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Service Employees International Union, Local 1000 et al v. Edmund G. Brown

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION TWO


July 8, 2011

SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 1000 ET AL., PLAINTIFFS AND RESPONDENTS,
v.
EDMUND G. BROWN, JR. ET AL., DEFENDANTS AND APPELLANTS.

Alameda County Super. Ct. No. RG09456750

The opinion of the court was delivered by: Richman, J.

CERTIFIED FOR PUBLICATION

This is an appeal by the Governor, the Director of the Department of Personnel Administration (DPA), and dozens of state government entities (collectively, the Governor) from a judgment of the Alameda Superior Court issuing a writ of mandate as petitioned by Local 1000 of the Service Employees International Union (SEIU) on behalf of approximately 95,000 members employed by the State of California. The gist of the judgment was that the Governor's 2008 and 2009 Executive Orders instituting three mandatory monthly furlough days for state employees were declared illegal as to certain groups of employees; the Governor and the Director were commanded to halt enforcement of the furlough program as to those employees; and the State Controller was directed to halt reducing those employees' salaries for the furlough days, as well as to "restore any salary wrongfully withheld as a consequence" of the Executive Orders.

The appeal was fully briefed when our Supreme Court decided Professional Engineers in California Government v. Schwarzenegger (2010) 50 Cal.4th 989 (Professional Engineers), dealing with the legality of the Governor's 2008 Executive Order directing a mandatory two-days-a-month unpaid furlough. The court summarized its core holding as follows:

"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 could be 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. . . . 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." (Professional Engineers, supra, 50 Cal.4th 989, 1000.)

By the time Professional Engineers was filed, the Legislature had, after the Governor had issued the second Executive Order, revised the 2009 Budget Act using language virtually identical to that it used in revising the 2008 Budget Act. The relevant language of both revised Budget Acts specifies that "each item of appropriation in this act . . . shall be reduced . . . to reflect a reduction in employee compensation achieved through . . . existing administration authority . . . ." The Governor reads Professional Engineers' construction of the "existing administration authority" language as a blanket legislative validation of the furlough program then in place, be it two or three days per month, with no exceptions. We conclude that this simplistic interpretation is not what the Supreme Court intended.

That said, we conclude that Professional Engineers is virtually dispositive. The scope of the furlough program that the Legislature was ratifying was pegged to the presence of an "item of appropriation," as the Legislature's reiteration of the language construed in Professional Engineers demonstrates. Beyond this, we further conclude that the dispositive statutory language in both instances is "item of appropriation," because "existing administration authority" as shorthand for the furlough program then in place, has relevance only as a mechanism for effecting the Legislature's reduction of a given "item of appropriation." In other words, there must be an "item of appropriation" before the particulars of the furlough program become relevant.

Our independent research--confirmed by the parties at reargument--discloses that all but five of the state agencies and departments made defendants by SEIU are the subject of an "item of appropriation" in both the 2008 and the 2009 Budget Acts. The three-day-per-month furlough program is therefore valid as to these defendants. Because their inclusion was proper, their employees have no grievance, and no entitlement to back pay. Thus, as to 58 of the 63 defendants, the judgment must be reversed. As to the five remaining entities that have already implemented the full furlough program but are not named in an "item of appropriation," their inclusion cannot be deemed "mandated by the act" of the Legislature. However, given the virtual irrelevance of the record on appeal to the issues made dispositive in the wake of Professional Engineers, we remand in order that the parties may have the opportunity to present evidence as to whether the sources of funding for these entities are otherwise part of the budgetary process and therefore may be within the ambit of Professional Engineers.

BACKGROUND

The financial woes of the state that generated the Governor's Executive Orders and the ensuing litigation--including this case--are too well known to require detailed reiteration. The history of the situation up to the issuance of the second Executive Order in 2009 is also set out in Professional Engineers, supra, 50 Cal.4th 989, 1001-1008. Only the salient highlights will be noted here.

On December 19, 2008, the Governor issued Executive Order S-16-08. Citing "an approximately $15 billion General Fund deficit for the 2008-09 fiscal year, which without effective action, is estimated to grow to a $42 billion General Fund budget shortfall over the next 18 months," he directed that "effective February 1, 2009 through June 30, 2010, the Department of Personnel Administration shall adopt a plan to implement a furlough . . . for two days per month, regardless of funding source" for "represented state employees," managers, and supervisors. Then, on July 1, 2009, because "California's revenues . . . continue to plummet," the Governor issued Executive Order S-13-09 which ordered the furlough program expanded to three days per month for the period from July 1, 2009 through June 30, 2010, applicable to all state employees, whether "represented" or "non-represented," to include "supervisors, managers, and exempt state employees." The Governor reiterated that the additional day of furlough was to be imposed on employees "regardless of funding source."

In June 2009, SEIU, alleging that it represented approximately 95,000 state employees in nine bargaining units, brought suit alleging that the Executive Orders were "arbitrary, capricious and without a rational basis because they apply to employees whose salaries are paid by sources other than the General Fund, such as federal funds or special funds. In other words, the furloughing of employees in positions paid from sources other than the General Fund does not achieve the stated purpose of the Orders."*fn1 SEIU prayed for declaratory and injunctive relief, together with a writ of mandate commanding the Controller "to halt any further salary reductions which resulted from the . . . Orders, and to order back pay for any furlough dates previously implemented."

