


State Supreme Court Declines to Review Ruling That $2 Billion Pension Bond Is Unconstitutional


From Staff and Wire Service Reports


The California Supreme Court has declined review of a lower court ruling that the state’s plan to borrow nearly $2 billion to pay for employee pensions, part of the more than $15 billion in borrowing lawmakers relied on to balance the budget, is unconstitutional.

The justices Wednesday unanimously denied a petition for writ of mandate or prohibition seeking to overturn Sacramento Superior Court Judge Thomas Cecil’s September ruling that the proposal violated a portion of the state Constitution requiring voter approval before the state can borrow more than $300,000 over several years to pay for routine spending.

“This is a significant victory for taxpayers,” Jon Coupal, president of the Howard Jarvis Taxpayers Association and a member of Gov. Arnold Schwarzenegger’s transition team, said yesterday in a statement. “It clarifies that the state constitution entrusts to the voters, not the Legislature, the responsibility of deciding whether the state should incur debt.”

The Jarvis association, represented by Coupal and the group’s legal director, Timothy A. Bittle, had contested the bond validation proceeding, arguing that the state could not stick taxpayers with responsibility for payments of principal and up to 15 percent interest in order to make this year’s annual payment to the California Public Employees’ Retirement System.

The plan would have freed up money in special funds that is earmarked for CalPERS, allowing the state to transfer that money to the general fund to be spent on other things, the Jarvis group argued.

The administration of since-recalled Gov. Gray Davis had asked the high court to hear the merits and to expedite the case.

The pension bond was part of the compromise that lawmakers agreed on prior to the recall election, after legislators cut spending on programs and services by $11 billion, but Republicans unanimously opposed raising taxes to offset other cuts.

The biggest part of the compromise package, a $10.7 billion deficit reduction bond issue, was quietly endorsed by Schwarzenegger last week as negotiations to roll that obligation into a $15 billion issue that would be placed on the March 2 ballot stalled. Lawmakers were at work late last night on a compromise that may yet place the larger bond before voters.

Another conservative legal group, the Pacific Legal Foundation, has filed suit to block the  deficit reduction bonds. PLF says that issue would violate the same provision cited by the Jarvis association in the suit over the pension bonds.

State officials have argued that the two bond issues are dissimilar, since the deficit reduction issue would use a dedicated revenue stream to repay the bond. In addition, the Legislature would have to pass annual appropriations to make the payments.

The case is Pension Obligation Bond Committee v. Superior Court (Howard Jarvis Taxpayers Association), S119882.


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