Supreme Court of California Justia
Docket No. S108099
White v. Davis

Filed 5/1/03




IN THE SUPREME COURT OF CALIFORNIA



STEVEN WHITE,

Plaintiff and Appellant,

S108099

v.

Ct.App. 2/4 B122178

GRAY DAVIS, as Governor, etc., et al.,

Los Angeles County

Defendants and Respondents. )

Super. Ct. No. BC175284



HOWARD JARVIS TAXPAYERS

ASSOCIATION et al.,

Plaintiffs

and

Respondents,

v.

Ct.App. 2/4 B123992

STEVE WESTLY, as Controller, etc.

Los Angeles County

Defendant and Appellant;

Super. Ct. No. BC193174

CALIFORNIA STATE EMPLOYEES

ASSOCIATION, LOCAL 1000, SEIU,

AFL-CIO, CCL, et al.,

Intervenors and Appellants.



Article IV, section 12 of the California Constitution provides in part that

“[t]he Legislature shall pass the budget bill by midnight on June 15 of each year,”

but in recent years the timely adoption of the budget bill in California has proven

to be the exception, rather than the rule. This proceeding arises out of two


taxpayer actions that were filed in the wake of budget impasses that occurred in

1997 and 1998.1 In the action filed in 1998, the trial court issued a preliminary

injunction broadly barring the Controller from making payments from the state

treasury in the absence of passage of the budget bill or an emergency

appropriation ― a preliminary injunction that largely would have shut down

government operations in California, but for the Legislature’s prompt enactment

of an emergency appropriation and the Court of Appeal’s subsequent order staying

the effect of the preliminary injunction. In the Court of Appeal, the Controller

contended that, contrary to the trial court’s ruling in the 1998 case, a variety of

payments lawfully may be made from the treasury during a budget impasse.

Although the ultimate passage of budget bills in 1997 and 1998 rendered the

appeals in these cases moot, the Court of Appeal  concluding that the issues

presented by this proceeding are important and likely to recur, but will regularly

evade timely appellate review  retained the matter to consider this contention.

After briefing and argument, the Court of Appeal, in a lengthy decision,

ultimately concluded that the Controller may authorize the payment of state funds

during a budget impasse in a variety of circumstances, including (1) when

payment is authorized by a “continuing appropriation” enacted by the Legislature,

(2) when payment is authorized by a self-executing provision of the California

Constitution (for example, the payment of certain funds for public schools under

article XVI, section 8.5 of the Constitution, and the payment of elected state

officers’ salaries under article III, section 4 of the California Constitution), and


1

For convenience, we use the term “budget impasse” to refer, with regard to

any year in which the budget bill has not been enacted into law before July 1 (the
beginning of the state’s fiscal year), to the situation that exists between July 1 and
the date the budget bill is enacted into law.

2

(3) when payment is mandated by federal law (for example, the prompt payment

of those wages mandated by the federal Fair Labor Standards Act, and the prompt

payment of benefits mandated under federal food stamp, foster care and adoption,

child support, and child welfare programs). (White v. Davis (2002) 98

Cal.App.4th 969 (White v. Davis I); see fn. 14, post.) The Court of Appeal

reversed the trial court’s judgment granting a preliminary injunction insofar as the

injunction applied to these categories of payments, but otherwise affirmed the

order.

The Controller and a number of state employee unions and associations that

had intervened in the lower court actions (hereafter referred to as state employee

intervenors) filed petitions for review in this court, but the petitions challenged

only two aspects of the Court of Appeal’s decision. First, both the Controller and

the state employee intervenors, contending that the Court of Appeal erred in

affirming in any respect the trial court’s 1998 order granting the preliminary

injunction, maintained that the trial court’s issuance of a preliminary injunction in

this action constituted a clear abuse of discretion in light of (1) prior case law

holding that the alleged harm to a taxpayer’s interest in the public treasury is

insufficient to support the issuance of a preliminary injunction to bar the alleged

improper expenditure of public funds, and (2) the circumstance that the harm

posed by granting the broad preliminary injunctive relief sought by plaintiffs

greatly outweighed the potential harm that would have resulted from denying such

injunctive relief pending a full adjudication on the merits. Second, the state

employee intervenors challenged the Court of Appeal’s conclusions regarding the

payment of state employee salaries during a budget impasse, contending that the

Court of Appeal erred in determining that state law did not authorize the

Controller to pay all state employees their full and regular salaries in the absence

of a duly enacted budget bill, and erred additionally in concluding that the federal

3

Fair Labor Standards Act required the Controller, during a budget impasse, to pay

state employees covered by that law only at the minimum wage rate for hours

worked during the impasse.

We granted review to address only the two matters raised in the petitions

for review: (1) the procedural question whether the trial court erred in granting a

preliminary injunction in the underlying taxpayer action, and (2) the substantive

question whether the Controller is authorized to pay state employees their full and

regular salaries during a budget impasse.

With regard to the first issue, we conclude that the trial court in the 1998

action abused its discretion in granting a preliminary injunction and that the Court

of Appeal erred in affirming in any respect the order granting the preliminary

injunction.

With regard to the second issue, we conclude that the trial court erred in

ruling that state employees who work during a budget impasse properly may be

considered “volunteers” who obtain no right to the payment of salary or wages

either under state or federal law, and also that the Court of Appeal erred insofar as

that court concluded that state employees’ entitlement “to compensation for work

performed during a budget impasse does not accrue until the enactment of a

budget or other proper appropriation.” (White v. Davis I, supra, 98 Cal.App.4th

969, 998.) Instead, we conclude that under the applicable California statutes, state

employees who work during a budget impasse obtain the right, protected by the

contract clauses of the federal and state Constitutions, to the state’s ultimate

payment of their full salary for work performed during the budget impasse; that is,

when state employees work during a budget impasse, the state becomes

contractually obligated ultimately to pay employees the full salary they have

earned. At the same time, however, we conclude that the Court of Appeal was

correct in determining that state employees do not have a contractual right actually

4

to receive the payment of salary prior to the enactment of an applicable

appropriation, and that the Controller is not authorized under state law to pay

those salaries prior to such an appropriation. Thus, state law contractually

guarantees that state employees ultimately will receive their full salary for work

performed during a budget impasse, but state law does not authorize the Controller

to disburse state funds to the employees until an applicable appropriation has been

enacted.

In addition, we conclude that, in light of the requirements of federal law,

the Controller is required, notwithstanding a budget impasse and the limitations

imposed by state law, to timely pay those state employees who are subject to the

minimum wage and overtime compensation provisions of the federal Fair Labor

Standards Act — a category that includes many, but not all, state employees — the

wages required by that act.

I

As noted, this case arises out of two separate taxpayer actions, the first filed

in 1997 concerning the 1997-1998 budget impasse (hereafter, the 1997 action),

and the second filed in 1998 related to the 1998-1999 budget impasse (hereafter,

the 1998 action). We briefly describe each of the actions.

A

On July 25, 1997, Steven White filed the 1997 action against the Governor

and numerous other state officials, a taxpayer action alleging the improper

expenditure of public funds. On September 22, 1997, White filed a first amended

complaint, alleging that the Legislature had failed to pass a budget for the 1997-

1998 fiscal year by the constitutionally required date of June 15, 1997, and that

from June 15 to August 18, 1997, when a budget finally was enacted, the

Controller improperly had disbursed funds from the state treasury to welfare

recipients, state employees, members of the Legislature, and other individuals

5

without the enactment of an emergency appropriation bill. The complaint

maintained that “[w]ithout any appropriations, the government of the State of

California should have closed,” and sought declaratory and injunctive relief.

Defendants filed a demurrer to the complaint, and on March 13, 1998, the

trial court sustained the demurrer without leave to amend, concluding that the

action was moot as to the 1997-1998 fiscal year because a budget for that year had

been enacted, and that the action was premature as to the following fiscal year.

White filed an appeal from the dismissal of the 1997 action.

B

On June 24, 1998, the Howard Jarvis Taxpayers Association and Steven

White (hereafter plaintiffs) initiated the 1998 action, another taxpayer action

seeking declaratory and injunctive relief against the Controller. The complaint

stated that the Legislature had not passed a budget by June 15, 1998, and asserted

that “[t]he Constitution of the State of California does not have any provision to

allow the state government to function without a budget, absent emergency bills.

Under the Constitution . . . , without an emergency bill, the state government must

close.” The complaint further alleged that the Controller was likely to disburse

funds despite this asserted constitutional restriction, and sought both interim and

permanent injunctive relief.

On July 9, 1998, the trial court issued a temporary restraining order barring

the Controller from paying out funds absent the enactment of a budget or an

emergency appropriation, unless payments were authorized by a continuing

appropriation or federal law. Thereafter, the trial court granted intervenor status to

6

several state employee unions and associations as well as several individual state

employees.2

On July 21, 1998, after conducting a hearing, the trial court granted a

preliminary injunction barring the Controller from disbursing any funds in the

absence of a budget, with the exception of (1) funds properly appropriated prior to

July 1, 1998, for expenditure in the 1998-1999 fiscal year, (2) funds properly

appropriated pursuant to emergency bills, and (3) payments of minimum wages

and overtime compensation required under the federal Fair Labor Standards Act

for work performed prior to July 21, 1998. In the course of its decision, the trial

court determined that state employees who continued to work during the budget

impasse after the entry of its order did so as “volunteers,” and prohibited the

Controller from making any payments for such work. The trial court also found

that continuing appropriations “have no constitutional basis and simply represent

examples of expenditures from the state treasury that have no unique position over

other required expenditures.” As part of its injunctive order, the trial court also

ordered plaintiffs to post a $100,000 bond.

The Controller and the state employee intervenors immediately appealed

from the order granting the preliminary injunction, and requested the Court of

Appeal to stay the preliminary injunction by supersedeas.3 On July 22, 1998 —


2

The following state employee unions and associations were granted

intervenor status: California State Employees Association, Service Employees
International Union, Local 1000, AFL-CIO, CLC ; Professional Engineers in
California Government; California Association of Professional Scientists;
California Correctional Peace Officers Association; and California Union of
Safety Employees.
3

At the same time, the Controller and intervenors filed petitions for an

original writ of mandate in the Supreme Court. This court transferred the petitions
to the Court of Appeal, which consolidated them with the appeals in this

(footnote continued on next page)

7

the day after the trial court issued its preliminary injunction — the Legislature

enacted an emergency appropriation to fund vital services and pay the salaries of

state employees through August 5, 1998. On July 28, 1998, the Court of Appeal

issued a writ of supersedeas staying the trial court’s preliminary injunction

pending consideration of the appeal. That stay has remained in effect throughout

the pendency of the appeal. The 1998-1999 budget bill ultimately was passed and

signed into law on August 21, 1998.

C

The Court of Appeal consolidated the appeals from the 1997 and 1998

actions and decided the cases in a single opinion. (White v. Davis I, supra, 98

Cal.App.4th 969.) Because the budget bills for both the 1997-1998 and 1998-

1999 fiscal years had been enacted prior to the resolution of the appeal, the Court

of Appeal turned first to the issue of mootness, dismissing the appeal from the

1997 action as moot but retaining the appeal from the 1998 action for decision.

The Court of Appeal explained that an appellate court has “ ‘discretion to decide

otherwise moot cases presenting important issues that are capable of repetition yet

tend to evade review’ ” (98 Cal.App.4th at p. 980, quoting Conservatorship of

Wendland (2001) 26 Cal.4th 519, 524, fn. 1), and that the issues presented here

“are of profound public significance and arise with some frequency, but escape

review with the enactment of a budget.” (98 Cal.App.4th at p. 980.)

In addressing the validity of the broad preliminary injunction issued by the

trial court in the 1998 action, the Court of Appeal noted that the Controller

contended in the trial court and on appeal that there are numerous circumstances

(footnote continued from previous page)

proceeding and ultimately dismissed the petitions as moot. No one has challenged
the Court of Appeal’s disposition of those mandate actions.

8

under which payment of public funds is authorized even in the absence of the

enactment of the annual budget act: (1) when payment is authorized by a

“continuing appropriation” enacted by the Legislature, (2) when payment is

authorized by a self-executing provision of the California Constitution, and

(3) when payment is required by federal law. The Court of Appeal proceeded to

address each of these categories, emphasizing that its decision was limited to the

provisions of law discussed by the parties on appeal, and that its decision did not

purport to determine “whether other provisions of law may authorize or mandate

the disbursement of funds during a budget impasse.” (White v. Davis I, supra, 98

Cal.App.4th 969, 978, fn. 1.)

Because the Court of Appeal’s discussion of the numerous issues before it

reveals the complexity of the task of determining which payments of public funds

lawfully may be made during a budget impasse, we believe it is useful to review at

some length that court’s analysis and conclusions.

1. Continuing Appropriations

The Court of Appeal initially scrutinized the category of “continuing

appropriations.” In California Assn. for Safety Education v. Brown (1994) 30

Cal.App.4th 1264, 1282, the court explained that “[a]n appropriation is a

legislative act setting aside ‘a certain sum of money for a specified object in such

manner that the executive officers are authorized to use that money and no more

for such specified purpose.’ [Citation.] A continuous [or continuing]

appropriation runs from year to year without the need for further authorization in

the budget act. [Citations.]” (Fn. omitted, italics added.) Government Code

section 16304 evidences the Legislature’s approval of such appropriations.4

4

Government Code section 16304 provides in relevant part: “An

appropriation shall be available for encumbrance during the period specified

(footnote continued on next page)

9

As the Court of Appeal noted, the Controller’s brief cited a considerable

number of statutes and voter-approved initiatives that establish continuing

appropriations independent of the budget act, authorizing payments for items such

as tax refunds, disability and retirement payments, and payments to bond holders.5


(footnote continued from previous page)

therein, or, if not otherwise limited by law, for three years after the date upon
which it first became available for encumbrance. An appropriation containing the
term ‘without regard to fiscal years’ shall be available for encumbrance from year
to year until expended. [¶] . . . [¶]


“Appropriations for the following purposes are exempt from limitations as

to period of availability in any appropriation, and shall remain available from year
to year until expended:


“(a) Payment of interest and redemption charges on any portion of the

bonded debt of the state.


“(b) Transfers of money from any fund for the benefit of elementary

schools, high schools, community colleges, the University of California, or any
interest and sinking fund in the State Treasury.


“(c) Money transferred to revolving funds specifically created by law,

including, but not limited to, the Architecture Revolving Fund and the Water
Resources Revolving Fund.


“(d) Appropriations available for the acquisition of real property to the

extent that such appropriations have been encumbered by the filing of
condemnation proceedings on behalf of the State of California prior to the
expiration of the period of availability of the appropriation.


“(e) Money transferred to and expendable from funds other than the fund in

which originally deposited, pursuant to the provisions of law earmarking or
appropriating for expenditure certain classes of revenue or other receipts.