On December 31, 2009, the trial court issued its "Order Granting Petition For Writ of Mandate." The court's decision rested on two grounds. The first ground for finding the furlough program--and the Governor's Executive Orders--invalid was that the Governor "violated a mandatory duty" imposed by Government Code section 19851, subdivision (a), "to take into account the Agencies' 'varying needs' before reducing working hours."*fn2 Not only was the failure to comply with the mandatory duty an abuse of discretion, "when furloughs are implemented to save money, yet their implementation in some agencies saves nothing and increases costs, such a policy is arbitrary, capricious and unlawful."

The second ground for the court's decision was that "furloughing employees to increase potential borrowing from special fund agencies interferes with those agencies' operations," and thereby violated section 16310, subdivision (a), and again qualified as an abuse of discretion "by ordering and implementing furloughs in order to increase internal borrowing from special funds, without regard to whether such borrowing interfered with the objects for which the special funds were created."*fn3

Questions arose thereafter concerning the scope of relief that the trial court would order. After hearing argument from the parties, and over the Governor's objections, the trial court on February 25, 2010, filed an "Order After Hearing" in which it determined that its decision would apply to all employees of the named departments and agencies regardless of whether SEIU represented them, and that the relief ordered would include back pay.

Also on February 25, 2010, the court filed its judgment directing issuance of a peremptory writ of mandate commanding: (1) the Governor and the Director "to set aside the portions of the Governor's Executive Orders S-16-08 and S-13-09 calling for a furlough and resulting salary reduction for all employees of Respondent Departments and Agencies, and to cease and desist the furlough of such employees"; and (2) the Controller "to immediately pay all employees of Respondent Departments and Agencies their full salary without any reductions pursuant to the illegal furloughs directed by the unlawful Executive Orders, and to take any and all actions required by law to restore any salary wrongfully withheld as a consequence thereof." The following day the Governor perfected this timely appeal from the judgment.*fn4

In the wake of Professional Engineers, the parties filed supplemental briefs addressing that decision and its impact upon the arguments advanced in the briefs already on file.

REVIEW

Professional EngineersEstablishes The Validity Of The Third Furlough

Day Imposed By The Governor's Second Executive Order and Ratified

By The Legislature When It Enacted The Revised 2009 Budget Act

The ultimate fulcrum for the Supreme Court in Professional Engineers was this language in a provision of the legislation revising the 2008 Budget Act:

"[T]he legislation that revised the budget applicable to the 2008-2009 fiscal year (Sen. Bill 3X 2) effectuated a reduction in the appropriations for employee compensation by adding a provision to the 2008 Budget Act. (Sen. Bill 3X 2, § 36.)

"Section 36 of Senate Bill 3X 2 provides in full:

" 'Section 3.90 is added to the Budget Act of 2008, to read:

" 'Sec. 3.90. (a) Notwithstanding any other provision of this act, each item of appropriation in this act, with the exception of those items for the California State University, the University of California, Hastings College of the Law, the Legislature (including the Legislative Counsel Bureau), and the judicial branch, shall be reduced, as appropriate, to reflect a reduction in employee compensation achieved through the collective bargaining process for represented employees or through existing administration authority and a proportionate reduction for nonrepresented employees (utilizing existing authority of the administration to adjust compensation for nonrepresented employees) in the total amount of $385,762,000 from General Fund items and $285,196,000 from items relating to the other funds. It is the intent of the Legislature that General Fund savings of $1,024,326,000 and other fund savings of $688,375,000 in the 2009-10 fiscal year shall be achieved in the same manner described above. The Director of Finance shall allocate the necessary reduction to each item of appropriation to accomplish the employee compensation reductions required by this section.

" '(b) The Department of Personnel Administration shall transmit proposed memoranda of understanding to the Legislature promptly and shall include with each such transmission estimated savings pursuant to this section of each agreement.

" '(c) Nothing in this section shall change or supersede the provisions of the Ralph C. Dills Act (Chapter 10.3 (commencing with Section 3512) of Division 4 of Title 1 of the Government Code).' " (Professional Engineers, supra, 50 Cal.4th 989, 1044.)

The Supreme Court identified three reasons why the phrase "existing administration authority" should be treated as referring to the existing two-day-per-month furlough program:

"First, the legislative history of the provision in question clearly and explicitly establishes that the reductions in appropriations for employee compensation that were included in the bill reflected the two-day-a-month furloughs. . . . This history makes it abundantly clear the Legislature contemplated that the reduction in appropriations for employee compensation set forth in section 3.90 could be achieved through the furlough plan that was then in existence

"Second, aside from the furlough plan, the only other available 'existing administration authority' through which the state could have achieved the very substantial reduction in the appropriations for employee compensation mandated by the February 2009 budget legislation was the authority provided by section 19997, permitting a state appointing authority to 'lay off' state employees '[w]henever it is necessary because of lack of . . . funds, or whenever it is advisable in the interests of economy, to reduce the staff of any state agency . . . .' In our view it is not reasonable to suggest that the Legislature intended to compel the state, in the absence of a mutually agreed-upon collective bargaining resolution, to resort to layoffs of a significant percentage of state employees rather than to permit the state to utilize the furlough plan that was then already in use, particularly when the legislative history makes no reference to such layoffs.

"Third, although at the time the revised budget act was adopted on February 20, 2009, the trial court's judgment upholding the validity of the furlough program already had been appealed and the Legislature could not have known how the appeal ultimately would be resolved, it is reasonable to assume that body recognized that the reduction in employee compensation mandated by the revised 2008 Budget Act would have to be implemented prior to a final resolution of the appeal. We conclude that, in view of the exigent circumstances facing the Legislature, it intended to permit the then-existing furlough program to be used as an alternative to other means that might be agreed upon through the collective bargaining process, without regard to whether the appellate courts ultimately determined that the Governor or the DPA possessed the authority to impose an unpaid furlough program unilaterally.

