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SACRAMENTO — In 1991, the last time California faced serious money troubles, Attorney General Dan Lungren laid off lawyers who file plaintiffs actions on behalf of the state. Twelve years later, the state’s financial crisis is far worse. Lungren’s successor — Attorney General Bill Lockyer — must slash nearly 5 percent from the Department of Justice budget. But Lockyer’s budget request doesn’t touch any of 1,100 lawyers at the attorney general’s office, and in contrast to Lungren, he’s making the lawyers in his public law section a selling point to help keep his staff intact. Lockyer’s pitch? The attorneys are revenue generators — in other words, they constitute a state-run plaintiffs firm that pulls in millions of dollars a year in settlement cash. And much of that money lands in the general fund, the account that finances most of the programs favored by Gov. Gray Davis and lawmakers. To be sure, the governor and his budget planners don’t consider the DOJ a revenue source in the traditional sense. And Peter Siggins, chief deputy attorney general for legal affairs, said Lockyer files suits based on perceived wrongdoing, not because his lawyers are “bounty hunters.” Even so, when budget makers start talking cuts, the DOJ holds up its plaintiffs actions to defend itself. Perhaps the most potent example of the potential money-making power of the AG’s actions is the historic, nationwide tobacco settlement. Though initially resisted by Lungren, the deal eventually earned $25 billion for California and its cities and counties, spread out over several years. But a steady stream of smaller cases has also helped fill the state’s coffers. Siggins pointed to the settlement reached with BP-Arco last year over underground storage tanks. The largest in the nation, the agreement set aside $21 million for state water pollution cleanup and $860,000 for the AG’s future litigation efforts. This year, the state is eyeing energy litigation. At one point, Lockyer’s office was involved with or tracking 120 separate suits filed as a result of California’s power crisis, including the recent high-profile settlement with El Paso Corp. In its budget request, Lockyer’s office is asking for $9.5 million over two years to continue going after the firms accused of manipulating the power market to drive up prices for ratepayers. FACING QUESTIONS Still, the energy company litigation has been the subject of questions from legislators. The Legislative Analyst’s Office, the Legislature’s nonpartisan research arm, says the DOJ has not justified spending that much money. Also, the LAO wants the AG’s office to consider using $5 million that it received in attorneys fees to fund future litigation. At a recent Assembly budget subcommittee hearing, Assemblywoman Sarah Reyes, D-Fresno, didn’t quite buy the DOJ’s justification for the money and seemed concerned that there was some duplication of effort by Lockyer and the California Public Utilities Commission. The subcommittee did not settle the issue this month and has asked the DOJ for more information about the energy cases. Republicans, too, have questioned the spending. Sen. Dick Ackerman, R-Fullerton, who ran against Lockyer for the AG job last year, wrote an op-ed for The Orange County Register about the state’s settlement with Williams Energy Marketing & Trading Co. “Believe it or not, this much-ballyhooed ‘victory for the ratepayers’ does not provide for a single penny to be refunded to consumers,” wrote Ackerman, who is also vice chair of the Senate Budget Committee. While the deal has perks for the state and ratepayers, most of the savings lauded by Lockyer when he announced the settlement are realized in the renegotiation of the state’s long-term contract with Williams. The settlement also included $15 million for private attorneys to continue pursuing actions against other energy giants. In a recent interview, Ackerman said Lockyer’s ability to generate money does not exempt the office from scrutiny, and he’s sure the AG can cut costs. He said some of the AG’s lawsuits are little more than “extortion” and pointed to litigation against Microsoft Corp. as the kind of case Lockyer shouldn’t spend money on. “We’re not looking for him to make money for the state; we’re looking for him to defend the state,” Ackerman said. Lockyer’s office does a “good job” defending the state, although there’s always “room for efficiency,” the senator added. DEFENSE MECHANISM While Lockyer’s office is using the relatively novel approach of citing the financial benefits of plaintiffs work, the DOJ is also relying on a more traditional argument: The AG needs a full staff to help defend the state against myriad lawsuits. Chief Deputy AG Siggins said the state seems to be sued more during tough fiscal times. Lockyer spends twice as much money defending the state against liability as he does filing plaintiffs actions. The 2003-04 budget would devote $105 million to state defense. According to a document provided by the AG’s office, lawyers are working on at least 20 cases where the state could be liable for payments or refunds of $300 million or more. Many of those are suits filed against the Board of Equalization and the Franchise Tax Board. “Some of these cases have ripple effects that we could project to billions of dollars,” Siggins said. The governor’s proposed 2003-04 budget allocates $607 million to the DOJ, a 4.9 percent decrease from 2002-03 and a 1.5 percent decrease from 2001-02. Although the nonpartisan Legislative Analyst’s Office considers that a serious reduction, the mood around the AG’s office is not nearly as despairing as other places in Sacramento. The cuts have been spread out among the office’s various sections, with plaintiffs and defense civil litigation suffering less damage than criminal enforcement. The budget proposes reducing civil law, which provides legal services to state agencies, by 2 percent, and public rights, which does pro-active litigation, by 5 percent. The other major sections — executive programs, criminal law and law enforcement — are cut by 13 percent, 10 percent and 8 percent, respectively. Lockyer’s decision on how to share the hurt follows his political promise of devoting more resources to consumer litigation. To make the cuts, Siggins said legal services is reducing the amount of money spent on outside experts and consultants, characterizing it as “trying to essentially do a little bit more with a little bit less help.” At the recent budget subcommittee hearing, legislators delved into seeming minutiae with questions to DOJ officials about spending requests of as little as a half-million dollars. Assemblywoman Reyes was concerned that the office wasn’t efficient in the way it allocates attorneys to specific cases, something she considers important during a time when resources are scant. Dissatisfied with DOJ’s answers, she quipped sarcastically, “In tough budget times, I love lawyers.” Siggins said such attention was unusual. “I think this year because of the level of scrutiny that they’re putting on some of these matters, we really have a lot of education about how litigation works and what the demands are in litigation,” he said. But figuring out exactly how much money the AG hopes to recover is going to be difficult for legislators. It’s hard to put a price tag on most of the 55,000 cases where the AG represents the state as a plaintiff or defendant. There are no precise budget lines, no calculation for how many dollars Lockyer hopes to recover from, say, the energy companies or the exact liability he’s defending in other situations. “We try to quantify some of that, and we actually have a risk management program that’s a work in progress,” Siggins said. “It’s infantile in its development, but we’re getting there.”

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