California is in the first rank of the economic mess, which is forcing a new look at ways of dealing with state governmental funding. In spite of raising taxes, issuing IOUs, and cutting the budgets of numerous sectors of state government, the budget gap is so wide that those steps did not close it. Indeed, with the decline of state revenues the budget problem grows. As a partial solution, Governor Schwarzenegger acted on his own authority to furlough state workers in an effort to save the taxpayers' money. Public employees' unions have challenged the Governor's furlough decisions in numerous lawsuits, which are being resolved in conflicting ways by the California superior courts.
On December 19, 2008, Governor Schwarzenegger issued Executive Order S-16-08, directing California's Department of Personnel Administration to furlough certain employees and managers for two days per month. Six months later, the Governor issued a second furlough Executive Order that increased the number of furlough days from two to three per month. Unions representing employees affected by the furloughs filed several lawsuits in different courts seeking to either 1] stop the furloughs or 2] require paying the money already lost due to their imposition of the furlough. Several state executive officers, who are separately elected by the voters, refused in many instances to act in accordance with the furlough orders on the basis that, as separately elected officers, they were not bound by Governor Schwarzenegger's decision. These actions also resulted in widespread litigation.
The Supreme Court of California has recognized public employees' rights in the past. In 1985, that court decided that public employees had a right to strike. Now state employees' unions are seeking redress from the Governor's furlough orders. Where do these cases stand? What follows is a brief description of these cases and their current statuses. Are the courts the place of relief for the unions and their members or not? Remember, the courts empowered them with the right to strike twenty-five years ago.
Claims that the Governor is without authority
First, unions filed the anti-furlough cases in Sacramento Superior Court, which challenged the very authority of the Governor to order furloughs. The superior court rejected that argument. The Sacramento Superior Court ruled that the Governor was authorized to reduce state-employee hours and pay because of the fiscal emergency. The court considered California's economic situation to be "an extremely urgent fiscal crisis" in which certain agencies would not be able to function without budget cuts, which also included the furloughs.
The prison guards filed a separate action against the Governor, which argued that his Executive Order violated applicable law because state employees cannot be forced to use accrued vacation and holiday time; meaning that the Executive Order constitutes a "true salary range reduction." The trial court concluded that the exigency of the budget crisis authorized Governor Schwarzenegger to order furloughs because temporary reductions in hours did not result in salary adjustments in and of themselves.
Arguments regarding the specially funded positions
One union filed suit in San Francisco Superior Court, alleging that the furlough orders could not apply to non-executive agency employees who were specially funded, such as those of the State Compensation Insurance Fund. The superior court agreed, finding that the Insurance Code protects Insurance Fund workers from any provision that applies to agencies "generally or collectively," unless specifically named. In addition, the San Francisco Superior Court denied the Governor's argument that all of the union's allegations should continue to reside exclusively in the Sacramento Court because those consolidated actions had only concerned executive-branch employees. Thus, in spite of "any other provision of law," Insurance Fund employees "are exempt from any hiring freezes and staff cutbacks otherwise required by law."
Several unions filed in Alameda County Superior Court, arguing that the law mandated that the Governor consider the varying needs of various agencies before reducing working hours. By failing to do more than require an across-the-board hour reduction, Governor Schwarzenegger had not "considered" varying needs of the respective agencies at all. All of the plaintiff-employees were employed by a "specially-funded" agency. Thus, they claimed to be affected by the furloughs in violation of a provision that forbids any transfer that will interfere with the object for which a special fund was created. The trial court agreed with their argument. Subsequently, the Governor has won a stay of the court's order pending its appeal.
Although several cases other than the consolidated Sacramento and coordinated Alameda County actions have been filed, only one has resulted in a substantive decision. In that case, the CalPERS board claimed a specific need for workers to handle the influx of investment issues related to the poor economy, as well as claiming that as a specially-funded entity the Governor could not furlough its employees. Unlike the Alameda County actions, however, the Sacramento Superior Court rejected the "special funding" argument and upheld Governor Schwarzenegger's power to require furloughs.
Reconciling these various decisions and cases is critical to resolving the state's budget woes. Right now two separate courts of appeal – the First and the Third – would be hearing cases discussed above. If they make differing decisions, the status of furloughs will remain unresolved. Continuing uncertainty would cause more trouble for the state because of the effect California's debt would have on taxpayers, the employees and the market.
Governor requests overall consolidation and expedition
According to the Governor's Petition to Consolidate and Expedite Appeals, submitted in the California Supreme Court, "[a]llowing the myriad legal challenges to the statewide furlough program to work their way through the numerous trial courts and appellate courts will lead to more inconsistent rulings and will delay final resolution of the legal issues regarding the Governor's authority to furlough state employees as one means of addressing a fiscal crisis. The nature and importance of the issues in these cases for the current Governor and future Governors, and their statewide impact on employees, warrant speedy and final resolution by this court."
For all of the controversy, few would disagree about the importance of these cases and the need for a speedy resolution.
For more information on this report or other Judiciary issues , contact Mike Petersen, Senate Republican Office of Policy at 916/651-1501.