"Accordingly, we conclude that the phrase 'existing administration authority'--as used in section 36 of Senate Bill 3X 2--was intended to encompass the then existing furlough program. By enacting this provision, the Legislature, through the exercise of its own legislative prerogative, authorized the substantial reduction in the appropriations for employee compensation, mandated in the revised budget legislation, to be achieved through the two-day-a-month furlough plan." (Professional Engineers, supra, 50 Cal.4th 989, 1046-1048.)

On July 23, 2009, 22 days after Governor Schwarzenegger issued Executive Order S-13-09 expanding the furlough program to three days per month, the Legislature passed Assembly Bill No. 4X 1, the revised Budget Act of 2009, which was signed by the Governor on July 28, 2009. The measure directs personnel cost reductions using the same language as contained in the revised Budget Act of 2008.*fn5 Specifically:

"SEC. 552. Section 3.90 of the Budget Act of 2009 is amended to read:

"Sec. 390. (a) Notwithstanding any other provision of this act, each item of appropriation in this act, with the exception of those items for the California State University, the University of California, Hastings College of the Law, the Bureau of State Audits, the Legislature (including the Legislative Counsel Bureau), and the judicial branch, shall be reduced, as appropriate, to reflect a reduction in employee compensation achieved through the collective bargaining process for represented employees or through existing administration authority and a proportionate reduction for nonrepresented employees (utilizing existing authority of the administration to adjust compensation for nonrepresented employees) in the total amounts of $1,477,917,000 from General Fund items and $973,058,000 from items relating to other funds. The Director of Finance shall allocate the necessary reductions to each item of appropriation to accomplish the employee reductions required by this section.

"(b) The Department of Personnel Administration shall transmit proposed memoranda of understanding to the Legislature promptly and shall include with each such transmission estimated savings pursuant to this section of each agreement.

"(c) Nothing in this section shall change or supersede the provisions of the Ralph C. Dills Act (Chapter 10.3 (commencing with Section 3512) of Division 4 of Title 1 of the Government Code)." (Stats. 2009, 4th Ex. Sess. 2009-2010, ch. 1, § 552, p. 425.)

Our analysis of Professional Engineers leads us to conclude that the third day of the furlough program imposed by the Governor's second Executive Order was ratified by the Legislature when it revised the 2009 Budget Act. Professional Engineers made it clear that it is the Legislature, not the Governor, which has the preeminent role--and the final say--in fixing the compensation paid to represented state employees, with that final say often being expressed in the budget process.*fn6 (Professional Engineers, supra, 50 Cal.4th 989, 1024 ["the Legislature has demonstrated a special interest in retaining (through the budget process or otherwise) ultimate control over the salary and wages of such employees"], 1043 ["the Legislature retained it ultimate control (through the budget process) over expenditure of state funds required by the provisions of an MOU"]; see also id. at pp. 1019-1020, 1038, fn. 34.)

The Professional Engineers court explained that by enacting revisions to the 2008 Budget Act, the Legislature exercised its ultimate authority over compensation of state employees: "[W]hen the Legislature enacted, and the Governor then signed, legislation revising the 2008 Budget Act, the validity of the mandatory furlough program fundamentally changed. The new legislation explicitly reduced the 2008-2009 fiscal year appropriation for state employee compensation to a level reflecting the reduced compensation to be paid to employees under the Governor's furlough plan." (Professional Engineers, supra, 50 Cal.4th 989, 1043.)

Professional Engineers considered only the two furlough days implemented by reason of Executive Order S-16-08 and validated by the Legislature's subsequent ratification as evidenced by language in the revised 2008 Budget Act. The validity of the third furlough day mandated by Executive Order S-13-09 was not addressed. (Professional Engineers, supra, 50 Cal.4th 989, 1003, 1007.) But the Legislature's subsequent revision of the 2009 Budget Act used virtually identical language, and, by parity of reasoning, should thus be viewed as the Legislature's ratification of the third furlough day mandated by Executive Order S-13-09.

Neither the Governor nor SEIU appears to seriously contest that the validity of the three-days-per-month furlough program is established by the revised 2009 Budget Act, viewed through the lens of Professional Engineers; indeed, SEIU does not even mention the revised 2009 Budget Act in its supplemental brief. Beyond this generality, however, the parties have fiercely opposed views of the permissible scope of the program.

All But Five Of The Defendants Were Legislatively Included In The Expanded Furlough Program

As previously indicated, the Governor submits that "Professional Engineers fully disposes of the issues in this case," intimating our only function is tantamount to a ministerial duty to reverse the trial court's judgment. Hoping to keep all of the named agencies within the furlough program, the Governor points to the language in both Executive Orders that the furlough program to be applied to all state agencies "regardless of funding source." The court in Professional Engineers repeatedly referred to the ambit and operation of the program as "across the board" in reducing wages and salaries. (Professional Engineers, supra, 50 Cal.4th 989, 1025, 1030, 1035, 1037), and spoke of the Legislature's revision of the 2008 Budget Act in connection with "the furlough program that was then in existence." (Id. at pp. 1000, 1047; see also, id., at pp. 1046, 1047 ["then existing furlough plan"].) Thus, the Governor sees Professional Engineers as the Supreme Court's upholding legislative approval for the entirety of the expanded furlough program, leaving no room for distinctions based on funding sources.