“(f) Continuing provisions of law appropriating for specific purposes

certain classes of revenue or other receipts, upon their deposit in a particular fund
in the State Treasury or upon their collection by an agency of this state.”
5

In a brief filed in the Court of Appeal, the Controller cited, as a “small

sampling” of current enactments authorizing continuing appropriations, the
following provisions authorizing continuing appropriations for (1) disability
income payments (Unemploy. Ins. Code, § 3012), (2) income tax refunds (Rev. &
Tax. Code, § 19611), (3) the Local Revenue Fund (Welf. & Inst. Code, § 17600),
(4) the Local Public Safety Account (Gov. Code, § 300052, subd. (a)),
(5) contributions to the Teachers Retirement Fund (Ed. Code, § 22955),

(footnote continued on next page)

10

Plaintiffs did not claim in the trial court or in the Court of Appeal that any of the

provisions cited by the Controller were not intended to create continuing

appropriations, but rather argued that, as a general matter, continuing

appropriations are not constitutionally permissible. The trial court agreed with

plaintiffs, and its preliminary injunction barred the Controller from making

payments during a budget impasse pursuant to any continuing appropriation. The

Court of Appeal disagreed with the trial court on this fundamental issue, holding

that legislative or voter-approved measures authorizing continuing appropriations

independent of the budget act are constitutionally valid.

In reaching this conclusion, the Court of Appeal began by observing that

under the California Constitution “[g]enerally, the Legislature ‘may exercise any

and all legislative powers which are not expressly or by necessary implication

denied to it by the Constitution.’ (Methodist Hosp. of Sacramento v. Saylor (1971)

5 Cal.3d 685, 691.)” (White v. Davis I, supra, 98 Cal.App.4th 969, 983-984.) In

Methodist Hosp. of Sacramento, our court explained this fundamental point at

greater length: “Unlike the federal Constitution, which is a grant of power to

Congress, the California Constitution is a limitation or restriction on the powers of

the Legislature. [Citations.] Two important consequences flow from this fact.

First, the entire law-making authority of the state, except the people’s right of

initiative and referendum, is vested in the Legislature, and that body may exercise


(footnote continued from previous page)

(6) retirement and disability payments (Ed. Code, § 22307), (7) the operations of
the California Highway and Infrastructure Finance Agency (Health & Saf. Code,
§§ 51000, 50154), (8) the Local Agency Investment Fund ( Gov. Code,
§ 16429.1), (9) bond-related payments (Gov. Code, §§ 15814.16, 15814. 48), and
(10) voter-approved general obligation bond payments (Gov. Code, § 8879.10;
Pen. Code, § 7428; Pub. Util. Code, § 99693.)

11

any and all legislative powers which are not expressly or by necessary implication

denied to it by the Constitution. [Citations.] In other words, ‘we do not look to the

Constitution to determine whether the legislature is authorized to do an act, but

only to see if it is prohibited.’ [Citation.] [¶] Secondly, all intendments favor the

exercise of the Legislature’s plenary authority: ‘If there is any doubt as to the

Legislature’s power to act in any given case, the doubt should be resolved in favor

of the Legislature’s action. Such restrictions and limitations [imposed by the

Constitution] are to be construed strictly, and are not to be extended to include

matters not covered by the language used.’ [Citation.]” (Methodist Hosp. of

Sacramento v. Saylor, supra, 5 Cal.3d at p. 691.)

The Court of Appeal then turned to the terms of the two state constitutional

provisions upon which plaintiffs relied. Article IV, section 12, subdivision (c) of

the California Constitution provides in relevant part: “The Legislature shall pass

the budget bill by midnight on June 15 of each year. Until the budget bill has been

enacted, the Legislature shall not send to the Governor for consideration any bill

appropriating funds for expenditure during the fiscal year for which the budget bill

is to be enacted, except emergency bills recommended by the Governor or

appropriations for the salaries and expenses of the Legislature.” Article XVI,

section 7, provides: “Money may be drawn from the Treasury only through an

appropriation made by law and upon a Controller’s duly drawn warrant.”

The Court of Appeal observed that “nothing in . . . article IV, section 12,

expressly bars continuing appropriations. On its face, section 12 prohibits the

Legislature from sending specified appropriation bills to the Governor prior to the

enactment of a budget, and it provides for exceptions to this prohibition; it does

not otherwise limit the Legislature’s authority to enact appropriations.” (White v.

Davis I, supra, 98 Cal.App.4th 969, 984.) Similarly, article XVI, section 7, simply

provides that money may be drawn from the Treasury “only through an

12

appropriation made by law . . . .” (Italics added.) That provision does not limit the

form in which an appropriation may be adopted.

In addition to noting that the relevant constitutional provisions do not on

their face preclude the Legislature from enacting continuing appropriations, the

Court of Appeal further explained that the predecessor to current article IV,

section 12 — former article IV, section 34 — had been interpreted by this court to

permit the Legislature to enact continuing appropriations that are available for

expenditure independent of the budget act (see, e.g., Gillum v. Johnson (1936) 7

Cal.2d 744, 758; Railroad Commission v. Riley (1923) 192 Cal. 54, 56-58), that

there was no indication that the drafters or the voters intended any change in

meaning in this regard when article IV was substantially revised in 1966 and the

current provisions of article IV, section 12, were adopted, and that subsequent

Court of Appeal opinions have recognized the existence of continuing

appropriations (see, e.g., California Assn. for Safety Education v. Brown, supra,

30 Cal.App.4th 1264, 1283). (White v. Davis I, supra, 98 Cal.App.4th 969, 984-

988.) Accordingly, the Court of Appeal concluded that continuing appropriations

are constitutionally permissible, and it set aside the preliminary injunction insofar

as it rested on the trial court’s contrary determination.6


6

The Court of Appeal noted that because the trial court had concluded that

continuing appropriations as a general matter are constitutionally impermissible,
the trial court did not make individual determinations as to whether each of the
particular statutes or laws cited by the Controller validly establish a continuing
appropriation. The Court of Appeal further explained that because the trial court
did not address the individual continuing appropriations, and because a full
showing had not been made regarding those measures, the Court of Appeal would
not itself address whether any of the provisions establish continuing appropriations
independent of the budget act. (White v. Davis I, supra, 98 Cal.App.4th 969, 982.)

13

2. Payments Authorized by the State Constitution

The Court of Appeal next considered the Controller’s contentions that a

number of provisions of the California Constitution authorize the payment of

funds from the state treasury independent of the budget act.

(a) Article III, section 4

The Court of Appeal first addressed the Controller’s contention that the

payment of salaries of elected state officers is authorized by article III, section 4,

of the California Constitution without a specific budget act appropriation. That

constitutional provision states in relevant part: “[S]alaries of elected state officers

may not be reduced during their term of office. Laws that set these salaries are

appropriations.” (Italics added.) The Controller maintained that because the

salaries of state officers are set by statute, the Controller may authorize the

payment of these salaries independent of a budget act or emergency appropriation.

The Court of Appeal agreed with the Controller’s position, explaining that

not only did the explicit constitutional language of article III, section 4, establish

that the statutes setting those salaries themselves operate as appropriations for

purposes of the Constitution, but that this conclusion found support in the decision

of Brown v. Superior Court (1982) 33 Cal.3d 242, which states that “though a bill

setting salaries of elected state officers is not an appropriation bill it nonetheless

takes effect as an appropriation once it has been enacted.” (33 Cal.3d at pp. 249-

250, fn. 6.)

(b) Article XVI, Section 8

The Court of Appeal next addressed the Controller’s contention that article

XVI, section 8 of the California Constitution — a provision establishing a

minimum level of education funding enacted as part of the voter initiative

popularly known as Proposition 98 — authorizes the disbursement of funds

independent of a budget act or emergency appropriation. On this point, the Court

14

of Appeal rejected the Controller’s contention and agreed with the earlier decision

of County of Sonoma v. Commission on State Mandates (2000) 84 Cal.App.4th

1264, 1290, that “Proposition 98 does not appropriate funds. . . . The power to

appropriate funds was left in the hands of the Legislature. Proposition 98 merely

provides formulas for determining the minimum to be appropriated every budget

year. The state’s obligation is to ensure specific amounts of moneys are applied

by the state for education.” Accordingly, the Court of Appeal concluded that the

provisions of article XVI, section 8 “do not constitute a self-executing

authorization to disburse funds.” (White v. Davis I, supra, 98 Cal.App.4th 969,

993.)

(c) Article XVI, Section 8.5

The Court of Appeal next addressed the Controller’s argument that article

XVI, section 8.5, of the California Constitution — an additional educational

funding provision, also adopted as part of Proposition 98 — authorizes the

disbursement of funds independent of a budget act or emergency appropriation.

After analyzing the somewhat complex features of this provision, the Court of

Appeal ultimately agreed with the Controller that article XVI, section 8.5 provides

an independent basis for the disbursement of funds.

As the Court of Appeal explained, article XVI, section 8.5 operates in

conjunction with another provision of the California Constitution, article XIII B,

which generally limits governmental spending. “As originally enacted, article

XIII B required that all governmental entities return revenues in excess of their

appropriation limits to the taxpayers through tax rate or fee schedule revisions. In

Proposition 98, . . . article XIII B was amended to provide that half of state excess

revenues would be transferred to the state school fund for the support of school

districts and community college districts.” (Hayes v. Commission on State

Mandates (1992) 11 Cal.App.4th 1564, 1580, fn. 7.)

15

Along with the amendment of article XIII B in Proposition 98, the voters

adopted article XVI, section 8.5. Article XVI, section 8.5, subdivision (a)

provides that in addition to the education funding required under article XVI,

section 8, “the Controller shall during each fiscal year transfer and allocate all

revenues available [under the relevant provisions] of article XIII B to that portion

of the State School Fund restricted for elementary and high school purposes, and

to that portion of the State School Fund restricted for community college purposes,

respectively, in proportion to the enrollment in school districts and community

college districts respectively.” Article XVI, section 8.5, subdivision (c), in turn,

provides that “[f]rom any funds transferred to the State School Fund pursuant to

subdivision (a), the Controller shall each year allocate to each school district and

community college district an equal amount per enrollment in school districts from

the amount in that portion of the State School Fund restricted for elementary and

high school purposes and an equal amount per enrollment in community college

districts from that portion of the State School Fund restricted for community

college purposes.” Finally, article XVI, section 8.5, subdivision (d) provides that

“[a]ll revenues allocated pursuant to subdivision (a) shall be expended solely for

the purposes of instructional improvement and accountability as required by law.”

In analyzing whether the provisions of article XVI, section 8.5 authorize

the disbursement of funds without the need for a legislative appropriation, the

Court of Appeal noted that in California Teachers Assn. v. Hayes (1992) 5

Cal.App.4th 1513, the appellate court, in discussing this constitutional provision,

declared: “The measure is self-executing; it requires no legislative action. . . . [¶]

. . . Section 8.5 does not extend the Legislature’s spending power to excess

revenues; rather it imposes a self-executing, ministerial duty upon the Controller

to transfer such excess revenues to a restricted portion of the school fund and

thence to allocate such revenues to school districts and community college

16

districts on a per-enrollment basis. Section 8.5 specifically restricts the purposes

for which those funds may be expended.” (5 Cal.App.4th at p. 1530.)

The Court of Appeal below agreed with California Teachers Assn.’s

description of the effect of this provision, and held that “[a]s such, article XVI,

section 8.5, bears the earmarks of a continuing appropriation entrenched by the

voters in the state Constitution. We therefore conclude that this provision contains

a self-executing authorization to disburse funds.” (White v. Davis I, supra, 98

Cal.App.4th 969, 995.)

3. Payments Pursuant to Federal Law

After addressing the Controller’s contentions regarding the permissibility of

authorizing payments from the treasury absent a budget bill or emergency

appropriation, pursuant to continuing appropriations and various provisions of the

California Constitution, the Court of Appeal turned to the third general category

asserted by the Controller as providing a basis for the payment of state funds

during a budget impasse — payments that are required to comply with federal law.

In analyzing this claim, the Court of Appeal recognized at the outset that in

light of the supremacy clause of the federal Constitution (U.S. Const., art. VI, cl. 2

[“Laws of the United States . . . shall be the supreme Law of the Land; and the

Judges of every State shall be bound thereby, any Thing in the Constitution or

Laws of any State to the Contrary notwithstanding”]), the requirements of federal

law necessarily prevail over any restrictions that state law may place on the

disbursement of state funds. (See, e.g., McCulloch v. Maryland (1819) 17 U.S. (4

Wheat.) 316, 427; Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 516

[“state law that conflicts with federal law is ‘without effect’”].) Thus, the Court of

Appeal concluded that when federal law places an obligation upon the state

promptly to make payments of public funds, the Controller is authorized to make

such payments independent of the enactment of a budget bill or emergency

17

appropriation. The Court of Appeal held that the pertinent question in each

instance is whether the applicable federal law in fact requires the state to make the

payment or payments during the time period in question.

The Court of Appeal then discussed a number of federal statutes asserted by

the Controller to require the disbursement of public funds notwithstanding a

budget impasse.

(a) Fair Labor Standards Act

The Court of Appeal first addressed the question whether the Controller is

required under the Fair Labor Standards Act (29 U.S.C. § 201 et seq.) (FLSA) to

disburse funds to pay the salaries of state employees during a budget impasse.

The trial court had concluded that the state was required by the FLSA to pay the

wages required by that act only for work performed prior to the date of the trial

court’s preliminary injunction — determining that state employees would be

“volunteers” not entitled to compensation with regard to work performed after the

trial court issued its injunction. The Court of Appeal rejected this conclusion,

determining that the state is obligated to pay in a timely fashion the wages

required by the FLSA for all work performed during a budget impasse. That court

also concluded, however, that, contrary to the arguments set forth by the state

employee intervenors, state employees “do not have an entitlement to their full

salaries (over and above the compensation required under the FLSA) pursuant to

the contract clauses of the United States and California Constitutions.” (White v.

Davis I, supra, 98 Cal.App.4th 969, 995.)

Because the question of the payment of state employee salaries during a

budget impasse is one of the issues upon which review was sought and granted,

we describe in detail the Court of Appeal’s resolution of the salary issue.

The Court of Appeal began its analysis by explaining that the FLSA —

which by its terms applies to public employers, including a state (29 U.S.C.

18

§ 203(d), (e)(2)(C)) — requires an employer to pay minimum wages (29 U.S.C.

§ 206(a)) and overtime compensation (29 U.S.C. § 207(a)(1)) to those employees

to whom those provisions apply, and provides for the recovery of unpaid

minimum wages, unpaid overtime compensation, and liquidated damages.

(29 U.S.C. § 216(b).)7 The Court of Appeal also noted that the federal courts have

held that, as a general matter, “ ‘the FLSA is violated unless the minimum wage is

paid on the employee’s regular payday . . . .’ (Biggs v. Wilson (9th Cir. 1993) 1

F.3d 1537, 1541 [cert. den. (1994) 510 U.S. 1081].)” (White v. Davis I, supra, 98

Cal.App.4th 969, 996, italics added.)

