S.C. Declines to Hear Challenge to Prison Bond Act

Thursday, June 18, 2009

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S.C. Declines to Hear Challenge to Prison Bond Act

By KENNETH OFGANG, Staff Writer

The California Supreme Court yesterday unanimously declined to hear a constitutional challenge to legislation authorizing the state to sell $7.4 billion worth of revenue bonds in order to build and improve prison and jail facilities and expand rehabilitation and treatment programs.

Taxpayers for Improving Public Safety, a prison reform group, claimed AB 900, the Public Safety and Offender Rehabilitation Services Act of 2007, violates the “pay-as-you-go” provisions of the state Constitution.

The Third District Court of Appeal, however, upheld the act on March 24, and the Supreme Court, at its weekly conference in San Francisco, declined to hear TIPS’ challenge.

TIPS—which argues that releasing non-dangerous offenders, rather than building expensive new facilities, is the answer to the state’s prison overcrowding crisis—brought suit for declaratory and injunctive relief after Gov. Arnold Schwarzenegger signed the act into law. TIPS and two individuals contended that the act authorized the creation of long-term debt without voter approval, in violation of Art. XVI, Sec. 1 of the California Constitution.

The Court of Appeal disagreed, affirming Sacramento Superior Court Judge Loren McMaster’s rejection of the suit, in Taxpayers for Improving Public Safety v. Schwarzenegger (2009) 172 Cal.App.4th 749.

Justice Harry Hull, said the law is constitutional under a long-recognized rule that an obligation to make payments that are contingent on the future use or availability of goods or services is not a long-term debt prohibited by Art. XVI.

AB 900, Hull explained, was a legislative follow-up to the governor’s earlier order, which was upheld by the Third District, declaring an emergency that allows the California Department of Corrections and Rehabilitation to transfer inmates out of state.

Partly as a result of changes to sentencing laws in recent years, the justice noted, the inmate population has grown at a faster rate than the construction of facilities. By 2007, the prison population was at 173,000, about double capacity, resulting in large numbers of prisoners being confined to gymnasiums, dayrooms, program rooms, and other areas not designed for housing.

Under AB 900, as recently amended, the Public Works Board can issue revenue bonds to build facilities to be operated by the CDCR. Although both are state entities, the CDCR will technically lease the facilities from the board, which will use the lease payments to pay the bondholders.

TIPS argued that the lease arrangement was a “fabrication” to avoid the conclusion that the state had created unconstitutional debt in order to pay for the facilities. The Court of Appeal, however, said that it makes no difference which entity owns the facilities or makes the payments, since the benefit to the state will be experienced over the entire period that the facilities are being paid for.

Hull cited cases upholding arrangements in which the state or a local entity transferred land to a private entity for the purpose of constructing an office building or other facility, to be leased back to the public entity, with a proviso either allowing the public entity to buy back the property or transferring the property back automatically at the end of the lease term.

Under this “exception” to the anti-debt rule, the justice explained, “no debt is created where future payments by a governmental entity are contingent on property, goods, or services being made available to the entity during future periods.”

AB 900, Hull said, is similarly consistent with the pay-as-you-go principle.

He explained: “[T]he underlying purpose...is to force governments to live within their means by prohibiting them from financing current expenses with future revenue. Thus, if the state were to borrow $1 billion dollars today to pay for current expenses, such as welfare benefits or employee salaries, and pay off the loan over the next several years, that would be burdening the taxpayers of tomorrow with the expenses of today. However, when a government constructs a facility that will be used for many years, it has created an asset that will benefit both current and future taxpayers. It is therefore appropriate that future taxpayers help pay for that benefit as it is used up. If, as plaintiffs suggest, the construction of a prison today should be paid for by the taxpayers of today, it is the taxpayers of tomorrow who would reap a windfall.”

In other conference action, the justices left standing a March 30 ruling by this district’s Div. One, affirming a $2.7 million judgment in favor of Laffit Pincay Jr. against Huntington Ambulance, LLC. The suit arose from the 2003 accident that ended the career of Pincay, then the winningest jockey of all time.

Pincay, who was knocked off his horse, claimed that emergency medical technicians exacerbated his injuries by failing to immediately immobilize his broken cervical spine. The panel held, in an unpublished opinion, that there was substantial evidence to support the verdict, and that because the jury had not differentiated between economic and non-economic damages, the defendant was not entitled to an offset against the amount paid Pincay by settling tortfeasors.