SEIU accepts that Professional Engineers covers state employees who are paid out of the General Fund for two days of furlough pursuant to the Governor's first Executive Order. But SEIU insists that the authority of Professional Engineers ends there, and cannot reach three groups of state employees: (1) those who work for agencies or departments that are not funded by "an item of appropriation" in the Budget Act, which would mean agencies or departments that are financed from other sources, primarily dedicated or "special funds"; (2) those in agencies using special funds that are statutorily protected from having resources borrowed by the General Fund, the so-called "non-borrowable" funds; and (3) those in units of state government that are financed entirely by the federal government. As SEIU observes, there is no mention in Professional Engineers of "special" funds, "borrowable" funds, or federal funds that pay for operations of state government.*fn7 By virtue of these silences, SEIU asserts, the opinion actually "supports granting SEIU's petition for writ of mandate" as to the three categories of state employees SEIU has identified, because imposing furloughs on them results in no reduction in state expenditures, the ostensible justification for the furloughs--an argument that would require us to explore every nook and cranny of this unfamiliar landscape, searching for special funds, and then checking the codes to ascertain whether they may be borrowed. This, we need not do, because such specialized knowledge is not necessary to decide the matter.

It is true that the court in Professional Engineers repeatedly used the language quoted by the Governor. But the Governor's view that the Legislature and the Supreme Court have made a blanket endorsement of the furlough program as implemented is contrary to the plain words of the revisions to both Budget Acts.

The relevant language of both revised versions of section 3.90, subdivision (a) provide that "each item of appropriation in this act . . . shall be reduced . . . to reflect a reduction in employee compensation achieved through . . . existing administration authority . . . ." It is clear that the phrase "existing administration authority"--which Professional Engineers treated as a near-synonym for the two-day per month furlough program--is subordinate to, and dependent on, the words "each item of appropriation." If there is no "item of appropriation," there is no predicate for "existing administration authority" to operate because, as the Professional Engineers court put it, there is no legislative "mandate" for the executive branch to reduce expenditures by furloughing employees. (Professional Engineers, supra, 50 Cal.4th 989, pp. 1000, 1044, 1046, 1047-1048, 1052.) Only this interpretation can explain the command in the final sentence that "The Director of Finance shall allocate the necessary reduction to each item of appropriation to accomplish the employee compensation reductions required by this section." (Section 3.90, subd. (a).)

In his opening brief, the Governor represented that of the more than 60 state defendants, only 30 "receive a portion of their budgets from the General Fund." Given the importance of the issues, we followed President Reagan's famous maxim to "Trust, but verify," and examined the Budget Acts themselves. They establish that of the 63 named defendants, all but five have at least one "item of appropriation" in each of the Budget Acts. For the readers who also prefer to "Trust, but verify," the particulars are set out as an appendix to this opinion.

SEIU was expressly asked at oral argument whether, if a state agency is the subject of an item of appropriation in the 2008 and 2009 Budget Acts, that agency's inclusion in the furlough program was governed by Professional Engineers. SEIU replied that the existence of an item of appropriation for a named defendant agency was merely "the first requirement," while "the second requirement goes to the issue of borrowability."*fn8 If SEIU is arguing that, in addition to an item of appropriation, an agency can only be validly included in the furlough program if that agency has a special fund and the Legislature actually borrowed money from that fund, we cannot agree.

We have examined the question of "borrowability" with considerable attention because it has been a central theme of SEIU's litigation strategy before and after Professional Engineers. Whether money in a given special fund was actually borrowed by the Controller pursuant to section 16310, or was merely theoretically "borrowable," is immaterial in the face of the incontestable proof of "items of appropriation" covering the great majority of the state officers and agencies named in SEIU's amended petition. Nothing in Professional Engineers hints that the indisputable existence of an "item of appropriation" may be ignored or otherwise undermined because all or a portion of that appropriation represents a borrowed loan from a special fund. Indeed, the concept of "borrowability" was never mentioned by the Supreme Court. Thus, the Legislature's long standing practice of borrowing special funds (see fn. 8, ante) has no significance in transmuting an "item of appropriation" into something else. It has long been held that the entirety of monies allocated by the Legislature to fund the operations of a unit of state government is likewise deemed a single "item of appropriation." (See Metropolitan Water Dist. v. Marquardt (1963) 59 Cal.2d 159, 174, citing Veterans' Welfare Board v. Jordan (1922) 189 Cal. 124; Reardon v. Riley (1938) 10 Cal.2d 531, 536, citing Riley v. Johnson (1933) 219 Cal. 513; California Teachers Assn. v. Cory (1984) 155 Cal.App.3d 494, 513-514.) SEIU advances no compelling reason why this line of authority is inapplicable here.

Thus, under Professional Engineers, the existence of one or more items of appropriation for any of the named defendant agencies is conclusive. Despite much argument, SEIU is unable to identify a single statutorily-designated "non-borrowable" specific fund (see fn. 8, ante) from which the Legislature purported to transfer amounts in order to balance either of the budgets.*fn9 Such an identification would in any event be ineffective at neutralizing the existence of an express item of appropriation. And the same would logically hold true for the asserted existence of any agency employing staff who are paid with federal funds.*fn10

As previously mentioned, our independent research disclosed that 58 of the 63 defendant state entities named in SEIU's amended petition are the subject of at least one item of appropriation in the 2008 and the 2009 Budget Acts. Therefore, as to those entities the Legislature has mandated and ratified the inclusion of their employees in the furlough program. It follows that the judgment against them must be reversed.