Although nothing in the FLSA specifically addresses a state’s obligation to

pay wages required under the act during a budget impasse, the Court of Appeal

explained that in Biggs v. Wilson, supra, 1 F.3d 1537, the Ninth Circuit squarely

held that California had violated the FLSA in July 1990 by failing to pay the

wages owed to public transportation employees under the FLSA during a budget

impasse. In this proceeding, no one has questioned the validity of the

interpretation or application of the FLSA set forth in Biggs — namely that under


7

The Court of Appeal recognized that the United States Supreme Court

recently held that individual employees may not initiate actions under the FLSA
against a state that has not waived its immunity under the Eleventh Amendment to
the United States Constitution (see Alden v. Maine (1999) 527 U.S. 706, 754), and
that a lower federal court had held that California has not waived this immunity
(Baird v. Kessler (E.D.Cal. 2001) 172 F.Supp.2d 1305, 1312). The Court of
Appeal nonetheless pointed out that the FLSA authorizes the Secretary of Labor to
seek the payment of minimum wages and overtime compensation “owing to any
employee or employees” under the FLSA (29 U.S.C. § 216(c)) and thus that the
state remains obligated to comply with the provisions of the FLSA. (White v.
Davis I, supra,
98 Cal.App.4th 969, 996, fn. 10; see also Alden v. Maine, supra,
527 U.S. at p. 755 [explaining that the high court’s holding in that case “does not
confer upon the State a . . . right to disregard the Constitution or valid federal
law”].)

19

the FLSA, the state is required to pay the wages owed under that act on the

employees’ regular payday, notwithstanding the existence of a budget impasse.

The Court of Appeal noted that although the trial court in this case had

acknowledged the Biggs decision, the trial court had concluded that under that

decision the Controller was authorized to pay the minimum wages and overtime

compensation required under the FLSA only for work performed prior to the date

of the preliminary injunction, because state employees who continued to work

after that date were “volunteers” not entitled to compensation under the FLSA.

The Court of Appeal reasoned that the trial court apparently had concluded “that a

budget impasse nullifies the relationship between the state and its employees, and

that employees who continued to work despite notification of this nullification fall

outside the protection of the FLSA.” (White v. Davis I, supra, 98 Cal.App.4th

969, 996.) The Court of Appeal treated the trial court’s ruling as raising three

issues: “(1) whether there is a continuing employment relationship between the

state and its employees during a budget impasse; (2) whether this relationship, if it

exists, falls within the scope of the FLSA; and (3) whether state employees are

entitled to payment of their salaries during a budget impasse absent an

appropriation, over and above the compensation requirements found in the FLSA.”

(Ibid.) The appellate court proceeded to address each of those issues.

(i) Continuing Employment Relationship

In discussing this issue, the Court of Appeal first recognized that although

“ ‘[p]ublic employment, by and large, is not held by contract, but by statute,’ ”

“public employment [nonetheless] may give rise to obligations regarding

compensation treated as contractual under the contract clauses of the federal and

state Constitutions.” (White v. Davis I, supra, 98 Cal.App.4th 969, 996, citation

omitted.)

20

The Court of Appeal noted that the Legislature had enacted two statutes —

Government Code sections 1231 and 1231.1  relating to the status of public

employees and to the payment of their salaries in the event of a budget impasse.

Government Code section 1231 provides in part: “No state officer or employee

shall be deemed to have a break in service or to have terminated his or her

employment, for any purpose, nor to have incurred any change in his or her salary

or other conditions of employment, solely because of the failure to enact a budget

act for a fiscal year prior to the beginning of that fiscal year.” Government Code

section 1231.1 provides: “Funds from each appropriation made in the budget act

for any fiscal year may be expended to pay to officers and employees whatever

salary that would have otherwise been received had the budget act been adopted

on or prior to July 1, of that fiscal year.”

The Court of Appeal then stated: “In interpreting these statutes, we seek a

construction that is constitutionally sound. [Citation.] ‘Under our Constitution the

creation of an enforceable contract with the state requires compliance with the

constitutional debt limitation provisions of article XVI, section 1, or a valid

appropriation in support of the contract under article XVI, section 7. [Citations.]

In this respect our law is consistent with federal law and the law of nearly every

state in the Union. [Citations.] Persons who deal with the government are held to

have notice of this limitation upon the authority to enter into contracts.

[Citation.]’ [Citation.]” (White v. Davis I, supra, 98 Cal.App.4th 969, 997.)

The Court of Appeal observed that “[n]othing supports a determination that

Government Code sections 1231 and 1231.1 establish an obligation to pay

employee salaries in conformity with . . . the debt limitation provisions of

California Constitution, article XVI, section 1. [Citation.] Nor do the parties

dispute that the salaries at issue here are generally paid pursuant to an

appropriation on the general treasury fund, rather than pursuant to a continuing

21

appropriation or constitutional mandate.” (White v. Davis I, supra, 98 Cal.App.4th

969, 998.)

The Court of Appeal concluded that “[u]nder these circumstances,

Government Code sections 1231 and 1231.1 cannot establish an employment

relationship that entitles state employees to their salaries during a budget impasse

absent an appropriation, given the constitutional limitations that we have

described.” (White v. Davis I, supra, 98 Cal.App.4th 969, 998.) Instead, the Court

of Appeal held that “these statutes, if constitutionally sound, authorize a

continuing employer-employee relationship during a budget impasse under which

entitlement to compensation for work done during the budget impasse arises only

upon the satisfaction of a condition precedent, namely, the enactment of a budget

or other proper appropriation.” (Ibid., italics in original.)

The Court of Appeal continued: “Although the employer-employee

relationship at issue here is ultimately governed by statute, we discern no reason

rooted in the state Constitution barring the Legislature from subjecting the

entitlement to wages earned during a budget impasse to an analogue of a condition

precedent. Thus, the entitlement of state employees to compensation for work

performed during a budget impasse does not accrue until the enactment of a

budget or other proper appropriation. Furthermore, given the friction of

democratic politics — which Government Code sections 1231 and 1231.1

impliedly recognize — state employees assume the risk that satisfaction of this

condition may be delayed due to the Legislature’s inaction during a budget

impasse. [Citations.]” (White v. Davis I, supra, 98 Cal.App.4th 969, 998.)

In sum, with regard to the question of a continuing employment

relationship, the Court of Appeal ultimately concluded that state employees who

work during a budget impasse do have a continuing employment relationship with

the state, but it is one under which an employee’s “entitlement to compensation for

22

work done during the budget impasse arises only upon . . . the enactment of a

budget or other proper appropriation.” (White v. Davis I, supra, 98 Cal.App.4th

969, 998.)

(ii) Scope of the FLSA

The Court of Appeal then turned to the question whether the type of

employment relationship that it just had described — that is, an employment

relationship in which an employee’s entitlement to compensation for work done

during a budget impasse is subject to a condition precedent — falls within the

scope of the FLSA. Although that court indicated it had found “little case

authority addressing the extent to which the FLSA applies to employer-employee

relationships subject to such a condition precedent” (White v. Davis I, supra, 98

Cal.App.4th 969, 999), the court ultimately concluded that the type of continuing

relationship that state employees have with the state during a budget impasse does

fall within the protection of the FLSA during such an impasse. (Ibid.) Reiterating

that the FLSA “requires wages to be paid in a timely fashion” (ibid.), the Court of

Appeal thus concluded that “the FLSA requires the prompt payment of minimum

wages and overtime compensation for work performed during a budget impasse,

with due reference to the state employee’s established work period.” (Ibid.)

(iii) Compensation Over and Above the FLSA Requirements

The final issue that the Court of Appeal addressed regarding state employee

salaries was the question whether state employees are entitled to receive

compensation during a budget impasse, beyond that required under the FLSA, by

virtue of the contract or due process clauses of the federal and state Constitutions.

As the Court of Appeal recognized, both the state and federal Constitutions

contain provisions prohibiting the state from passing any law “impairing the

obligation of contracts.” (U.S. Const., art. I, § 10; Cal. Const., art. I, § 9.)

Although the federal contract clause has been interpreted to be “directed only

23

against impairment by legislation and not by judgment of courts” (Tidal Oil Co. v.

Flanagan (1924) 263 U.S. 444, 451), the Court of Appeal noted that the state

contract clause has been construed also to apply to judicial action. (Bradley v.

Superior Court (1957) 48 Cal.2d 509, 519.) Because the state employee

intervenors in this case contended that a judicial order — the trial court’s

preliminary injunction — constituted an impermissible impairment of contract in

prohibiting the Controller from authorizing the full and regular payment of salaries

to which the employees contended they were contractually entitled, the appellate

court limited its consideration to the state contract clause.

In addressing the employees’ contract clause claim, the Court of Appeal

began by explaining that “[u]nder the state contract clause, ‘[n]either the court nor

the Legislature may impair the obligation of a valid contract . . . .’ [Citation.]

However, the contract clause does not protect contracts that are prohibited by law

or against public policy. [Citations.]” (White v. Davis I, supra, 98 Cal.App.4th

969, 1001, italics added by White v. Davis I.)

The Court of Appeal then stated that “[g]enerally, ‘no contractual

obligation may be enforced against a public agency unless it appears the agency

was authorized by the Constitution or statute to incur the obligation; a contract

entered into by a governmental entity without the requisite constitutional or

statutory authority is void and unenforceable.’ ” (White v. Davis I, supra, 98

Cal.App.4th 969, 1001.)

The Court of Appeal concluded: “In our view, the state Constitution

precludes the state from incurring an obligation to pay employee salaries during a

budget impasse in the absence of a proper appropriation, and thus the failure to

pay full salaries under such circumstances does not constitute an impairment of

contract under the state contract clause.” (White v. Davis I, supra, 98 Cal.App.4th

969, 1001.) The Court of Appeal reasoned that a contractual obligation to pay

24

salaries in the absence of an appropriation “would directly undermine the

appropriation requirement in article XVI, section 7 of the state Constitution. As

our Supreme Court explained in Humbert v. Dunn (1890) 84 Cal. 57, 59, this

requirement, which is taken from the United States Constitution, ‘had its origin in

Parliament in the seventeenth century, when the people of Great Britain, to

provide against the abuse by the king and his officers of the discretionary money

power with which they were vested, demanded that the public funds should not be

drawn from the treasury except in accordance with express appropriations therefor

made by Parliament [citation]; and the system worked so well in correcting the

abuses complained of, our forefathers adopted it, and the restraint imposed by it

has become a part of the fundamental law of nearly every state in the Union.’ In

view of the fundamental nature of this requirement, we conclude that the state

cannot undertake obligations protected by the contract clause that directly

contravene it. To hold otherwise would gut the requirement.” (White v. Davis I,

supra, 98 Cal.App.4th at p. 1002.)

The Court of Appeal, in similarly denying the employees’ claim that the

preliminary injunction violated the due process clause insofar as it denied them the

payment of their full salaries during a budget impasse, reasoned that “[u]nder

principles of contract interpretation, ‘ “ ‘all applicable laws in existence when an

agreement is made, which laws the parties are presumed to know and to have in

mind, necessarily enter into the contract and form a part of it . . . .’ ” ’ ” “For this

reason, state employees must be deemed to have notice of the limitation on the

payment of their salaries during a budget impasse.” (White v. Davis I, supra, 98

Cal.App.4th 969, 1002.)

(iv) Conclusion on State Employee Salary Issue

In view of the foregoing conclusions, the Court of Appeal ultimately held

that “the preliminary injunction must be reversed to the extent that it denies state

25

employees the compensation required under the FLSA during a budget impasse

. . . .” (White v. Davis I, supra, 98 Cal.App.4th 969, 1003.)

(b) Other Federal Law

In addition to the FLSA, the Controller contended in the Court of Appeal

that a number of other federal laws require the disbursement of public funds

during a budget impasse. The Controller asserted that such payments are required

pursuant to the state’s participation in the federal (1) food stamp program

(7 U.S.C. § 2011 et seq.), (2) foster care and adoption programs (42 U.S.C.

§§ 670-679b), (3) child support programs (42 U.S.C. §§ 651-669b), and (4) child

welfare services program (42 U.S.C. §§ 620-628).

In analyzing this contention, the Court of Appeal stated that it found

guidance in two federal decisions, Pratt v. Wilson (E.D.Cal. 1991) 770 F.Supp.

539 and Dowling v. Davis (9th Cir. 1994) 19 F.3d 445. In Pratt, the plaintiffs

brought a federal action challenging the Controller’s cessation, during the 1990

budget impasse, of payments that were partially funded under the former federal

Aid to Families with Dependent Children (AFDC) program. The court in Pratt

held that under the supremacy clause the state was required to make AFDC

payments during the budget impasse notwithstanding the appropriation

requirements of the state Constitution, reasoning that once a state had elected to

participate in the AFDC program it was required to comply with the governing

federal statutes and regulations mandating timely payments.

In Dowling v. Davis, supra, 19 F.3d 445, the plaintiffs brought a somewhat

similar federal action challenging the Controller’s delay, also during the 1990

budget impasse, of payments under the Medi-Cal program (Welf. & Inst. Code

§ 14000 et seq.) (partially funded through the federal Medicaid law (42 U.S.C.

§ 1236)) and under the In-Home Support Service program (Welf. & Inst. Code,

§ 12300) (partially funded by a federal block grant). In Dowling, unlike Pratt, the

26

court held that the delay in payments did not violate federal law, concluding that

“[d]elayed payment is an inherent feature of the Medicaid statutory and regulatory

framework,” that the federal block grant supporting the In-Home Support Service

program did not require timely payments, and that the state statute governing the

In-Home Support Service program predicated the continuing existence of the

program on an appropriation in the state budget act. (19 F.3d at pp. 447-448.)

The Court of Appeal held that “[i]n view of Pratt and Dowling, the key

issue is whether the federal laws cited by the Controller require timely payments

during a budget impasse.” (White v. Davis I, supra, 98 Cal.App.4th 969, 1004.)

The Court of Appeal then carefully reviewed the controlling statutory

provisions and regulations governing each of the federal programs identified by

the Controller to determine whether federal law mandates timely payment. With

regard to the food stamp program, the foster care and adoption programs, and the

child support program, the Court of Appeal concluded that the relevant statutes

and regulations require the prompt payment of benefits and prompt provision of

services specified by those programs, and thus that the Controller properly may

disburse funds during a budget impasse to comply with such federal mandates.

(White v. Davis I, supra, 98 Cal.App.4th 969, 1104-1105.) With regard to the

child welfare services program, however, the Court of Appeal concluded that the

applicable federal regulations mandated the timely disbursement only of those

funds necessary to comply with certain notice and hearing requirements imposed

by the federal regulations on the child welfare services program, and it held that

only such funds may be properly disbursed by the Controller during a budget

impasse. (Id., at pp. 1005-1006.)

4. Adequacy of Injunction Bond

After addressing the validity of the various grounds upon which the

Controller maintained that payments properly could be made during a budget

27

impasse, the Court of Appeal took note of the Controller’s and state employee

intervenors’ additional contention that the trial court had failed to require plaintiffs

to post an adequate injunction bond. As noted above, in granting the preliminary

injunction the trial court ordered plaintiffs to post a $100,000 bond.

As the Court of Appeal recognized, Code of Civil Procedure section 529,

subdivision (a), provides generally that “[o]n granting an injunction, the court or

judge must require an undertaking on the part of the applicant to the effect that the

applicant will pay to the party enjoined any damages, not exceeding an amount to

be specified, the party may sustain by reason of the injunction, if the court finally

determines that the applicant was not entitled to the injunction.” As past cases

have explained, “the trial court’s function is to estimate the harmful effect which

the injunction is likely to have on the restrained party and to set the undertaking at

that sum.” (ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 14.)

The Court of Appeal determined, however, that it was unnecessary for it to

address the claimed inadequacy of the injunction bond in view of (1) its

conclusion that the preliminary injunction must be set aside in part, and

(2) plaintiffs’ representation that they were not seeking further relief from the trial

court. (White v. Davis I, supra, 98 Cal.App.4th 969, 1006-1007.)

