Prof'l Eng'rS IN Cal. Gov't v. SCHWARZENEGGER

Decision Date04 October 2010
Docket NumberNo. S183411.,S183411.
Citation239 P.3d 1186,116 Cal.Rptr.3d 480,50 Cal.4th 989
CourtCalifornia Supreme Court
PartiesPROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT, et al., Plaintiffs and Appellants, v. Arnold SCHWARZENEGGER, as Governor, etc., et al., Defendants and Respondents; John Chiang, as State Controller, etc., Defendant and Appellant. California Attorneys, Administrative Law Judges and Hearing Officers in State Employment, Plaintiff and Appellant, v. Arnold Schwarzenegger, as Governor, etc., et al., Defendants and Respondents; John Chiang, as State Controller, etc., Defendant and Appellant. Service Employees International Union Local 1000, Plaintiff and Appellant, v. Arnold Schwarzenegger, as Governor, etc., et al., Defendants and Respondents; John Chiang, as State Controller, etc., Defendant and Appellant.

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Law Offices of Brooks Ellison and Patrick J. Whalen, Sacramento, for Plaintiffs and Appellants, California Attorneys, Administrative Law Judges and Hearing Officers in State Employment.

Paul Harris and Anne M. Giese, Sacramento, for Plaintiff and Appellant, Service Employees International Union Local 1000.

Gerald A. James, Sacramento; Altshuler Berzon, Stephen P. Berzon and Danielle Leonard, San Francisco, for Plaintiffs and Appellants Professional Engineers in California Government and California Association of Professional Scientists.

Reed Smith, Harvey L. Leiderman, San Francisco, and Jeffrey R. Rieger, Oakland, for Teachers' Retirement Board of the California State Teachers' Retirement System as Amicus Curiae on behalf of Plaintiffs and Appellants.

Kelly Vent as Amicus Curiae, on behalf, of Plaintiffs and Appellants.

Richard J. Chivaro, Sacramento, Ronald V. Placet, Shawn D. Silva, Ana Maria Garza; Remcho, Johansen & Purcell, San Leandro, Robin B. Johansen and Margaret R. Prinzing, for Defendant and Appellant.

K. William Curtis, Warren C. Stracener, Linda A. Mayhew, Will M. Yamada, Sacramento; Kronick, Moskovitz, Tiedemann & Girard, David W. Tyra, Kristianne T. Seargeant and Meredith H. Packer, Sacramento, for Defendants and Respondents.

Edmund G. Brown, Jr., Attorney General, Gordon B. Burns, Deputy State Solicitor General, Jonathan K. Renner, Assistant Attorney General, James M. Humes, Stephen P. Acquisto and Mark R. Beckington, Deputy Attorneys General, for California Constitutional Officers as Amicus Curiae.

GEORGE, C.J.

On December 1, 2008-faced with (1) a large current state budget deficit that was projected to grow to more than $40 billion by theend of the 2009-2010 fiscal year, and (2) the very serious prospect that by as early as February 2009 the state would run out of cash to pay its ordinary expenses-the Governor of California declared a fiscal emergency, called the Legislature into special session, and submitted to the Legislature a comprehensive plan to address the budget problem. The Governor's budget plan included, among many other cost-saving features, two proposed statutory provisions that would direct the Department of Finance and the Department of Personnel Administration to implement, for the remainder of the 2008-2009 fiscal year and for the entire 2009-2010 fiscal year, a mandatory one-day-a-month unpaid furlough of most state employees employed by the executive branch, a proposal that would save the state approximately $37.5 million per month by reducing by approximately 5 percent the wages paid to each of the affected employees.

Two and one-half weeks later, on December 18, 2008, the Legislature passed its own proposed comprehensive budget legislation, comprising 15 separate budget-related bills. Among many other differences from the Governor's proposal, the Legislature's alternative plan did not include the Governor's recommended furlough provision.

On December 19, 2008, the Governor issued the executive order that lies at the heart of the present litigation, instructing the Department of Personnel Administration to implement, beginning on February 1, 2009, and continuing through June 30, 2010, a mandatory two-day-a-month unpaid furlough of most state workers employed in the executive branch.

