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Thumbnail image for chiangsmiling.JPGDemocratic legislative leaders sued Controller John Chiang today for blocking their pay during last year's budget dispute, a decision that drew scorn from lawmakers last summer.

Senate President Pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez said the Democratic controller overstepped his bounds when he decided that lawmakers sent Gov. Jerry Brown a flawed budget last June and docked their pay. They said they are not suing for back earnings, but to ask the court whether Chiang can intervene this year if lawmakers face another budget dispute with Brown at the June 15 deadline.

The lawmakers filed in Sacramento Superior Court, hiring Arthur G. Scotland, retired presiding justice of the 3rd District Court of Appeal, as well as the Los Angeles firm Strumwasser & Woocher. The Legislature's operating budget, financed by tax dollars, will pay for legal costs. Billing rates range from $435 per hour for the two lead attorneys to $130 per hour for a paralegal, according to the leaders' offices.

Chiang said his own party's lawmakers failed to balance the budget largely because their plan underfunded schools by $1.3 billion according to his interpretation of the state constitution. He also said they failed to pass all of the bills necessary to carry out a balanced budget. Chiang's decision came after Brown vetoed the first budget lawmakers sent him at the deadline.

Under a 2010 voter-approved law, lawmakers lose their pay and tax-free expense money if they do not send the governor a balanced budget by the June 15 deadline. Democrats added that provision as a sweetener in Proposition 25, the main thrust of which was reducing the budget vote threshold to a majority, rather than two-thirds. The controller believes he has discretion to determine what counts as a balanced budget under the initiative.

Steinberg and Pérez believe the controller has no role under Proposition 25 to determine the validity of the Legislature's budget. Scotland said today the controller illegally interfered with the Legislature's powers of appropriation.

Aside from veto powers, Steinberg said "neither the governor nor any member of the executive branch may brandish the threat of withholding legislative pay because they disagree with the decisions made by the legislative branch."

Brown and lawmakers ultimately reached agreement on June 27, costing most lawmakers about $4,830 each, equal to 12 days' worth of pay and expense money. The state saved a total of $583,200 in foregone legislative pay.

Mindful of public acrimony against the Legislature, the two leaders emphasized Tuesday that they were not asking for back pay. "Let me be clear from the outset, both the pro tem and I have waived our claims for renumeration should this lawsuit succeed," Pérez said. "This is fundamentally an issue of separation of powers."

Chiang said Tuesday in a statement that he welcomed the court's review. But he also used the words of fellow executive branch members as a retort to lawmakers.

"It is noteworthy to point out that the Legislature's budget proposal was not only vetoed by the Governor for not being a 'balanced solution,' but it was determined by the Treasurer to not be financeable, and would have, within months of its passage, led to the issuance of IOUs," the controller said.

Chiang's move gave Brown leverage in budget negotiations, as the controller essentially suggested that Brown could block legislative pay with his veto pen. Lawmakers have seethed ever since. If their lawsuit succeeds, they would not only have greater pay protection this year, but also greater leverage. Brown has asked lawmakers to pass significant cuts to health and welfare programs and to put school funding at risk if voters reject his tax plan.

The governor and Chiang had different reasons for rejecting the Legislature's first budget last year. Brown was more concerned with dubious budget balancers such as raising $1.2 billion by selling and then leasing back state buildings or taking $1 billion from First 5 funds that was under legal dispute.

Brown and lawmakers ultimately settled their differences by assuming the state would receive $4 billion more in tax revenues over the 2011-12 fiscal year. Fiscal gurus at the Department of Finance subsequently determined in December that the state would only see $1.8 billion of that money, and the state imposed $1 billion in mid-year cuts to education and social services.

As for Chiang's $1.3 billion underfunding problem, lawmakers and Brown solved that by shifting 1.06 percentage point in sales tax revenue to counties to pay for new responsibilities such as housing state inmates and overseeing parolees. Brown and lawmakers believe that relieved the state of $2.1 billion owed to schools under the constitution - an interpretation over which K-12 administrators and school boards have since sued the state.


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