5. Disposition by the Court of Appeal

In its disposition, the Court of Appeal dismissed the appeal in the 1997

action as moot. With regard to the 1998 action, the court stated: “The preliminary

injunction . . . is reversed to the extent that it bars the Controller from disbursing

funds pursuant to (1) continuing appropriations, (2) article III, section 4, and

article XVI, section 8.5 of the state Constitution, (3) the [f]ederal [Fair] Labor

Standards Act (29 U.S.C. § 201 et seq.), and (4) the federal funding mandates that

we have identified applicable to the food stamp program (7 U.S.C. § 2011 et

seq.,), foster care and adoption programs (42 U.S.C. § 670 et seq.), child support

28

program (42 U.S.C. §§ 651-669b), and child welfare services program (42 U.S.C.

§§ 620-628). The preliminary injunction is otherwise affirmed. In view of

[plaintiffs’] abandonment of further action in the trial court, we do not remand the

matter for modification of the preliminary injunction. . . .” (White v. Davis I,

supra, 98 Cal.App.4th 969, 1007.)

II

As noted above, only the Controller and several state employee intervenors

sought review from the Court of Appeal’s decision,8 and the petitions for review

challenged only two aspects of that decision. The Controller’s principal objection

is to the Court of Appeal’s treatment of the preliminary injunction issue: the

Controller maintains that under the general principles governing the issuance or

denial of a preliminary injunction, the trial court in the 1998 case should not have

granted a preliminary injunction in any respect, and that the Court of Appeal

consequently erred in upholding the preliminary injunction in part. The state

employee intervenors principally challenge the Court of Appeal’s conclusions

with regard to the payment of state employee salaries during a budget impasse,

contending that the Court of Appeal should have held that the Controller is

authorized to pay all state employees their full and regular salaries during a budget

impasse. No party has challenged any other aspect of the Court of Appeal’s

decision and none of the numerous additional issues passed upon by the Court of

Appeal has been briefed or argued in this court, and thus we have no occasion to


8

A petition for review was filed by the California State Employees

Association (CSEA), and a separate petition for review jointly was filed by the
California Correctional Peace Officers Association (CCPOA) and the California
Correctional Union of Safety Employees (CAUSE).

29

address any of those additional issues here.9 Moreover, as noted above, the Court

of Appeal itself confined its discussion only to the particular provisions of law that

were raised by the parties on appeal, and did not purport to determine whether any

other provision of law may authorize or mandate the disbursement of funds during

a budget impasse.10

Accordingly, we shall address only the two general issues presented on

review: (1) Did the trial court err in granting a preliminary injunction in this

case?, and (2) Is the Controller authorized to pay all state employees their full and

regular salaries during a budget impasse? We turn first to the preliminary

injunction issue.11


9

As we explain more fully below, however, because the other issues

discussed by the Court of Appeal are important in their own right, we shall order
the Court of Appeal opinion in this matter to be published in the Official Reports.
(See, post, p. 45, fn. 14.)
10

An amicus curiae brief has been filed in this court by the California

Appellate Defense Counsel (CADC), asserting that under the supremacy clause of
the federal Constitution (U.S. Const., art. VI, § 2) attorneys who are appointed to
represent indigent defendants in criminal prosecutions are entitled to obtain
payment for their services during a budget impasse because the state is obligated
by the Sixth and Fourteenth Amendments of the federal Constitution to provide
such representation. Unlike the state employee intervenors, however, CADC did
not seek to intervene in this proceeding in the trial court, and the contention raised
in its brief was not addressed by either the trial court or the Court of Appeal.
Under these circumstances, we conclude that it is not appropriate to address the
issue in this proceeding, and we express no view on the merits of this assertion.


For similar reasons, we do not address the claims raised in a separate

amicus curiae brief challenging the validity of the state’s failure during a budget
impasse to make payments to those persons or entities that furnish goods or
services to or on behalf of the state.
11

Two requests for judicial notice have been filed in this case. No objection

to either request has been received.


The Controller requests that we take judicial notice of (1) the date that the

budget act for the 1998-1999 fiscal year (Stats. 1998, ch. 324) was enacted, (2) the

(footnote continued on next page)

30



III

The Controller’s principal contention before this court is that the Court of

Appeal erred in upholding the preliminary injunction in any respect. The

Controller argues that the trial court’s issuance of a preliminary injunction was

contrary to well established principles governing the circumstances in which a trial

court in a taxpayer action may enjoin a public official from expending funds prior

to a full adjudication of the merits of the taxpayer’s claim. As we explain, we

agree that the trial court erred in granting the preliminary injunction.

As its name suggests, a preliminary injunction is an order that is sought by

a plaintiff prior to a full adjudication of the merits of its claim. (See 6 Witkin,

Cal. Procedure (4th ed. 1997) Provisional Remedies, § 287, p. 228.) To obtain a

preliminary injunction, a plaintiff ordinarily is required to present evidence of the

irreparable injury or interim harm that it will suffer if an injunction is not issued

(footnote continued from previous page)

effective dates of the emergency appropriation enacted after the issuance of the
trial court’s preliminary injunction (Stats. 1998, ch. 213, § 1, enacting Sen. Bill
No. 267 (1997-1998 Reg. Sess.)), and (3) the legislative history of Senate Bill No.
267. All of these items are proper subjects of judicial notice (Evid. Code, § 452,
subd. (c) [official acts of the legislative branch of the State of California]), and
accordingly the request to take judicial notice is granted.


CAUSE and CCPOA, two of the state employee intervenors, request the

court to take judicial notice of (1) the current salary ranges for certain state public
safety employees as set forth in the salary schedule in the current agreement
between CAUSE and the state, and (2) the current salary ranges for state
correctional workers as set forth in the Department of Personnel Administration’s
California Civil Service Pay Scales. Although the relevance of this material is
debatable, the material appears to be properly subject to judicial notice under
Evidence Code section 452, subdivisions (c) (official acts of the executive branch
of the State of California) and (h) (facts that are not reasonably subject to dispute
and are capable of immediate and accurate determination by resort to sources of
reasonably indisputable accuracy). Accordingly, the request to take judicial notice
of this material is granted.

31

pending an adjudication of the merits. (See City of Torrance v. Transitional

Living Centers for Los Angeles, Inc. (1982) 30 Cal.3d 516, 526.)

Past California decisions further establish that, as a general matter, the

question whether a preliminary injunction should be granted involves two

interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits,

and (2) the relative balance of harms that is likely to result from the granting or

denial of interim injunctive relief. As explained in IT Corp. v. County of Imperial

(1983) 35 Cal.3d 63, 69-70: “This court has traditionally held that trial courts

should evaluate two interrelated factors when deciding whether or not to issue a

preliminary injunction. The first is the likelihood that the plaintiff will prevail on

the merits at trial. The second is the interim harm that the plaintiff is likely to

sustain if the injunction were denied compared to the harm that the defendant is

likely to suffer if the preliminary injunction were issued.” As the court in IT Corp.

further noted: “The ultimate goal of any test to be used in deciding whether a

preliminary injunction should issue is to minimize the harm which an erroneous

interim decision may cause. [Citation.]” (Id. at p. 73, italics added.)

A number of Court of Appeal decisions have addressed the proper

application of these general principles relating to preliminary injunctions in the

particular circumstance of a taxpayer action that is brought to enjoin the alleged

improper expenditure of public funds. In Cohen v. Board of Supervisors (1986)

178 Cal.App.3d 447 (Cohen II), the Court of Appeal, in a decision on remand

from this court (see Cohen v. Board of Supervisors (1985) 40 Cal.3d 277

(Cohen I)), addressed the question whether the relative “balance of harms” in that

case supported the trial court’s decision denying a preliminary injunction in a

taxpayer action that challenged the validity of a recently enacted city ordinance

imposing various regulations and restrictions on escort services within the city.

The action challenged the ordinance on a variety of grounds, including a claim that

32

it was facially unconstitutional under the First Amendment. Noting that one of the

plaintiffs in the case had brought suit solely as a resident taxpayer under section

526a of the Code of Civil Procedure to enjoin the alleged illegal expenditure of

public funds, the court in Cohen II observed that this plaintiff’s “interest appears

to be limited to his taxpayer’s pocketbook, an interest which is sufficient to confer

statutory standing to maintain this action and bring it to final judgment

permanently enjoining unlawful expenditures (Blair v. Pitchess (1971) 5 Cal.3d

258, 267-270), but which to our knowledge has never been held to satisfy the high

degree of existing or threatened injury required for the prejudgment injunctive

relief sought here.” (178 Cal.App.3d at p. 454, italics added.) The court in Cohen

II went on to expressly reject the plaintiff taxpayer’s argument that its assertion

that the ordinance was unconstitutional, and that the public funds that would be

expended to enforce the ordinance would therefore be unlawfully incurred, was

itself sufficient to demonstrate the type of irreparable injury that would justify

granting a preliminary injunction. (Id. at pp. 454-455.) Accordingly, on this

ground alone, the court in Cohen II affirmed the trial court’s order in that case

denying the taxpayer’s request for a preliminary injunction.

In Loder v. City of Glendale (1989) 216 Cal.App.3d 777(Loder I), the Court

of Appeal considered the question of interim harm in reviewing the validity of a

trial court order granting a preliminary injunction in a taxpayer action challenging

the validity of a recently adopted city drug testing program as violative of federal

and state constitutional restrictions on unreasonable searches and seizures.

Following the reasoning of the decision in Cohen II, the Court of Appeal in

Loder I held that the plaintiff’s “status as a taxpayer by itself was insufficient to

entitle her to a preliminary injunction. . . . [W]hile plaintiff’s alleged status as a

taxpayer affords her standing to maintain this action, her harm for preliminary

injunction purposes is limited to defendants’ alleged improper use of tax funds.

33

This monetary harm is insufficient to justify the issuance of a preliminary

injunction.” (216 Cal.App.3d at pp. 784-785.) On this basis, the court in Loder I

reversed the trial court’s order granting a preliminary injunction, taking care at the

same time to note that “[n]othing in this opinion is intended to reflect on, or

express any opinion as to the validity of the City’s drug testing program or any

part of it.”12

In Leach v. City of San Marcos (1989) 213 Cal.App.3d 648 (Leach), the

Court of Appeal reached the same conclusion as the courts in Cohen II and Loder I

with regard to the general principle that a taxpayer’s claim of an illegal

expenditure of public funds ordinarily is not sufficient in itself to warrant the

issuance of a preliminary injunction. In Leach, a taxpayer challenged the validity

of a redevelopment plan adopted by the defendant city, and sought a preliminary

injunction to prevent the city from taking any further action to implement the

challenged plan. Although the taxpayer presented evidence to support his claim

that the redevelopment plan at issue might well not conform with the applicable

Community Redevelopment Law, he presented no specific evidence indicating

that an injunction was necessary to prevent irreparable harm pending a trial on the

merits of the claim, and the trial court denied the preliminary injunction. On

appeal, the Court of Appeal affirmed the denial of a preliminary injunction,

concluding that even though the taxpayer had demonstrated a likelihood of success

on the merits, the trial court properly had denied a preliminary injunction on the

ground that the taxpayer had failed to demonstrate sufficient interim harm. The

12

After a trial on the merits, the trial court in the Loder case granted a

permanent injunction enjoining the application of the Glendale drug testing
program as applied to some employment positions, and on appeal of that judgment
this court in Loder v. City of Glendale (1997) 14 Cal.4th 846 (Loder II) addressed
the validity of the program.

34

court in Leach stated that “even if the record here demonstrated the imminent

expenditure of tax increment revenues, such an expenditure would not support a

preliminary injunction in favor of a private citizen.” (213 Cal.App.3d at p. 662.)

After quoting at length the pertinent portions of Cohen II, the court in Leach

observed that, “[c]ontrary to Leach’s argument, we find no meaningful distinction

between his status as a taxpayer whose burden might be increased by the plan and

the plaintiff in Cohen II whose tax dollars might have been unlawfully spent

enforcing the escort ordinance. While the redevelopment plan may eventually

impose a larger burden on taxpayers outside the plan area than enforcement of an

escort ordinance, Leach has not suggested how much of a burden he would suffer,

and most importantly, how that burden would affect him. Given these

circumstances, his status as a taxpayer will not support a preliminary injunction.”

(Id. at p. 663.) Accordingly, the court affirmed the trial court order denying a

preliminary injunction.

In the present proceeding, plaintiffs brought their 1998 action solely in their

capacity as taxpayers and relied upon their interest as taxpayers in claiming that

they would be irreparably harmed by the alleged impropriety of the payments of

public funds that the Controller proposed to authorize during the budget impasse.

Plaintiffs suggested that such payments not only violated the state Constitution,

but also eliminated significant public pressure that (in the absence of such

payments) would be brought to bear upon the Legislature to comply with its

constitutional obligation to timely enact a budget bill. Under the Court of Appeal

decisions discussed above, a taxpayer’s general interest in not having public funds

spent unlawfully (including not having such funds spent in alleged contravention

of fundamental constitutional restrictions), while sufficient to afford standing to

bring a taxpayer’s action under Code of Civil Procedure section 526a and to obtain

a permanent injunction after a full adjudication on the merits, ordinarily does not

35

in itself constitute the type of irreparable harm that warrants the granting of

preliminary injunctive relief. Under these appellate decisions, the granting of a

preliminary injunction in the present case arguably would be improper on this

ground alone.

In this case, however, we need not decide whether interim harm to a

taxpayer’s interest is ever in itself sufficient to justify a preliminary injunction

barring the expenditure of public funds during a budget impasse, because even if

there may be some circumstances in which granting a preliminary injunction

might be warranted in a taxpayer’s action (for example, if the Controller continues

to approve expenditures that have been held unlawful by a controlling judicial

precedent), in the case before us we believe it is clear that in light of both the

relative balance of harms and the lack of clear authority supporting the merits of

plaintiffs’ broad claim, the trial court abused its discretion in granting a

preliminary injunction.

In support of their claim of irreparable injury if a preliminary injunction

were not issued, plaintiffs alleged that “[t]he failure to grant the injunction will

allow the flagrant violation of the Constitution to continue as it has for the past

dozen years causing extreme hardship and sometimes bankruptcy to the numerous

small businesses and other suppliers of goods and services to the State who have

not been paid due to the failure of the Legislature to timely pass and the Governor

to timely approve a State Budget, while illegally paying themselves. [¶] The

respect for the Constitution has and will be destroyed by this illegal activity. If the

Legislature and the Governor wish to continue their illegal activity, the correct

method is to seek an Amendment to the Constitution to legalize such activity.”

In advancing this claim of irreparable injury, however, plaintiffs failed to

cite any authority to support the contention that a taxpayer’s interest in forestalling

an alleged continuing violation of the state Constitution constitutes the type of

36

irreparable injury that will support granting a preliminary injunction, and, as we

have seen, the Court of Appeal decisions cited above have rejected just such a

contention.