Shortly after the Governor's issuance of this executive order, a number of employee organizations-the recognized, exclusive bargaining representatives of a majority of the workers employed by the State of California-filed three separate, but similar, lawsuits, contending that the Governor lacked authority to implement unilaterally an involuntary furlough of represented state employees that reduced such employees' hours and earnings by approximately 10 percent. The trial court, acting on an expedited basis, treated the three cases as related, heard argument in the cases together, and thereafter issued a single ruling rejecting the broad attacks made by the employee organizations on the executive order and concluding that the Governor possessed the authority to impose the furlough in response to the fiscal emergency facing the state.

The employee organizations (hereafter sometimes referred to as plaintiffs) appealed from the trial court's ruling. After briefing in the Court of Appeal was completed and the three cases were consolidated for purposes of oral argument and decision, but before the Court of Appeal set the matter for oral argument or issued a decision, we exercised our authority pursuant to articleVI, section 12, subdivision (a) of the California Constitution to transfer the consolidated matter to this court for oral argument and decision.

For the reasons explained below, we conclude that, under existing constitutional provisions and statutes, the Governor on December 19, 2008, possessed authority to institute a mandatory furlough of represented state employees, reducing the earnings of such employees, only if specifically granted such unilateral authority in an applicable memorandum of understanding entered into between the state and the employee organization representing the affected employees. Although there is considerable doubt whether the applicable memoranda of understanding granted the Governor such authority, we further conclude that even if the Governor lacked authority to institute the challenged furlough plan unilaterally, plaintiffs' challengeto the furlough plan now before us must be rejected. In mid-February 2009-shortly after the furlough program went into effect-the Legislature enacted, and the Governor signed, legislation that revised the Budget Act of 2008 (2008 Budget Act) by, among other means, reducing the appropriations for employee compensation contained in the original 2008 Budget Act by an amount that reflected the savings the Governor sought to obtain through the two-day-a-month furlough program. The February 2009 legislation further provided that the specified reduction in the appropriations for employee compensation couldbe achieved either through the collective bargaining process or through “existing administration authority.” That phrase, in the context in which the revised budget act was adopted and in light of the provision's legislative history, reasonably included the furlough program that was then in existence and that had been authorized by the current gubernatorial administration. In particular, the bill analyses considered by the Legislature made specific reference to furlough-related reductions of employee compensation costs. Under these circumstances, we conclude that the Legislature's 2009 enactment of the revisions to the 2008 Budget Act operated to ratify the use of the two-day-a-month furlough program as a permissible means of achieving the reduction of state employee compensation mandated by the act.

Accordingly, we conclude that the 2009 budget legislation validated the Governor's furlough program here at issue, and reject plaintiffs' challenge to that program.

I

The California Constitution provides that [t]he Legislature shall pass the budget bill by midnight on June 15 of each year” (Cal. Const., art. IV, § 12, subd. (c)(3)), but, as we noted in White v. Davis (2003) 30 Cal.4th 528, 533, 133 Cal.Rptr.2d 648, 68 P.3d 74, “in recent years the timely adoption of the budget bill in California has proven to be the exception rather than the rule.”

Enactment of the initial 2008 Budget Act was an unusually difficult and protracted task and, instead of being passed by June 15, 2008, the budget bill that year was not enacted by the Legislature and signed into law by the Governor until September 23, 2008.

Although the national and state economies already were in dire straits when the 2008 Budget Act finally was enacted, shortly thereafter the economy further deteriorated dramatically in light of the financial credit crisis and the resulting stock market collapse in October 2008 and a sharp decline in real estate values and consumer spending. In early November 2008, the California Department of Finance reported that the state faced a revenue shortfall of $11.2 billion for the 2008-2009 fiscal year and a much higher budget deficit by the end of the 2009-2010 fiscal year, and further stated that [i]f no action is taken to reduce spending, increase revenues, or a combination of both, the state will run out of cash in February and be unable to meet all of its obligations for the rest of the year.” (Cal. Dept. of Finance, Rep., Governor's Budget, Special Session 2008-09, p. 1, at 2009- 10/ documents/ special_session_08-09_web.pdf> [as of Oct. 4, 2010].)

On November 6, 2008, the Governor published a letter addressed to all state employees, announcing that in order to cope with the state's worsening fiscal situation he would propose, among other spending reductions, a number of cuts related to state employees, including a one-day-a-month furlough of state employees that would result “in a pay cut of about 5 percent” but that would not “affect retirement and other benefits for which you are eligible.” The letter declared...

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