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In a ruling with the potential to shut down state government on an annual basis, the California Supreme Court on Thursday held that the state controller isn’t authorized to pay state employees’ regular salaries after a certain date each year during budget impasses. But the court gave legislators plenty of wiggle room by saying payment could proceed if legislators enact an emergency appropriation as allowed by law or make salaries a continuing appropriation through legislation. The justices also said federally mandated minimum wage and overtime compensation could be doled out without violating the state constitution. Additionally, in what could be viewed as the offering of an olive branch, the court also assured legislators that the judiciary will attempt to steer clear of future budget disputes. It set a high bar for any judge considering granting a preliminary injunction prohibiting the state controller from authorizing the expenditure of public funds. “In light of the separation of powers doctrine,” Chief Justice Ronald George wrote for a unanimous panel, “courts must be especially sensitive about intruding upon the Legislature’s fundamental — and essentially political — legislative and budget powers.” Courts must not depart from the rules regarding the issuance of preliminary injunctions, he said, “simply in order to lend support to an effort to increase the leverage on the Legislature to pass a budget bill.” White v. Davis, 03 C.D.O.S. 3730, was filed by angry taxpayers, including Steven White, who claimed that the state controller’s office violated the state constitution by continuing to pay state employees during budget impasses in 1997 and 1998. They argued that the state is constitutionally required to have a budget by June 15 of each year and could not pay employee salaries beyond that date without one. On Thursday, the high court agreed. “State law contractually guarantees that state employees ultimately will receive their full salary for work performed during a budget impasse,” Chief Justice George wrote, “but state law does not authorize the controller to disburse state funds to the employees until an applicable appropriation has been enacted.” But the court pointed out that there are several methods for the controller to make payments without violating the law. Among them, George wrote, are for the Legislature to authorize a continuing appropriation, a self-executing state constitutional mandate or a federal mandate. In 1998, legislators kept payments going by enacting an emergency appropriation. And just last week, Assemblyman Rudy Bermudez, D-Bellflower, introduced a bill — AB 1535 — that would make state salaries a continuing appropriation. The Supreme Court on Thursday also made it quite clear that the federal Fair Labor Standards Act requires that all state employees, except those in executive, administrative or professional positions, be paid minimum wage and overtime during budget impasses. “These minimum wage and overtime compensation provisions of the FLSA,” George pointed out, “apply to most, although by no means all, state employees.” Most importantly to the controller’s office, the high court said that while courts could issue preliminary injunctions to block payments, it should not be done to pressure the Legislature into action. “Any legal action seeking an injunction against the controller’s expenditure of funds during a budget impasse,” the court held, “necessarily must rest on the asserted illegality of a particular challenged expenditure or expenditures, rather than on the conduct of the Legislature.” In this case, George held, the lower courts erred, in part, by granting and affirming a preliminary injunction without considering the harm that could befall state employees left without pay for weeks at a time. “The balance of harms dramatically favored denial of the preliminary injunction,” he wrote. Gov. Gray Davis said the ruling “is just another motivation” for the legislative and executive branches of government to get their work done on time. Controller Steve Westly said that while he’s pleased the court ruled that the state has authority to make essential payments in the absence of a budget, he fears the decision leaves some employees vulnerable. He also questioned the court’s suggestion that employees who work overtime be rewarded with full pay, while those who don’t be paid minimum wage. “It is not feasible to implement a multi-tiered pay system for 4,500 job classifications within the next two months,” he said. “It is also unfair to ask fire, police and other public employees to work at minimum wage. “The right thing to do,” Westly added, “is for the Legislature to pass a budget on time, so we can ensure that the state continues to provide essential services to the public.” Anne Giese, an attorney for the Sacramento-based California State Employees Association who argued part of the case before the high court last month, said she’s pleased that the court reaffirmed that state employees get their full pay, even if not during an impasse. “We’re satisfied with the wins we got,” she said, “though we would have liked the whole enchilada.”

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