Further, as part of their claim of irreparable harm, plaintiffs referred to the

hardship sustained by small businesses and other suppliers of goods and services

to the state that are not paid during a budget impasse. Although plaintiffs did not

expressly explain how the granting of a preliminary injunction prohibiting the

Controller from making any payments to state employees or other persons would

relieve the hardship suffered by such small businesses and other vendors during a

budget impasse, plaintiffs’ contention apparently was based upon the strategic

assumption that the trial court’s granting of a preliminary injunction prohibiting

the Controller from making any payments during a budget impasse would place

pressure on the Legislature to enact a budget bill promptly, and in that indirect

manner might result in relieving the hardship suffered by small businesses or other

vendors during the budget impasse. Even if we assume that plaintiffs, in their

capacity as taxpayers, have standing to rely upon the interim harm that would be

sustained by such businesses or other vendors, the suggestion that a trial court may

issue a preliminary injunction broadly prohibiting the Controller from authorizing

the expenditure of public funds for the purpose of placing pressure on the

Legislature to pass a budget in a timely fashion is problematical. The relevant

provision of the California Constitution that requires passage of the budget bill “by

midnight on June 15” (Cal. Const., art. IV, § 12) does not purport to authorize a

preliminary injunction against the Controller as a “sanction” or “lever” against the

Legislature for failing to enact a budget on time, and thus any legal action seeking

an injunction against the Controller’s expenditure of funds during a budget

impasse necessarily must rest on the asserted illegality of a particular challenged

expenditure or expenditures, rather than on the conduct of the Legislature. Indeed,

37

in light of the separation of powers doctrine (Cal. Const., art. III, § 3), courts must

be especially sensitive about intruding upon the Legislature’s fundamental  and

essentially political  legislative and budget powers, and must be vigilant not to

depart from established principles governing preliminary injunctions simply in

order to lend support to an effort to increase the leverage on the Legislature to pass

a budget bill.

Thus, the principal properly cognizable harm alleged by plaintiffs that

would be prevented by the granting of a preliminary injunction would be the

indirect fiscal harm they as taxpayers would suffer by the Controller’s payment of

those public funds that the Controller concluded properly could be made during

the budget impasse, but that plaintiffs contended were not properly authorized by

the Constitution.

In its opposition to the request for a preliminary injunction, the Controller

cited and relied upon the numerous Court of Appeal opinions, described above,

holding that a taxpayer’s claim that public funds may be improperly expended

does not itself constitute sufficient harm to support the issuance of a preliminary

injunction. The Controller further pointed out that when the budget act for the

then-current fiscal year was enacted, that act, like prior budget acts, would be

retroactive to the beginning of the fiscal year (Gov. Code, §§ 1231.1, 1231.2),13


13

As noted above, Government Code section 1231.1 provides: “Funds from

each appropriation made in the budget act for any fiscal year may be expended to
pay officers and employees whatever salary that would have otherwise been
received had the budget act been adopted on or prior to July 1, of that fiscal year.”


Government Code section 1231.2 provides: “Funds from each

appropriation made in the budget act for any fiscal year may be expended to pay
any obligation incurred between the commencement of that fiscal year and the
effective date of the budget act for that fiscal year, which would otherwise have
been authorized by the budget act of that year had that act been adopted, on or

(footnote continued on next page)

38

and thus even if the trial court were to assume, as plaintiffs contended, that some

or all of the expenditures that the Controller proposed to authorize during the

budget impasse could not lawfully be paid at that time, the asserted loss to the

treasury in any event would be temporary, because the subsequently enacted

budget act ultimately would provide the necessary appropriation for such

expenditures. The Controller argued that under these circumstances plaintiffs

certainly had not demonstrated the type of irreparable harm that would support a

preliminary injunction.

Moreover, in contrast to the lack of irreparable harm that assertedly would

result from the denial of a preliminary injunction, the opposition papers filed by

both the Controller and the state employee intervenors strongly emphasized the

serious and widespread hardship that would be imposed by the granting of the

preliminary injunction sought by plaintiffs. As our summary of the Court of

Appeal’s decision in this case makes clear, the public funds at issue in this case

affected the availability of the essential necessities of life for tens of thousands of

Californians. The opposition papers pointed out that granting the broad

preliminary injunction sought by plaintiffs — precluding the Controller from

making any payments authorized by continuing appropriations or from paying any

wages to state employees for work done after the preliminary injunction was

granted or making other payments required by federal law — would deprive

current state employees, persons receiving state pensions or disability benefits,

persons receiving food stamps, persons caring for adopted children with special

needs, and thousands of others, of funds necessary to feed, house, and clothe

(footnote continued from previous page)

prior to July 1 of that year, subject to the same limitations, conditions, and
requirements.”

39

themselves and their families for the duration of the budget impasse. The

Controller also noted that granting a preliminary injunction would prevent the

state from making payments to bondholders — thereby exposing the state to

potentially costly litigation and damage claims — and would deny local

governmental entities access to the funds such entities had invested in the Local

Agency Investment Fund, a special fund in the state treasury that was created for

the purpose of providing a safe and reliable investment option to local

governments. (See Gov. Code, § 164294.1.) Finally, the Controller observed that

if the injunction were to result in the scenario that plaintiffs asserted was

required — the closure of state government — the injunction would have a “dire

effect on numerous important state services involving safety, health and education,

and thus could dramatically impact the public at large.”

In granting a preliminary injunction, the trial court did not provide any

indication that it had considered or weighed the hardship that would be imposed

by granting such an injunction against the hardship that would result from denying

an injunction. Instead, the order granting the preliminary injunction rested simply

on the trial court’s agreement with the merits of plaintiffs’ constitutional claim.

The order stated that, in the court’s view, article IV, section 12, subdivision (c) of

the California Constitution prohibits the Controller from authorizing any payments

prior to the enactment of a budget bill (other than pursuant to the exceptions

embodied in article IV, section 12). The order further concluded that “so-called

‘continuing appropriations’ have no constitutional base” and expressed the view

that the holding in Biggs v. Wilson, supra, 1 F.3d 1537, requiring the state to pay

the wages required by the FLSA during a budget impasse, did not apply to the

present situation, because “if the state employees choose to continue to work with

knowledge of no authority to appropriate money to pay them, there can be no

violation of the FLSA. The employees would simply be volunteers.”

40

In granting a preliminary injunction without considering the relative harms

that would be imposed by denying or granting a preliminary injunction, the trial

court erred. As discussed above, the controlling authorities make it clear that in

evaluating a request for a preliminary injunction a court must consider two

factors — both the likelihood of success on the merits, and the relative harms that

would flow from denying or granting a preliminary injunction.

Although the Controller and state employee intervenors argued in the Court

of Appeal that the preliminary injunction should be set aside in its entirety because

of the trial court’s failure to consider the balance of hardships, and because the

hardship resulting from granting a preliminary injunction dramatically outweighed

any hardship that the plaintiff-taxpayers would incur if a preliminary injunction

were denied, the Court of Appeal declined to set aside the preliminary injunction

in its entirety and held instead that the injunction granted in this case properly

could be upheld in part even if the balance of harms did not favor plaintiffs 

based upon “ ‘a sufficiently strong showing of likelihood of success on the

merits . . . .’ (Common Cause v. Board of Supervisors (1989) 49 Cal.3d [432,]

447.)” (White v. Davis I, supra, 98 Cal.App.4th 969, 1002-1003.)

We agree with the Controller that the decision in Common Cause v. Board

of Supervisors, supra, 49 Cal.3d 432, provides no basis for upholding the

preliminary injunction issued by the trial court in the present case. The relevant

passage in Common Cause upon which the Court of Appeal relied reads in full:

“The likelihood of success on the merits and the balance-of-harms analysis are

ordinarily ‘interrelated’ factors in the decision whether to issue a preliminary

injunction. [Citations.] The presence or absence of each factor is usually a matter

of degree, and if the party seeking the injunction can make a sufficiently strong

showing of likelihood of success on the merits, the trial court has discretion to

41

issue an injunction notwithstanding that party’s inability to show that the balance

of harms tips in his favor.” (49 Cal.3d at pp. 446-447.)

As the Controller observes, although this passage indicates that in some

instances a trial court may grant a preliminary injunction upon a sufficiently strong

showing of likelihood of success even when the party seeking the injunction

cannot show that the balance of harms “tips” in its favor (Common Cause, supra,

49 Cal.3d at p. 477), the decision in Common Cause did not suggest that when a

party makes a sufficient showing of likely success on the merits a trial court need

not consider the relative balance of hardships at all, or that when the balance of

hardships dramatically favors the denial of a preliminary injunction a trial court

nonetheless may grant a preliminary injunction on the basis of the likelihood-of-

success factor alone. As noted, a principal objective of a preliminary injunction

“is to minimize the harm which an erroneous interim decision may cause” (IT

Corp. v. County of Imperial, supra, 35 Cal.3d 63, 73, italics added), and thus a

court faced with the question whether to grant a preliminary injunction cannot

ignore the possibility that its initial assessment of the merits, prior to a full

adjudication, may turn out to be in error.

In this case, the balance of harms dramatically favored denial of the

preliminary injunction. The principal legitimate interest of plaintiffs that allegedly

would be harmed by denying a preliminary injunction was their general interest as

taxpayers in not having public funds disbursed unlawfully, an interest that the

appellate court decisions discussed above found insufficient in itself to warrant the

granting of a preliminary injunction. On the other hand, granting the preliminary

injunction would cause great immediate harm to the many persons who would be

deprived of vital funds, frequently necessary to obtain the necessities of life, and

would threaten the continued delivery of a wide range of essential public services.

42

Furthermore, even if the relative hardships posed by granting or denying a

preliminary injunction were more evenly balanced, the trial court’s preliminary

injunction in this case could not be upheld on the theory that plaintiffs had made a

sufficiently strong showing of likelihood of success on the merits. As noted

above, in the trial court plaintiffs advanced the very broad position that, under the

California Constitution, if the Legislature fails to pass a budget bill on time, “state

government must shut down” in the absence of an emergency appropriation.

Plaintiffs, however, failed to cite any case authority to support their reading of the

state Constitution, and, as the Court of Appeal’s opinion in this case demonstrates,

such a reading of the relevant constitutional provisions is untenable and contrary

to established precedent. Under California law, the Controller and other public

officials in the executive branch have been given the initial and primary

responsibility for ascertaining the payments that lawfully may be made from the

treasury during a budget impasse. These officials, of course, have the obligation

to follow the law and must comply with controlling judicial decisions that have

determined whether a particular category of payments properly may be made

during a budget impasse. As explained by the Court of Appeal’s decision,

however, there are numerous grounds on which the Controller properly may

authorize the payment of funds from the treasury even when a budget bill has not

yet been enacted, and the question whether a particular payment or category of

payments validly may be made often involves complex legal issues. Plaintiffs’

broad legal argument that the Constitution bars virtually all such payments clearly

was not so unquestionably meritorious as to obviate any need to consider the

balance of relative harms. Accordingly, the trial court’s action in granting a

preliminary injunction cannot be defended on the ground that plaintiffs had made a

sufficiently strong showing of their likelihood of success on the merits.

43

In sum, we conclude that the trial court abused its discretion in issuing a

preliminary injunction in the 1998 action, and that the judgment of the Court of

Appeal must be reversed insofar as it affirms in any respect the granting of a

preliminary injunction.

IV

As discussed, the complaint filed by plaintiffs advanced the very broad

position that, in the absence of enactment of a budget bill or an emergency

appropriation, “the state government must close.” The complaint did not

challenge on a point-by-point basis the validity of specific categories or types of

payments authorized by the Controller during a budget impasse. In responding to

plaintiffs’ request for a preliminary injunction, the Controller cited a number of

categories of payments that assertedly could be made during a budget impasse, in

support of the Controller’s position that a preliminary injunction should not be

granted. In granting the preliminary injunction, the trial court largely rejected the

claim that payments during a budget impasse could be authorized on the various

grounds relied upon by the Controller.

On appeal, the Court of Appeal, after finding that the question of what

payments the Controller is authorized to make during a budget impasse constitutes

an issue of great importance but one that often will evade timely appellate review,

undertook to address the merits of the Controller’s claims that payment of public

funds during a budget impasse properly may be made when payment is authorized

by (1) a continuing appropriation, (2) a self-executing state constitutional mandate,

or (3) a federal mandate, and, within these categories, by particular constitutional

or statutory provisions.

Although the petitions for review filed in this court contended that the trial

court erred in granting a preliminary injunction in any respect and maintained that

the injunction should be set aside in its entirety, the petitions did not question the

44

Court of Appeal’s decision to address the substantive merits of the issue whether

disbursement of public funds may be authorized during a budget impasse on the

various grounds advanced by the Controller. Instead, the petitions for review

challenged the Court of Appeal’s conclusion with respect to one of the categories

of payments  the payment of salaries for state employees during a budget

impasse.

In light of our conclusion in part III of this opinion that the preliminary

injunction that was issued in this case must be set aside in its entirety because the

trial court failed to apply the applicable standards properly in granting the

injunction, it would be possible to dispose of this matter on that ground alone

without reaching the merits of the substantive payment-of-salary issue raised by

the petitions. As the Court of Appeal recognized, however, the question of what

payments the Controller is authorized to make during a budget impasse is the type

of issue that arises frequently but often may evade timely appellate review. Under

the circumstances, we conclude it is appropriate to address the state employee

salary issue that has been briefed in this court, in order to provide guidance to the

Controller and other public officials in the event of a future budget impasse.

Because the salary issue is the only substantive matter upon which review was

sought and granted, we confine our substantive discussion to that category of

payments.14


14

Under the current California Rules of Court, a Court of Appeal opinion that

is superseded by a grant of review ordinarily is not published in the Official
Reports, but this court has authority after granting review, or after decision, to
order the opinion of the Court of Appeal published in whole or in part. (Cal. Rules
of Court, rule 976(d).) In Agricultural Labor Relations Bd. v. Tex-Cal Land
Management, Inc.
(1987) 43 Cal.3d 696, 709, footnote 12, we explained that the
efficient use of this court’s review jurisdiction — in which we may grant or limit
review to only some of the issues addressed in the Court of Appeal decision —

(footnote continued on next page)

45

The state employee intervenors maintain that all state employees are

entitled to timely payment, on their regular payday, of their full and regular

salaries for work performed during a budget impasse, notwithstanding the absence

of a duly enacted budget bill. They assert that payment of full state employee

salaries during a budget impasse is required under both state and federal law. We

begin with a discussion of California law.

A. California Law

1. State Constitutional Impairment-of-Contract Clause

The California State Employees Association (CSEA) argues that under the

provision of the California Constitution barring the impairment of contracts (Cal.

Const., art. I, § 9), the state is constitutionally required during a budget impasse to

pay state employees, on their regular payday, their regular and full salaries for

work performed during that period. CSEA relies upon a line of California


(footnote continued from previous page)

“suggests that . . . significant Court of Appeal opinions should be available as
citable precedent with respect to issues not reached by us on subsequent review.”
In Tex-Cal, upon finding that the Court of Appeal opinion in that case was
“worthy of publication in that regard” (ibid.), we ordered the Court of Appeal
opinion to be published in the Official Reports, but at the same time expressly
cautioned that “our order of publication does not necessarily imply agreement with
the Court of Appeal’s analysis on issues not addressed in our opinion.” (Ibid.)