The Five

The five agencies named by SEIU in its amended petition that are not the subject of an item of appropriation in either of the Budget Acts are: (1) the California Children and Families Commission (also known as First 5 California, the designation used by SEIU in its complaint); (2) the Prison Industry Authority; (3) the California Earthquake Authority; (4) the California Housing Finance Agency; and (5) the Office of Administrative Hearings. SEIU argues that these agencies are exempt from the furlough program because they do not rely on appropriations from the General Fund for their operation. More precisely, because these agencies receive no money from the General Fund, SEIU treats them as funded exclusively by special funds, and therefore per se outside the permissible scope of the furlough program.

These five agencies are not your standard bureaucracies. Their purposes, structures, and origin of operating moneys are so dissimilar as to preclude a group classification.*fn11 For present purposes, their only commonality is that none has an item of appropriation in either of the Budget Acts. There is no need to determine whether these agencies' special funds--assuming they have such--are borrowable because the parties have not presented any reason to believe, nor there is any indication in either of the Budget Acts, that such funds were in fact borrowed pursuant to section 16310.

Because the five agencies are not tied to an "item of appropriation" in the Budget Acts, their inclusion in the furlough program is not "mandated" by an act of the Legislature, and thus, strictly speaking, are outside the holding of Professional Engineers. (See Professional Engineers, supra, 50 Cal.4th 989, 1000.) Nevertheless, we do not categorically exclude the possibility that the five agencies may be brought within the furlough program for reasons not disclosed by the made-obsolete-by-subsequent-events record before us. We must allow for the possibility that not every answer can be found in the 763 pages (including the Governor's line item reductions) of the 2008 Budget Act (Stats. 2008, ch. 268), the 666 pages of the 2009 Budget Act (Stats. 2009, 3d Ex. Sess. 2009-2019, ch. 1), or the 639 pages of revisions. (Stats. 2008, ch. 269; Stats. 2009, 4th Ex. Sess. 2009-2010, ch. 1.)

For example, there is the distinct situation of the continuing appropriation, which, as previously mentioned, may or may not appear in the Budget Act. (See fn. 7, ante.) It has already been established that the California Earthquake Authority is maintained by a continuing appropriation. (See Ins. Code, § 10089.22, subd. (b), quoted in fn. 11.) It is conceivable that the California Prison Industry Authority may require legislative augmentation of the moneys on hand so as to keep the Prison Industries Revolving Fund at the statutorily-mandated minimum of $730,000. (See Pen. Code, § 2806, cited in fn. 11.) We must also recognize that once the parties have focused their attention--for the first time--on the issue of the continuing appropriation, they may be able to formulate arguments as to whether such an event was within the logic of Professional Engineers even if did not qualify as an "item of appropriation."*fn12 Another possibility is that a continuing appropriation is connected to a special fund that was recently made available for borrowing. (See fns. 7-8.) Yet another is that the personnel administering the Prison Industry Authority are within the logic of Professional Engineers even if not the subject of an express item of appropriation because, as employees in the Department of Corrections and Rehabilitation, they are covered by one of more items of appropriation for that department in the Budget Acts. Counsel for the Governor suggested at oral argument that the same might be true for the Office of Administrative Hearings.

These are merely some of the possibilities dealing with matters that were never addressed in the trial court and thus cannot be verified from the record on appeal. We have already conceded that knowledge of the state budget process is not an ordinary judicial qualification. Because these are matters that cannot be resolved solely by reading the Budget Acts, we conclude it is appropriate to provide the parties with an opportunity to introduce evidence more directly pertinent to the issues as reframed by Professional Engineers. This can be done on the remand we order.

Issues Of Public Policy We Do Not Consider

The Governor makes a compelling case that the state's budgetary problems were so deep and dire that innovative and comprehensive measures were required to halt the financial hemorrhaging. SEIU does not deny the need for action, but argues that the ostensible goal is not advanced by a Procrustean program that furloughs employees in agencies that are in effect making a profit for the state.

As an abstract matter, there may be much to commend the Governor's conception of a furlough program with the widest application consistent with public safety. On the other hand, there might be some force to SEIU's claim that it is economically pointless to try to reduce a massive budgetary shortfall by cutting back on the operations of agencies--for example, it claims, the Franchise Tax Board--that generate more revenues than their costs. These are weighty considerations, but it is not our job to resolve them.

This court is on record as recognizing the profound judicial reluctance to second guess policy decisions made by the political branches. We recently stated that "In reviewing statutes enacted by the Legislature, courts ' "may not undertake to evaluate the wisdom of the policies embodied in such legislation; absent a constitutional prohibition, the choice among competing considerations in enacting laws is a legislative function." ' " (Coastside Fishing Club v. California Resources Agency (2008) 158 Cal.App.4th 1183, 1203; see Rittenband v. Cory (1984) 159 Cal.App.3d 410, 432 ["resolution of competing goals is precisely the sort that is best left to the legislative process"].) This is particularly true when the competing considerations are economic (e.g., California Medical Assn. v. Brown, supra, 193 Cal.App.4th 1449, 1464; California Grocers Assn. v . Bank of America (1994) 22 Cal.App.4th 205, 218), and most true concerning the budget because "the Legislature is the branch of government that must, on a yearly basis, fit the needs of the state into the funds available." (Carmel Valley Fire Protection Dist. v. State of California (2001) 25 Cal.4th 287, 302; see County of Butte v. Superior Court (1985) 176 Cal.App.3d 693, 698-699 [the "integrated process of determining the budget . . . is a legislative function which 'may not be controlled by the courts.' "].) We have also stated that "[t]he fact that a statute may be harsh, unfair, inequitable or create hardships does not show that the Legislature did not mean what it said. The courts are not concerned with the expediency, wisdom or utility of legislative enactments so long as constitutional principles are not violated." (San Diego County Water Authority v. Metropolitan Water Dist. (2004) 117 Cal.App.4th 13, 28.)