In this case, as in Tex-Cal, we find that the issues that were decided by the

Court of Appeal but upon which review was not sought are significant issues, and
that the discussion of those issues in the Court of Appeal’s opinion is worthy of
publication. Accordingly, in order to preserve that court’s analysis of those issues
as citable Court of Appeal precedent, we shall order the Court of Appeal opinion
to be published in the Official Reports. As we have explained above, however,
because these additional issues have not been briefed or argued in this court, we
express no opinion on the merits of those issues, and we emphasize that the Court
of Appeal opinion shall constitute citable authority not of this court but of the
Court of Appeal
.

46

decisions holding that, in California, public employment gives rise to certain

obligations, protected by the contract clause of the Constitution, including “the

right to the payment of salary which has been earned.” (Kern v. City of Long

Beach (1947) 29 Cal.2d 848, 853; see also Olson v. Cory (1980) 27 Cal.3d 532,

538.) CSEA argues that the Controller is authorized to pay a state employee’s

salary on his or her regular payday even in the absence of a duly enacted and

available appropriation, because the failure to pay an employee’s salary at such

time would amount to an unconstitutional impairment of contract.

As CSEA acknowledges, it is well established that the terms and conditions

of public employment, unlike those of private employment, generally are

established by statute or other comparable enactment (e.g., charter provision or

ordinance) rather than by contract. (See, e.g., Boren v. State Personnel Board

(1951) 37 Cal.2d 634, 641.) Nonetheless, a long line of California cases

establishes that with regard to at least certain terms or conditions of employment

that are created by statute, an employee who performs services while such a

statutory provision is in effect obtains a right, protected by the contract clause, to

require the public employer to comply with the prescribed condition.

Kern v. City of Long Beach, supra, 29 Cal.2d 848, is perhaps the seminal

decision in this line of authority. In Kern, at the time the plaintiff firefighter had

begun his employment with the defendant city, the city charter provided that after

20 years of service a firefighter would be entitled to receive a retirement pension

equal to 50 percent of his or her annual salary. A month before the plaintiff in

Kern completed the required 20 years of service, the city revised the charter and

purported to eliminate all pension benefits as to all persons not then eligible for

retirement. In Kern, the plaintiff challenged the validity of the city’s action, and

this court concluded that the city “by completely repealing all pension provisions,

has attempted to impair its contractual obligations. This it may not

47

constitutionally do, and therefor the repeal is ineffective as to petitioner.”

(29 Cal.2d at p. 856.) In the course of reaching this determination, the court in

Kern explained that its conclusion was “not in conflict with language appearing in

some cases to the general effect that public employment is not held by contract.

[Citations.] These cases involve the right to remain in an office or employment, or

to the continuation of civil service status. Although there may be no right to

tenure, public employment gives rise to certain obligations which are protected by

the contract clause of the Constitution, including the right to the payment of salary

which has been earned. Since a pension right is ‘an integral portion of

contemplated compensation’ [citation], it cannot be destroyed, once it has vested,

without impairing a contractual obligation.” (Id. at p. 853.)

In Olson v. Cory, supra, 27 Cal.3d 532, another case invalidating an

attempt retroactively to reduce vested pension rights, the court similarly stated:

“We recognize the often quoted language that public employment is not held by

contract and therefore is not protected by the contract clause. [Citations.] Those

and other cases involve purported rights to remain in office or to continued public

employment. On the other hand, we deal here with the right to compensation by

persons serving their terms of public office to which they have undisputed rights.

‘[P]ublic employment gives rise to certain obligations which are protected by the

contract clause of the Constitution. . . .’ [Citations.] Promised compensation is

one such protected right. [Citation.] Once vested, the right to compensation

cannot be eliminated without constitutionally impairing the contract obligation.”

(27 Cal.3d at pp. 537-538, italics added.)

Other cases have recognized that the state may violate the impairment-of-

contracts clause not only by directly reducing the pension benefits an employee is

entitled to receive, but also by failing to fulfill its obligation — created by

statute — to make continuing contributions to its employees’ retirement fund so as

48

to preserve the actuarial soundness of the fund. (See, e.g., California Teachers

Assn. v. Cory (1984) 155 Cal.App.3d 494; Valdes v. Cory (1983) 139 Cal.App.3d

773.)

As CSEA maintains, these past California cases clearly establish that

although the conditions of public employment generally are established by statute

rather than by the terms of an ordinary contract, once a public employee has

accepted employment and performed work for a public employer, the employee

obtains certain rights arising from the legislative provisions that establish the

terms of the employment relationship  rights that are protected by the contract

clause of the state Constitution from elimination or repudiation by the state. As

noted, a number of cases have stated broadly that among the rights protected by

the contract clause is “the right to the payment of salary which has been earned.”

(E.g., Kern v. City of Long Beach, supra, 29 Cal.2d 848, 853.) None of the cases

upon which CSEA relies, however, specifically address the question whether the

rights obtained by a public employee under state law include the right to receive

payment of earned salary in the absence of an available appropriation. To answer

that question we must examine the applicable California constitutional provisions

and statutes to determine which rights such provisions purport to provide.

A number of constitutional and statutory provisions relate to the question

whether a state employee who works during a budget impasse obtains a right,

protected by the contract clause, to receive payment for such work prior to the

enactment of an available appropriation. We note that unlike past cases that have

generally involved impairment-of-contract challenges to new or revised legislative

provisions that purport to alter the compensation or other conditions of

employment set forth in earlier legislative measures after an employee already has

performed services, in this case there has been no recent change in the relevant

constitutional or statutory provisions.

49

To begin with, as noted above, article XVI, section 7 of the California

Constitution provides that “[m]oney may be drawn from the Treasury only

through an appropriation made by law and upon a Controller’s duly drawn

warrant.” As the Court of Appeal observed, this constitutional requirement ―

which has counterparts in the United States Constitution (U.S. Const., art. II, § 9,

cl. 7) and in most state constitutions ― “had its origin in Parliament in the

seventeenth century, when the people of Great Britain, to provide against abuse by

the king and his officers of the discretionary money power with which they were

vested, demanded that public funds should not be drawn from the treasury except

in accordance with express appropriations therefor made by Parliament [citation];

and the system worked so well in correcting the abuses complained of, our

forefathers adopted it, and the restraint imposed by it has become a part of the

fundamental law of nearly every state in the Union.” (Humbert v. Dunn, supra, 84

Cal. 57, 59.)

Consistent with the directive of article XVI, section 7 of the California

Constitution, Government Code section 12440 provides: “The Controller shall

draw warrants on the Treasurer for the payment of money directed by law to be

paid out of the State Treasury; but a warrant shall not be drawn unless authorized

by law, and unless, except for refunds authorized by Section 13144, unexhausted

specific appropriations provided by law are available to meet it.”

With regard to the payment of state employee salaries, Government Code

section 9610, enacted in 1943, provides: “The fixing or authorizing the fixing of

the salary of a State officer or employee is not intended to and does not constitute

an appropriation of money for the payment of the salary. The salary should be

paid only in the event that moneys are made available by another provision of

law.” (Italics added; cf. Cal. Const., art. III, § 4 [dealing with elected state

officers].) This statute sets forth the basic understanding that statutes or other

50

measures that set salaries for state employees are not themselves appropriations

for such salaries, and further makes clear that the payment of a salary to a state

employee depends upon the availability of an appropriation to pay the salary.

The foregoing provisions do not specify that an appropriation for state

employee salaries can be made only in the budget act, and in some instances state

employee salaries currently are paid from continuing appropriations,15 but

appropriations for most state employee salaries traditionally have been adopted as

part of the annual budget act. In any event, the constitutional and statutory

provisions set forth above clearly require that some applicable appropriation be

available before a state employee’s salary actually may be paid from public funds.

In addition to the provisions just discussed, Government Code sections

1231 and 1231.1 address the effect of a budget impasse upon the employment

relationship between the state and its employees and the payment of salary for

work performed during a budget impasse. As previously noted, section 1231,

enacted in 1969, provides: “No state officer or employee shall be deemed to have

a break in service or to have terminated his or her employment for any purpose,

nor to have incurred any change in his or her authority, status, or jurisdiction or in

his or her salary or other conditions of employment, solely because of the failure

to enact a budget act for a fiscal year prior to the beginning of that fiscal year. [¶]

A person entering state service on or after the beginning of a fiscal year and before

15

As CSEA points out, under current law the salaries of some state employee

are payable from a continuing appropriation. (See, e.g., Ins. Code, § 11770 et seq.
[“The assets of the [State Compensation Insurance Fund] shall be applicable . . . to
the payment of the salaries and other expenses charged against it . . . .”]; see also
Board of Osteopathic Examiners of California v. Riley (1923) 192 Cal. 158
[ordering Controller to pay salaries of members of the Board of Osteopathic
Examiners pursuant to a continuing appropriation from a special fund into which
fees paid by osteopaths were deposited].)

51

the effective date of the budget act for that fiscal year and who otherwise is a state

officer or employee, shall be deemed a state officer or employee from the time he

or she entered state service, notwithstanding the failure to enact a budget act for

that fiscal year.” And section 1231.1, which derives from a provision first enacted

as an urgency measure in 1976, provides: “Funds from each appropriation made

in the budget act for any fiscal year may be expended to pay to officers and

employees whatever salary that would have otherwise been received had the

budget act been adopted on or prior to July 1, of that fiscal year.”

By its terms, Government Code section 1231 establishes that the

employment relationship between the state and state employees is not dependent

upon the passage of the annual budget bill and continues to exist during a budget

impasse, and further provides that the conditions of employment — including an

employee’s salary — remain in effect during the budget impasse. Contrary to the

contention of the state employee intervenors, however, section 1231 does not

indicate a legislative intent to authorize the actual payment of salary to employees

prior to the passage of a budget act that includes a requisite appropriation of funds

for such salaries. Particularly when read in conjunction with Government Code

sections 9610 and 1231.1, we believe that section 1231 reasonably must be

interpreted to recognize that under state law the actual payment of a state

employee’s salary is dependent upon the availability of a duly enacted

appropriation. Indeed, it is because of that limitation that section 1231.1

establishes that once a budget ultimately is enacted, appropriations included in that

budget are available to pay for work performed during the budget impasse. If

section 1231 afforded employees the right actually to receive their full pay during

a budget impasse, there would have been no reason to provide in section 1231.1

that funds from appropriations in the budget act “may be expended to pay to . . .

employees whatever salary that would have otherwise been received had the

52

budget act been adopted on or prior to July 1, of that fiscal year.” (Italics

added.)16

Accordingly, we conclude that in light of article XVI, section 7, of the

California Constitution, and Government Code sections 12440, 9610, 1231, and

1231.1, the employment rights of state employees reasonably must be viewed as


16

Although the state employee intervenors contend that one of the

“conditions of employment” protected by Government Code section 1231 during a
budget impasse is a public employee’s right to the timely payment of salary, they
have not cited any statute or other authority that specifically creates such a right.
Labor Code section 204, which imposes an obligation of timely payment of wages
upon employers in California generally, is not applicable to the payment of wages
of employees who are directly employed by the state. (Lab. Code, § 220.) In any
event, assuming that state employees generally enjoy a right, protected by the
contract clause, to the timely payment of earned salary when appropriated funds
are available to pay such salary, the state employee intervenors have not
persuasively demonstrated how such a general right to the timely payment of
salary properly can apply during the period of a budget impasse, in light of the
constitutional and statutory provisions we have discussed above.


For similar reasons, we find inapposite the numerous out-of-state cases that

have considered the validity of a variety of “pay lag” and mandatory furlough
measures. (See, e.g., University of Hawaii Professional Assembly v. Cayetano
(9th Cir. 1999) 183 F.3d 1096; Mass. Community College Council v. Com. (Mass.
1995) 649 N.E.2d 708.). In general, these cases hold that a variety of state statutes
that postponed the payment of employee salaries for one or more pay periods or
that imposed mandatory furloughs without pay in order to save the state money
during a budget crisis were invalid under the impairment-of-contract clause. None
of the cases, however, involved the question whether public employees have a
right, protected by the contract clause, to obtain timely payment of salary in the
absence of an available appropriation
. Indeed, in Mass. Community College
Council
, supra, 649 N.E.2d 708, the court specifically noted that “[t]here is no
suggestion that the Legislature had not appropriated funds to pay the
compensation called for under the collective bargaining agreements. Indeed, the
furlough program was designed to generate revenue surpluses that would be
available at the end of the fiscal year to help balance the budget.” (649 N.E.2d at
pp. 711-712.) Accordingly, we do not find these decisions on point.

53

including a condition that the actual payment of an employee’s salary is dependent

upon the existence of an available appropriation.

In arguing against this conclusion, CSEA points to a footnote in this court’s

decision in Jarvis v. Cory (1980) 28 Cal.3d 563, 574, footnote 6, which it claims

supports its contention that state employees are entitled to receive payment of their

salaries during a budget impasse. In our view, however, the footnote in Jarvis v.

Cory upon which CSEA relies actually confirms the common understanding that

state employees whose salaries are paid from appropriations in the annual budget

act do not have a right, under state law, to receive immediate payment of their

salary prior to the enactment of a budget.

In Jarvis v. Cory, supra, 28 Cal.3d 563, this court rejected a claim that a

legislative enactment that authorized a lump-sum payment to state employees at

the end of a fiscal year constituted a payment of “extra compensation” and as such

was prohibited by article IV, section 17 of the California Constitution. In the

course of upholding the validity of the legislation, the decision in Jarvis v. Cory

included a footnote — footnote 6 — that reads in full: “Although no appropriation

for payment of salaries existed from July 1 to July 6, when the budget bill was

finally passed, state employees faithfully attended work as usual during that period

and were ultimately compensated as if their salaries had been established from the

beginning of the fiscal year. This procedure has practically become an annual

event, and illustrates not only that state employees have often worked without

guarantee of salary yet ultimately received compensation, but also that in

interpreting article IV, section 17 [the state constitutional provision barring ‘extra

compensation . . . after service has been rendered ’], a sensible recognition of the

imperfect and cumbersome machinery of state government has long been the

prevailing practice. Strict interpretation would impose needless constraints on the

ability of the state to function, and we find unacceptable the proposition that the

54

Constitution was intended to annually bring state government to a grinding halt.”

(28 Cal.3d at p. 574, fn. 6.)

Footnote 6 in Jarvis v. Cory, supra, 28 Cal.3d 563, 574, clearly reflects the

court’s view that the “extra compensation” clause of the California Constitution

should not be interpreted “to annually bring state government to a grinding halt”

by barring the Legislature from authorizing the payment of past-accrued state

employee salaries from appropriations that are included in a budget bill enacted

after the work in question has been performed. In our view, however, there is

nothing in this footnote to suggest that the court in Jarvis v. Cory anticipated that

state employees would receive payment of their salaries prior to enactment of the

budget bill. On the contrary, because the footnote refers to state employees who

“have often worked without guaranty of salary” and observes that such employees

“were ultimately compensated as if their salaries had been established from the

beginning of the fiscal year” (28 Cal.3d at p. 574, fn. 6, italics added), we believe

this footnote reasonably must be understood simply to confirm the common

understanding that, as a matter of state law, the Controller may pay the salaries of

state employees only after an applicable appropriation has been enacted. Other

cases reflect the same understanding. (See, e.g., California State Employees’

Assn. v. Flournoy (1993) 32 Cal.App.3d 219, 231 [“[I]t is clear that [the practice

of the Board of Regents] with regard to personnel salary increases has been to

apply for, and obtain, a legislative appropriation with which to pay the salary

increases”]; Theroux v. State of California (1984) 152 Cal.App.3d 1, 9 [“[The

State and the Controller] have argued that the funds remaining from the initial

appropriation are inadequate to pay appropriate salary adjustments to all entitled

employees once the restrictions are removed [as required by the Theroux

decision]. However, should that prove so, we must ‘presume the Legislature will

55

give meaning to our ruling and “that the proper steps will be taken to appropriate

the amount required” to pay such [adjustments].’ ”])

Although we thus conclude that state employees have no right under the

contract clause to the immediate payment of salary in the absence of a duly

enacted appropriation for payment of such salaries, it should be emphasized that

this conclusion does not mean that state employees who work during a budget

impasse do so as “volunteers,” not entitled to compensation, as suggested by the

trial court. Government Code section 1231 expressly provides for the continuation

of the employment relationship between the state and its employees during a

budget impasse, without any change “in salary or other conditions of

employment.” In light of this provision, and the holdings in past cases that a

public employee’s “right to the payment of salary earned” is “protected by the

contract clause of the Constitution” (Kern v. City of Long Beach, supra, 29 Cal.2d

848, 853), we conclude that employees who work during a budget impasse obtain

a right, protected by the contract clause, to the ultimate payment of salary that has

been earned. As indicated by the above quoted passage in Jarvis v. Cory, supra,

28 Cal.3d 562, 547, footnote 6, in the past the Legislature always has paid

employees for work performed during such a period, and Government Code

section 1231.1 now makes it clear that when a budget ultimately is enacted with

appropriations for salaries, these appropriations are available for payment of work

performed during the budget impasse.17

17

We have no occasion in this case to consider what remedy or remedies state

employees may have in the unlikely event that the state fails to pay employees
fully for work performed during a budget impasse, or whether any remedy would
include compensation for any loss sustained as a result of a delay in payment. As
explained above, however, we conclude that employees who work during a budget
impasse obtain the right, protected by the contract clause, to the ultimate payment
of their earned salary, and nothing in the Court of Appeal’s opinion should be read

(footnote continued on next page)

56

Nonetheless, because the California Constitution and the applicable statutes

establish that the Controller is not authorized actually to pay salaries to state

employees in the absence of a duly enacted appropriation, that condition or

qualification on the right to compensation necessarily comprises one term or

condition of employment that is an integral part of a state worker’s employment

rights that are protected by the constitutional contract clause. Accordingly, we

conclude that, contrary to the contention of CSEA, the state constitutional contract

provision does not afford state employees the right to obtain the actual payment of

salary from the treasury prior to the enactment of an applicable appropriation.18

2. Dills Act

CSEA argues alternatively that if, under state law, an appropriation is

necessary for the payment of state employee salaries, as we have determined

above, we should conclude that whenever the Legislature has approved a state

employee memorandum of understanding pursuant to the provisions of the Dills

Act (Gov. Code, § 3512 et seq., formerly known as the State Employer-Employee

Relations Act), such approval in itself properly must be viewed as, in effect, a

“continuing appropriation” of the funds necessary to meet the salary obligations

set forth in the memorandum of understanding, and thus that the payment of


(footnote continued from previous page)

to suggest that these employees properly may be found to have “assumed the risk”
that they never will be paid for such work.
18

Because we conclude that state employees do not have a contractual right to

receive payment of their salaries prior to the enactment of an applicable
appropriation, we have no occasion to determine whether  in the event these
employees possessed such a contractual right  the Controller would have the
authority to pay their salaries in the absence of an appropriation. (Cf. Tevis v. City
& County of San Francisco
(1954) 43 Cal.2d 190, 200; Theroux v. State of
California
, supra, 152 Cal.App.3d 1, 7-9.)

57

salaries of employees covered by such a memorandum of understanding may be

made in the absence of a budget act appropriation. As we shall explain, in our

view the provisions of the Dills Act fail to support CSEA’s argument.

As the Court of Appeal explained in Department of Personnel

Administration v. Superior Court (1992) 5 Cal.App.4th 155, 180-181:

“ ‘Although the [Dills Act] affords state employees significant new rights, the

Legislature at the same time placed definite limits on the scope of representation

and retained substantial control over state employee compensation and many other

terms and conditions of state employment. . . . The act . . . provides that as to

matters within the scope of representation, a memorandum of understanding

requiring the expenditure of funds does not become effective unless it is approved

by the Legislature in the annual Budget Act (§ 3517.6); under this provision,

virtually all salary agreements are subject to prior legislative approval.’ ”

(Original italics and fn. omitted, new italics added.)19

Although Government Code section 3517.6 specifically provides that any

provision of a memorandum of understanding that requires the expenditure of

funds — as obviously does a provision embodying a salary agreement  “shall

19

Government Code section 3517.6 states in relevant part: “If any provision

of the memorandum of understanding requires the expenditure of funds, those
provisions of the memorandum of understanding shall not become effective unless
approved by the Legislature in the annual Budget Act. If any provision of the
memorandum of understanding requires legislative action to permit its
implementation by amendment of any section not cited above [i.e., specified
statutory provisions that may be superseded by a conflicting provision of a
memorandum of understanding], those provisions of the memorandum of
understanding shall not become effective unless approved by the Legislature.”


Government Code section 3517.7 provides in relevant part: “If the

Legislature does not approve or fully fund any provision of the memorandum of
understanding which requires the expenditure of funds, either party may reopen
negotiations on all or part of the memorandum of understanding.”

58

not become effective unless approved by the Legislature in the annual Budget Act

(italics added), CSEA argues that it would undermine the effectiveness of a multi-

year memorandum of understanding if the Legislature, after initially approving

such a memorandum, retained the right during the period covered by the

memorandum to refuse to appropriate in a subsequent annual budget the funds

required by the agreement. We have no occasion in this case to determine what

remedy, if any — other than the reopening of negotiations prescribed by section

3517.7 (see fn. 19, ante) — state employees or their representatives may have if

the Legislature effectively repudiates one or more provisions of a multi-year

memorandum of understanding by declining to appropriate the necessary funds to

meet its obligations under the memorandum of understanding. In light of the

explicit language of section 3517.6 (“unless approved by the Legislature in the

annual Budget Act” (italics added)), however, we cannot agree that the

Legislature’s initial approval of the memorandum of understanding in a non-

budget act, or its appropriation of funds in one or more (but not all) of the annual

budgets of a multi-year contract, properly can be viewed as a continuing

appropriation, authorizing the Controller to pay salaries set forth in the

memorandum of understanding in a new fiscal year without enactment of an

applicable appropriation in that year’s budget act.20

20

The case of Association of Surrogates v. State (N.Y. 1991) 577 N.E.2d 10,

upon which CSEA relies, does not support a contrary conclusion. In Association
of Surrogates
, the New York Court of Appeals held that under the applicable New
York statute, the legislature’s ratification of a three-year public employee
collective bargaining agreement constituted “approval” of the entire three-year
obligation expressed in the contract and precluded the Legislature from thereafter
altering the provisions of the agreement by unilaterally instituting a “pay lag”
under which, in one of the years covered by the agreement, employees were to be
paid for only 50 rather than 52 weeks of work, with the withheld amounts to be
repaid to the employees upon the termination of their employment, at the

(footnote continued on next page)

59

3. Equity and Policy Reasons

Finally, CSEA argues that state employees, like all other employees, should

be able to work secure in the knowledge that they will timely receive their full

salaries, and that, as a matter of equity and sound public policy, “[s]tate employees

who report to work during a budget impasse and continue to faithfully serve the

people of the State of California deserve nothing less.” We could not agree more

with this proposition. The California Constitution contemplates that the

Legislature will pass a budget in time to provide timely payment of all of the

state’s regular obligations, and public employees certainly are treated inequitably

when, through no fault of their own, they are deprived of the prompt payment of

their salaries. Furthermore, we also agree with CSEA that, as a matter of policy,

this situation is almost certainly detrimental to the state as an employer because,

“if state employees must confront financial uncertainty each summer as to whether

they will receive their full and regular salaries, they [may well] look elsewhere for

employment.” But these points, however well founded, simply highlight the

crucial importance of timely enactment of a budget bill or some other legislative

(footnote continued from previous page)

employees’ then-current rate of salary. (577 N.E.2d at pp. 12-16.) Although the
court in Association of Surrogates concluded that the newly-adopted pay lag
mechanism was invalid, the court did not suggest that the legislature’s approval of
the multi-year agreement authorized the actual payment of funds from the treasury
without an applicable annual appropriation. On the contrary, the court in that case
expressly stated that “[a]s with any other expenditure of funds by the State, money
for public employees’ salaries must be appropriated by the Legislature each year
(id. at p. 12, italics added), and further noted that “[p]laintiffs do not dispute the
necessity for a legislative appropriation before State funds may be paid as salary to
public employees.” (Ibid.) Thus, the court in Association of Surrogates did not
hold that the legislature’s approval of a multi-year agreement properly could be
viewed as constituting a continuing appropriation, obviating the need for an annual
appropriation.

60

measure appropriating funds for the payment of state employee salaries. Our

agreement with these sentiments affords us no authority to disregard well-

established principles of state law that authorize the payment of state employee

salaries only when there is an applicable and available appropriation.

B. Federal Law

1. Federal Contract Clause and Due Process Clause

As explained above, we have concluded that state employees have no

contract right, under California law, to the immediate payment of salary during a

budget impasse, because one of the conditions that is part of their employment

contract is that the Controller is authorized to pay their salary only if there is a

duly enacted appropriation from which such payment may be made. For this

reason, the federal constitutional contract clause does not provide any support for

the employees’ claim, and similarly there is no violation of the federal due process

clause, because the state has not deprived the employees of a right they otherwise

possess.

2. Fair Labor Standards Act (FLSA)

The Court of Appeal held that under the federal supremacy clause,

California nevertheless is required to comply with the FLSA, which requires

timely payment of those wages required by the federal act, that is payment of such

wages on the regular payday of those workers to whom the minimum wage and

overtime compensation provisions of the FLSA apply. In a brief in this court, the

Controller takes the position that the Court of Appeal’s opinion did not purport to

determine the amount of wages the FLSA requires an employer to pay on the

regular payday — that is, whether the FLSA requires payment of the employee’s

full regular wages, or payment only of wages computed at the minimum wage

rate — and the Controller suggests that this court need not resolve that issue

either. The state employee intervenors, however, read the Court of Appeal’s

61

opinion as holding that the FLSA requires only the prompt payment of minimum

wages and overtime compensation. Although the opinion is somewhat ambiguous

on this point,21 we believe in any event that it is appropriate to clarify our

understanding of what the FLSA requires with regard to the amount of salary

payments that must be made during a budget impasse, so as not to leave the

Controller without guidance on this issue.

We begin with the governing language of the FLSA. The basic minimum

wage provision of the act provides in relevant part: “(a) Every employer shall pay

to each of his employees who in any workweek is . . . employed in an enterprise

engaged in commerce . . . , wages at the following rates: (1) . . . not less than [the

current designated minimum wage].” (29 U.S.C. § 206.) The relevant overtime

compensation provision of the FLSA provides in relevant part: “(a)(1) Except as

otherwise provided in this section, no employer shall employ any of his employees

. . . for a workweek longer than forty hours unless such employee receives

compensation for his employment in excess of the hours above specified at a rate

not less than one and one-half times the regular rate at which he is employed.”

(29 U.S.C. § 207.) These minimum wage and overtime compensation provisions


21

On the one hand, the Court of Appeal states in a footnote: “We do not

resolve the extent to which the FLSA applies to the different categories and
classes of state employees, or the extent to which the compensation required under
the FLSA may fall short of any state employee’s full salary. These questions have
not been presented to us, and we do not address them.” (White v. Davis I, supra,
98 Cal.App.4th 969, 995, fn. 9.) On the other hand, in another footnote the Court
of Appeal states: “Citing Donovan v. Crisostomo (9th Cir. 1982) 689 F.2d 869,
876, the state employee intervenors argue under the FLSA, employees who work
overtime must receive the requisite overtime wages plus their full straight time
pay. However, they do not cite any authority that the FLSA requires the full
payment of straight time wages in all circumstances, and we are unaware of any
such authority.” (White v. Davis I, supra, 98 Cal.App.4th at p. 1000, fn. 12.)

62

of the FLSA apply to most, although by no means all, state employees; thus, for

example, those employees “employed in a bona fide executive, administrative, or

professional capacity” generally are “exempt” from ― that is, they do not enjoy

the benefit of ― these provisions of the FLSA. (29 U.S.C. § 213(a)(1).)22

Employees to whom the minimum wage and overtime compensation provisions of

the FLSA apply are generally referred to as “nonexempt employees,” and

employees to whom those provisions do not apply are referred to as “exempt

employees.”

Although the United States Supreme Court has not yet directly addressed

the issue whether the FLSA requires prompt payment of a nonexempt employee’s

wages or overtime compensation, the lower federal courts consistently have

interpreted the act to require the prompt payment of minimum and overtime

wages. (See, e.g., Biggs v. Wilson, supra, 1 F.3d 1537; Olson v. Superior Pontiac-

GMC, Inc. (11th Cir. 1985) 765 F.2d 1570, 1579, as mod., 776 F.2d 265, 267;

United States v. Klinghoffer Bros. Realty Corp. (2d Cir. 1961) 285 F.2d 487, 491;

see also Brooklyn Sav. Bank v. O’Neil (1945) 324 U.S. 697, 707 & fn. 20, 709.)

In Biggs v. Wilson, supra, 1 F.3d 1537, the Ninth Circuit addressed the

question whether a state’s failure to pay its employees on their regular payday

during a budget impasse violates the FLSA. In Biggs, California highway

maintenance workers were not paid any wages on their regular payday (July 16,

1990) because of a budget impasse and did not receive wages for that pay period


22

No issue has been raised in this case  in either the trial court or on

appeal  regarding which particular state employees (or state employee positions)
are subject to the minimum wage and overtime compensation provisions of the
FLSA and which employees are exempt from such provisions, and thus we have
no occasion to address that issue here.

63

until July 30-31, when the state budget finally was enacted and signed into law.

Thereafter, the workers brought suit against the state under the FLSA, and the

Ninth Circuit held that the state’s failure to pay the employees on their regular

payday violated the FLSA, concluding that the existence of a state constitutional

provision prohibiting the payment of funds in the absence of an available

appropriation did not excuse the state’s obligation to comply with the

requirements imposed by federal law. (1 F.3d at pp. 1543-1544.)

There is some ambiguity in the language of the opinion in Biggs as to

whether that decision purported to hold that the FLSA requires the prompt

payment of an employee’s regular salary or only the prompt payment of wages

based on the minimum wage. Some language in the opinion, at least at first blush,

appears to support the position that the FLSA requires the prompt payment of an

employee’s regular salary. Thus, for example, the trial court order that was

affirmed in Biggs states in part that “ ‘[i]t is therefore declared that defendant’s

failure to issue plaintiffs’ paycheck when due violates the Fair Labor Standards

Act.’ ” (Biggs v. Wilson, supra, 1 F.3d at p. 1538, fn. 2.) Further, at the

conclusion of the opinion in Biggs, the court of appeals stated: “We therefore hold

that state officials’ failure to issue the class’s paychecks promptly when due

violates the FLSA. Paychecks are due on payday. After that, the minimum wage

is ‘unpaid.’ ” (1 F.3d at p. 1544.)