No constitutional issue is presented against the legality of the furlough program. SEIU spends a good deal of its attention to the asserted illogic of a furlough program that may not result in saving money and may actually cost the state more than it saves. That may be true. But the furlough program can be seen as serving other goals. The most obvious is to avoid adding state employees to the burgeoning number of the unemployed. (See Professional Engineers, supra, 50 Cal.4th 989, 1047.) Reducing the state's immediate labor costs helps stanch the flow of red ink, both in the obvious and immediate sense, and also for a reason found only in the shadowy realm of budget logic. As explained by the Department of Finance official: "The furloughing of employees paid out of the General Fund provides immediate . . . budgetary and cash savings. Although furloughing non-General Fund employees did not directly contribute to closing the General Fund budget gap, it did/does provide relief to the General Fund cash shortage since this increased the cash balances in internal borrowable resources. Furloughing employees in non-General Fund activities/programs/departments reduced spending from those borrowable funds as a result of the reduction in hours worked and thus increased borrowable fund cash balances for the General Fund. In projecting the impact of furloughing borrowable fund employees, it was estimated by the end of the 17-month furlough period, approximately $690 million would be added to the balances of these internal borrowable resources." This course of action was the unanimous recommendation of the Controller, the Treasurer, and the Legislative Analyst, who preferred it to the most costly alternative of "borrowing from the external market." *fn13

Giving the program the broadest scope consistent with public safety may implicate considerations more intangible but no less consequential. It is clearly in the interests of harmonious operations that a spirit of shared sacrifice be widespread, avoiding invidious comparisons of paychecks between employees who work together or perform equivalent functions. In addition, given what appears to be the fact that certain agencies have multiple sources of funding, it might be administratively difficult for the Controller to determine which employees are subject to the furlough program.

The dollars and cents consequences--if such there be--are not established by the record on appeal. Savings effected by the furlough program might not necessarily be confined simply to reductions in employee salaries, as SEIU posits. Furloughing all employees might allow a building to be closed, thereby saving money not spent for lighting, heating, security, etc. In addition, on the assumption that the staff of the five agencies qualify as public employees, there may be pension-related costs of which are unaware. There may be additional factors. We just do not know.

The controversy generated by the furlough program demonstrates that reasonable minds may disagree about the weight of these concerns. The furlough program may have a less than perfect application, be unable to satisfy the demands of Platonic perfection, or may result in less than optimal departmental efficiency. But these are, at bottom, competing theories about how the State should spend its money. The results may be uneven, perhaps even unfair, but that does not condemn them as--to use the trial court's characterizations--"arbitrary, capricious, and unlawful." The wisdom and expediency of the choices made by the political branches are not subject to judicial recalibration. (Coastside Fishing Club v. California Resources Agency, supra, 158 Cal.App.4th 1183, 1203; San Diego County Water Authority v. Metropolitan Water Dist., supra, 117 Cal.App.4th 13, 28.)

The foregoing establishes that neither of the two specified grounds for the judgment is sound. The first, based on the trial court's interpretation of section 19851, was rejected in Professional Engineers. (See fn. 2, ante.) The second, based on section 16310, is ineffective because it assumes a causal connection between borrowings from special funds and the furlough program that is no longer tenable after Professional Engineers.*fn14 (See fn. 3.)

The preceding analysis is based on matters and arguments that became relevant only after the trial court had entered its judgment. The filing of Professional Engineers shifted attention from the Government Code to the Budget Acts. A whole new nomenclature was introduced. And, although applying Professional Engineers we have been able to determine, as a matter of law, that almost all of the state agencies named as parties by SEIU are properly included in the expanded furlough program, there may be issues that cannot be answered by this court's independent research. We are sensitive to what Justice Holmes said more than a century ago: "Considerable latitude must be allowed for . . . possible peculiar conditions which this court can know but imperfectly, if at all." (Otis v. Parker (1903)187 U.S. 606, 608-609 ) We therefore deem it appropriate to provide counsel and the trial court an opportunity to explore whether any of the five remaining agencies were properly included within the three-days-per-month furlough program.

DISPOSITION

The purported appeals from the order overruling the demurrer and the two orders after hearing are dismissed. The judgment is reversed and the cause is remanded to the trial court with directions to: (1) recall the writ of mandate, (2) set aside the judgment granting the petition, and (3) conduct further proceedings as appropriate and enter a new judgment in conformity with this opinion. The parties shall bear their respective costs of appeal.

APPENDIX

The following are the officers and agencies named in SEIU's amended complaint. Beside each officer and agency are details of relevant items of appropriation in the 2008 and 2009 Budget Acts. We have elected not to mention every item of appropriation for a given officer or agency.

1. Governor (Stats. 2008, ch. 268, § 2.00, p. 35 [item 0500-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 29 [item 0500-001-001].)

2. Controller (Stats. 2008, ch. 268, § 2.00, p. 69 [items 0840-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 55 [item 0840-001-001].)

3. Insurance Commissioner (Stats. 2008, ch. 268, § 2.00, p. 79 [item 0845-001-0217]; Stats. 2009, ch. 1, § 2.00, p. 64 [item 0845-001-0217] for the Dept. of Insurance.)

4. Attorney General (Stats. 2008, ch. 268, § 2.00, p. 62 [item 0820-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 50 [item 0820-001-0001] for the Dept. of Justice.)

5. Dept. of Personnel Administration (Stats. 2008, ch. 268, § 2.00, p. 668 [item 8380-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 573 [item 8320-001-0001].)

6. Dept. of General Services (Stats. 2008, ch. 268, § 2.00, p. 128 [item 1760-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 103 [item 1760-001-0001].)

7. California Transportation Commission (Stats. 2008, ch. 268, § 2.00, p. 167 [item 2600-001-0046]; Stats. 2009, ch. 1, § 2.00, p. 135 [item 2600-001-0042].)

8. Board of California Pilot Commissioners (Stats. 2008, ch. 268, § 2.00, p. 672 [item 8530-001-0290]; Stats. 2009, ch. 1, § 2.00, p. 164 [item 2670-001-0290].)

9. California Labor & Workforce Development Agency (Stats. 2008, ch. 268, § 2.00, p. 47 [items 0559-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 40 [item 0559-001-0001].)

10. California Conservation Corps. (Stats. 2008, ch. 268, § 2.00, p. 220 [item 3340-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 174 [item 3340-001-0001].)

11. Governor's Office of Planning & Research (Stats. 2008, ch. 268, § 2.00, p. 47 [item 0650-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 40 [item 0650-001-0001].)

12. California Arts Council (Stats. 2008, ch. 268, § 2.00, p. 667 [item 8260-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 572 [item 8260-001-0001].)

13. Managed Risk Medical Insurance Board (Stats. 2008, ch. 268, § 2.00, p. 384 [item 4280-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 324 [item 4280-001-0001].)

14. Office of Real Estate Appraisers (Stats. 2008, ch. 268, § 2.00, p. 165 [item 2310-001-0400]; Stats. 2009, ch. 1, § 2.00, p. 135 [item 2310-001-0400].)

15. Dept. of Corporations (Stats. 2008, ch. 268, § 2.00, p. 157 [item 2180-001-0067]; Stats. 2009, ch. 1, § 2.00, p. 129 [item 2180-001-0067].)

16. Dept. of Managed Health Care (Stats. 2008, ch. 268, § 2.00, p. 166 [item 2400-001-0933]; Stats. 2009, ch. 1, § 2.00, p. 135 [item 2400-001-0933].)

17. Dept. of Real Estate (Stats. 2008, ch. 268, § 2.00, p. 165 [item 2320-001-0317]; Stats. 2009, ch. 1, § 2.00, p. 135 [item 2320-001-0317].)

18. Dept. of Consumer Affairs (Stats. 2008, ch. 268, § 2.00, p. 117 [items 1111-002-0702]; Stats. 2009, ch. 1, § 2.00, p. 94 [item 1111-002-0702].)

19. Dept. of Motor Vehicles (Stats. 2008, ch. 268, § 2.00, p. 210 [item 2740-001-0044]; Stats. 2009, ch. 1, § 2.00, pp. 168, 602 [items 2740-001-0044].)

20. CALPERS (Stats. 2008, ch. 268, § 2.00, pp. 147-148 [items 1900-015-0822, 1900-015-0830]; Stats. 2009, ch. 1, § 2.00, p. 116, 121 [items 1900-001-0950, 1900-015-0830].)

21. Santa Monica Mountains Conservancy (Stats. 2008, ch. 268, § 2.00, p. 282 [item 3810-001-0140]; Stats. 2009, ch. 1, § 2.00, p. 224 [item 3810-001-0140].)

22. State Coastal Conservancy (Stats. 2008, ch. 268, § 2.00, p. 260 [item 3760-001-0565]; Stats. 2009, ch. 1, § 2.00, p. 205 [item 3760-001-0565].)

23. Victim Compensation & Govt. Claims Board (Stats. 2008, ch. 268, § 2.00, p. 141 [item 1870-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 113 [item 1870-001-0001].)

24. State Council on Developmental Disabilities (Stats. 2008, ch. 268, § 2.00, p. 333 [item 4100-001-0890]; Stats. 2009, ch. 1, § 2.00, p. 266 [item 4100-001-0890].)

25. Dept. of Pesticide Regulation (Stats. 2008, ch. 268, § 2.00, p. 315 [item 3930-001-0106]; Stats. 2009, ch. 1, § 2.00, p. 251 [item 3930-001-0106].)

26. CALSTRS (Stats. 2008, ch. 268, § 2.00, pp. 152-153 [items 1920-002-0835, 1920-011-0001]; Stats. 2009, ch. 1, § 2.00, pp. 124, 125 [items 1920-001-0835, 1920-002-0835].)

27. Dept. of Financial Institutions (Stats. 2008, ch. 268, § 2.00, p. 156 [item 2150-001-0298]; Stats. 2009, ch. 1, § 2.00, p. 129 [item 2150-001-0298].)

28. Dept. of Alcohol Beverage Control (Stats. 2008, ch. 268, § 2.00, p. 155 [item 2100-001-3036]; Stats. 2009, ch. 1, § 2.00, p. 128 [item 2100-001-3036].)

29. Dept. of Boating & Waterways (Stats. 2008, ch. 268, § 2.00, p. 255 [item 3680-001-0516]; Stats. 2009, ch. 1, § 2.00, p. 201 [item 3680-001-0516].)

30. Gambling Control Commission (Stats. 2008, ch. 268, § 2.00, p. 81 [items 0855-001-0367]; Stats. 2009, ch. 1, § 2.00, p. 65 [item 0855-001-0367].)

31. Wildlife Conservation Board (Stats. 2008, ch. 268, § 2.00, p. 253 [item 3640-301-0262]; Stats. 2009, ch. 1, § 2.00, p. 198 [item 3640-301-0262].)

32. California Highway Patrol (Stats. 2008, ch. 268, § 2.00, p. 206 [item 2720-001-0044]; Stats. 2009, ch. 1, § 2.00, p. 165 [item 2720-001-0044].)

33. California Horse Racing Board (Stats. 2008, ch. 268, § 2.00, p. 672 [item 8550-001-0191]; Stats. 2009, ch. 1, § 2.00, p. 578 [item 8550-001-0091].)

34. California State Lottery Commission (Stats. 2008, ch. 268, § 2.00, p. 80 [item 0850-001-0562]; Stats. 2009, ch. 1, § 2.00, p. 64 [item 0850-001-0562].)

35. Dept. of Community Services & Development (Stats. 2008, ch. 268, § 2.00, p. 414 [item 4700-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 351 [item 4700-001-0890].)

36. California Integrated Waste Management Board (Stats. 2008, ch. 268, § 2.00, p. 311 [item 3910-001-0100]; Stats. 2009, ch. 1, § 2.00, p. 247 [item 3910-001-0100].)

37. Division of Workers Compensation (Stats. 2008, ch. 268, § 2.00, p. 657 [item 7350-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 563 [item 7350-001-0001].)

38. Dept. of Fish & Game (Stats. 2008, ch. 268, § 2.00, p. 245 [item 3600-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 192 [item 3600-001-0001].)

39. Commission on Teacher Credentialing (Stats. 2008, ch. 268, § 2.00, p. 573 [item 6360-101-0001]; Stats. 2009, ch. 1, § 2.00, p. 487 [item 6360-001-0407].)

40. California Unemployment Insurance Appeals Board (Stats. 2008, ch. 268, § 2, pp. 652-653 [item 7100-001-0870]; Stats. 2009, ch. 1, § 2.00, p. 559 [item 7100-001-0870].)

41. Dept. of Rehabilitation (Stats. 2008, ch. 268, § 2.00, p. 415 [item 5160-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 352 [item 5160-001-0001].)

42. Air Resources Board (Stats. 2008, ch. 268, § 2.00, p. 307 [item 3900-001-0044]; Stats. 2009, ch. 1, § 2.00, p. 244 [item 3900-001-0044].)

43. Dept. of Housing & Community Development (Stats. 2008, ch. 268, § 2.00, p. 157 [item 2240-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 129 [item 2240-001-0001].)

44. Employment Development Dept. (Stats. 2008, ch. 268, § 2.00, p. 647 [item 7100-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 553 [item 7100-001-0001].)

45. Dept. of Water Resources (Stats. 2008, ch. 268, § 2.00, p. 292 [item 3860-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 233 [item 3860-001-0001].)

46. California Tahoe Conservancy (Stats. 2008, ch. 268, § 2.00, p. 215 [item 3125-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 170 [item 3125-001-0001].)

47. Dept. of Conservation (Stats. 2008, ch. 268, § 2.00, p. 229 [item 3480-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 180 [item 3480-001-0001].)

48. State Water Resources Control Board. (Stats. 2008, ch. 268, § 2.00, p. 315 [item 3940-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 252 [item 3940-001-0001].)

49. Dept. of Health Care Services (Stats. 2008, ch. 268, § 2.00, p. 352 [item 4260-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 288 [item 4260-001-0001].)

50. Dept. of Public Health (Stats. 2008, ch. 268, § 2.00, p. 366 [item 4265-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 300 [item 4265-001-0001].)

51. Dept. of Social Services (Stats. 2008, ch. 268, § 2.00, p. 424 [item 5180-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 361 [item 5180-001-0001].)

52. Dept. of Transportation (Stats. 2008, ch. 268, § 2.00, p. 171 [item 2660-001-0041]; Stats. 2009, ch. 1, § 2.00, p. 139 [items 2660-001-0041].)

53. Dept. of Toxic Substances Control (Stats. 2008, ch. 268, § 2.00, p. 323 [item 3960-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 256 [item 3960-001-0001].)

54. Dept. of Industrial Relations (Stats. 2008, ch. 268, § 2.00, p. 657 [item 7350-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 563 [item 7350-001-0001].)

55. Dept. of Aging (Stats. 2008, ch. 268, § 2.00, p. 340 [item 4170-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 273 [item 4170-001-0001].)

56. Dept. of Parks & Recreation (Stats. 2008, ch. 268, § 2.00, p. 267 [item 3790-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 213 [item 3790-001-0001].)

57. Business, Transportation & Housing Agency (Stats. 2008, ch. 268, § 2.00, p. 37 [item 0520-001-0044]; Stats. 2009, ch. 1, § 2.00, p. 30 [item 0520-001-0044].)

58. California Post-secondary Education Commission (Stats. 2008, ch. 268, § 2.00, p. 574 [item 6420-001-0001]; Stats. 2009, ch. 1, § 2.00, p. 491 [item 6420-001-0001].)

We concur: Kline, P.J. Lambden, J.

A127776, SEIU v. Brown

Trial Court: Alameda County Superior Court Trial Judge: Honorable Frank Roesch


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