When the opinion in Biggs v. Wilson, supra, 1 F.3d 1537, is read as a

whole, however, it is clear that the opinion properly must be understood as holding

that an employer complies with the FLSA so long as it pays those employees who

are subject to the FLSA at the minimum wage rate on payday, and not that the

FLSA requires an employer to pay employees their regular wage on payday. The

basic reasoning of the Biggs decision is that the minimum wage required by the

FLSA must be paid promptly, not that the FLSA requires the payment of an

64

employee’s salary above the minimum wage. In describing the provisions of the

FLSA, the court’s opinion in Biggs states: “The FLSA provides for the recovery of

unpaid minimum wages, unpaid overtime compensation, and liquidated

damages. . . . These provisions necessarily assume that wages are due at some

point, and thereafter become unpaid.” (1 F.3d at p. 1539.) Nothing in the FLSA

provides for the recovery of unpaid regular wages above the minimum wage.

Furthermore, after explaining why it believed the language of the statute itself was

inconsistent with the state’s contention that the statute contained no prompt

payment requirement, the opinion in Biggs states: “Holding that the FLSA is

violated unless the minimum wage is paid on the employee’s regular payday also

comports with such case law as there is.” (Id. at p. 1541, italics added.) Finally,

in rejecting the argument that the existence of a budget impasse should relieve the

state of its obligation under the FLSA, Biggs states: “The FLSA does not require

California to pass a budget on time; it only requires California to do what all

employers must do — pay its employees the minimum wage on payday.” (1 F.3d

at p. 1543, italics added.)

Accordingly, we conclude that, under Biggs, the state is required to comply

with the FLSA during a budget impasse, but that the state satisfies the

requirements of the FLSA by paying nonexempt state employees (who do not

work overtime) at the minimum wage rate for the straight-time hours (that is,

nonovertime hours) worked by those employees during the pay period. For

nonexempt employees who do not work overtime, the FLSA does not require the

prompt payment of full salary.

By contrast, under the applicable federal regulation (29 C.F.R. § 778.315

(2002)), whenever a nonexempt employee works overtime, the FLSA requires the

employer to pay the employee his or her full regular salary for the employee’s

straight time as well as at least one and one-half times the employee’s regular

65

salary for overtime hours worked. (See Fidelity Federal Sav. & Loan Assn. v.

de la Cuesta (1982) 458 U.S. 141, 153 [“Federal regulations have no less pre-

emptive effect than federal statutes.”].) The applicable regulation states in this

regard: “Overtime compensation, at a rate not less than one and one-half times the

regular rate of pay must be paid for each hour worked in the workweek in excess

of the applicable maximum hours standard. This extra compensation for the

excess hours of overtime work under the Act cannot be said to have been paid to

an employee unless all straight time compensation due him for the nonovertime

hours under his contract (express or implied) or under any applicable statute has

been paid.” (29 C.F.R. § 778.315 (2002), italics added.) In Donovan v.

Crisostomo, supra, 689 F.2d 869, 876, the court explained the rationale underlying

this regulation, noting that without such a limitation “[a]n employer could

effectively eliminate the premium paid for overtime by [reducing an employee’s]

straight time wages in an amount equal to or greater than the overtime premium.”

In sum, in order to comply with the FLSA, the state, during a budget

impasse, must timely pay nonexempt employees who do not work overtime at

least at the minimum wage rate for all straight hours worked by the employee, and

must timely pay nonexempt employees who work overtime their full salary for all

straight time worked plus one and one-half times their regular rate of pay for

overtime.

In a declaration accompanying the opposition to the request for a

preliminary injunction filed in the trial court, the Controller maintained that it was

not feasible to determine and adjust all of the payments to state employees “to

only pay the federally required minimum wage instead of the wages to which each

employee is entitled prior to [the applicable] payroll deadlines.” The Controller

asserted it was thus necessary to pay all state employees covered by the FLSA

their full regular wages in order to assure compliance with the requirements of that

66

act. The trial court never addressed this claim, and the Court of Appeal took note

of the question but declined to address it for the first time on appeal. (White v.

Davis I, supra, 98 Cal.App.4th 969, 1003, fn. 13.)

In a supplemental brief filed in this court, the Controller has reiterated the

claim that it is infeasible or impossible for the state to timely pay only the

minimum compensation required by the FLSA, emphasizing the state’s current use

of a “negative payroll” system and the difficulty of “segregating those employees

who worked overtime from those who did not work overtime” and the further

difficulty of “determining whether an employee worked a full 40 hours each week

or may have worked less due to being on unpaid leave or being ill,” and of making

such determinations quickly enough to comply with the timely payment

requirements of the FLSA. On the record before us we have no means of

evaluating or resolving the Controller’s factual claim of impossibility, but even if

it is administratively infeasible, given the state’s current payroll system, for the

state, prior to preparing an individual employee’s paycheck, to determine with

certainty whether a particular nonexempt employee will or will not work overtime

during a given pay period or to determine the exact number of straight-time hours

the employee will work, we are somewhat skeptical of the contention that the state

would be found to have violated the FLSA if, during a budget impasse, the state

(1) pays full regular wages and overtime compensation to those nonexempt

employees who it reasonably anticipates will work overtime during a given pay

period, (2) pays minimum wage rate for all straight-time hours an employee is

scheduled to work during the pay period to those nonexempt employees who it

reasonably anticipates will not work overtime during a given pay period, and (3) in

the following pay period, pays employees all additional sums that are due under

the FLSA for the prior pay period based on information that the state obtains

through reporting forms that it collects on or immediately following the preceding

67

payday. (Cf. Walling v. Harnischfeger Corporation (1945) 325 U.S. 427, 432-433

[“Section 7(a) [the overtime provision of the FLSA] does not require the

impossible. If the correct overtime compensation cannot be determined until some

time after the regular pay period the employer is not thereby excused from making

the proper computation and payment. Section 7(a) requires only that the

employees receive a 50% premium as soon as convenient and practicable under

the circumstances.” (Italics added.)]; see also 29 C.F.R. § 778.106 (2002) [“When

the correct amount of overtime compensation cannot be determined until some

time after the regular pay period . . . the requirements of the Act will be satisfied if

the employer pays the excess overtime compensation as soon after the regular pay

period as is practicable. Payment may not be delayed for a period longer than is

reasonably necessary for the employer to compute and arrange for payment of the

amount due and in no event may payment be delayed beyond the next payday after

such computation may be made.”].)

In any event, as already noted, the Controller’s claim of infeasibility was

not fully litigated below, and thus we do not believe it would be appropriate to

attempt to definitively resolve the claim at this juncture. It is sufficient at this

point to make clear that, by virtue of the supremacy of federal law, the state is

obligated to comply with the minimum requirements of the FLSA during a budget

impasse, notwithstanding the lack of an available appropriation.

V

For the reasons set forth in part III, ante, we conclude that the Court of

Appeal erred in upholding in part the preliminary injunction granted by the trial

court. The judgment of the Court of Appeal is reversed insofar as it upheld in part

the preliminary injunction, and the matter is remanded to the Court of Appeal with

directions to set aside the preliminary injunction in its entirety. Further, as

explained above (see fn. 14, ante, p. 45), without ruling on the additional issues

68

resolved by the Court of Appeal that we have not addressed in our present opinion,

we order that the Court of Appeal’s opinion be published in the Official Reports.

(Cal. Rules of Court, rule 976(d).)

GEORGE, C.J.

WE CONCUR:

KENNARD, J.
BAXTER, J.
WERDEGAR, J.
CHIN, J.
BROWN, J.
MORENO, J.



69

See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion White v. Davis
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted
XXX 98 Cal.App.4th 969
Rehearing Granted

__________________________________________________________________________________

Opinion No.
S108099
Date Filed: May 1, 2003

__________________________________________________________________________________

Court:
Superior
County: Los Angeles
Judge: Robert H. O’Brien and Emilie H. Elias

__________________________________________________________________________________

Attorneys for Appellant:

Law Offices of Richard I. Fine & Associates, Richard I. Fine, Jeremy W. Faith, Genalin Sulat, Carmela
Tan, Cheri M. Vu; Jonathan M. Coupal and Trevor A. Grimm for Plaintiff and Appellant and for Plaintiffs
and Respondents.

Daniel E. Lungren and Bill Lockyer, Attorneys General, Manuel M. Medeiros, State Solicitor General,
Linda A. Cabatic and Andrea Lynn Hoch, Assistant Attorneys General, Louis R. Mauro, Acting Assistant
Attorney General, Paul H. Dobson, Keith Yamanaka and Jennifer K. Rockwell, Deputy Attorneys General,
for Defendant and Appellant and for Defendants and Respondents Gray Davis et al.

__________________________________________________________________________________

Attorneys for Respondent:

Bion M. Gregory, Richard Thomson; Eisen & Johnston Law Corporation and Marian M. Johnston for
Defendants and Respondents Bill Lockyer, Cruz M. Bustamante, Rob Hurtt and Curt Pringle.

Gary P. Reynolds, Anne M. Giese, Daniel S. Connolly and Michael D. Hersh for Interveners and
Appellants Gary Gavinski and California State Employees Association, Local 1000, SEIU, AFL-CIO,
CLC.

Dennis F. Moss for Interveners and Appellants Professional Engineers in California Government and
California Association of Professional Scientists.

Benjamin C. Sybesma, Christine Albertine and Joel H. Levinson for Intervener and Appellant California
Correctional Peace Officers’ Association.

Carroll, Burdick & McDonough, Ronald Yank, Gary M. Messing, Laurie J. Hepler and Cathleen A.
Williams for Intervener and Appellant California Union of Safety Employees.







Page 2 - counsel continued - S108099


Attorneys for Respondent:

Lynn S. Carman; Steinberg & Steinberg, Lawrence William Steinberg and Anita Steinberg for Interveners
and Appellants Jerome Feitelberg and Alameda Drug Company, Inc.

David P. Lampkin, R. Clayton Seaman, Jr., Jeralyn Keller and Jonathan P.
Milberg for California Appellate Defense Counsel as Amici Curiae.

Lynn S. Carman for Frederick S. Mayer as Amicus Curiae.






71





Counsel who argued in Supreme Court (not intended for publication with opinion):

Richard I. Fine
Law Offices of Richard I. Fine & Associates
468 North Cambden Drive, Suite 200
Beverly Hills, CA 90210
(310) 277-5833

Jennifer K. Rockwell
Deputy Attorney General
1300 I Street
Sacramento, CA 94244-2550
(916) 445-6998

Anne M. Giese
California State Employees Association
1108 “O” Street, Suite 327
Sacramento, CA 95814
(916) 326-4208

Gary M. Messing
Carroll, Burdick & McDonough
2100 21st Street
Sacramento, CA 95818-1708
(916) 456-2100

72

Opinion Information
Date:Docket Number:
Thu, 05/01/2003S108099

Parties
1Connell, Kathleen (Defendant and Appellant)
Represented by Attorney General - Sacramento Office
Jennifer K. Rockwell, Deputy Attorney General
P.O. Box 944255
1300 I St., 11th Floor
Sacramento, CA

2Howard Jarvis Taxpayers Association (Plaintiff and Appellant)
Represented by Jonathan M. Coupal
Howard Jarvis Taxpayers Association
921 - 11th Street, Suite 1201
Sacramento, CA

3California State Employees Association, Local 1000 (Intervener and Appellant)
Represented by Anne M. Giese
California State Employees Association
1108 "O" Street, Suite 327
Sacramento, CA

4California Correctional Peace Officers Association (Intervener and Appellant)
Represented by Joel H. Levinson
Calif. Correctional Peace Officers Association
775 Riverpoint Drive, Suite 200
West Sacramento, CA

5California Union Of Safety Employees (Intervener and Appellant)
Represented by Gary M. Messing
Carroll, Burdick & Mc Donough
2100 21st Street
Sacramento, CA

6Professional Engineers In California (Intervener and Appellant)
Represented by Dennis F. Moss
Spiro, Moss, Barness & Harrison LLP
11377 W. Olympic Blvd., Suite 1000
Los Angeles, CA

7Davis, Gray (Defendant and Respondent)
Represented by Jay-Allen Eisen
Eisen & Johnson Law Corporation
980 Ninth Street, Ste. 1400
Sacramento, CA

8Davis, Gray (Defendant and Respondent)
Represented by Robert Andrew Pratt
Office of the Legislative Counsel
925 L Street, #900
Sacramento, CA

9White, Steven (Plaintiff and Appellant)
10California Appellate Defense Counsel (Amicus curiae)
Represented by Jonathan P. Milberg
Appellate Associates
300 N Lake Ave #520
Pasadena, CA

11Mayer, Frederick S. (Amicus curiae)
Represented by Lynn S. Carman
Attorney At Law
1035 Cresta Way #3
San Rafael, CA


Disposition
May 1 2003Opinion: Reversed

Dockets
Jul 5 2002Received Court of Appeal record
  one doghouse sent overnight
Jul 5 2002Petition for Review with request for Stay filed (civil)
  in Sacramento by Kathleen Connell, as State Controller etc.
Jul 5 2002Record requested
  by e-mail this morning for record to be sent overnight.
Jul 8 20022nd petition for review filed
  by counsel for Intervenors/Aplts Calif. Union of Safety Employees and Calif. Correctional Peace Officers' Assn. (filed in Sac.)
Jul 8 20024th petition for review filed
  intervenor and appellant PROFESSIONAL ENGINEERS IN CAL
Jul 9 2002Stay application filed (separate petition pending - civil)
  by Int/Aplts. CSEA, Local 1000, SEIU, AFL-CIO, CLC. (entitled "Petn for Writ of Supersedeas")
Jul 9 20023rd petition for review filed
  by counsel for Intervenors/Aplts. Calif. State Emp. Assn., Local 1000, SEIU, AFL-CIO, CLC, Gary Gavinski, Tim Behrens and David Okumura. (filed in S.F., timely per CRC 40k)
Jul 15 20022nd record request
  B122178 (Overnight Mail Requested)
Jul 15 2002Received Court of Appeal record
  1 doghouse B122178 [being sent o/n]
Jul 16 2002Received Court of Appeal record
  2 doghouses in B123992 [being sent o/n]
Jul 30 2002Received:
  answer to petition for review--late>>Respondents Howard Jarvis Taxpayers Assn.
Jul 31 2002Answer to petition for review filed
  with permission.
Aug 9 2002Reply to answer to petition filed
  in Sacramento by the Attorney General for Kathleen Connell, California State Controller, Defendant and Appellant
Aug 14 2002Petition for Review Granted (civil case)
  (PETITIONS). The stay issued by the Court of Appeal shall remain in effect pending final determination of this matter, or pending further order of this court. Votes: George, CJ., Kennard, Baxter, Werdegar, Chin, Brown and Moreno, JJ.
Aug 21 2002Request for extension of time filed
  for aplt State Controller to file the opening brief on the merits, to 10/15.
Aug 26 2002Request for extension of time filed
  for aplts Calif. Union of Safety Emp. and Calif. Correctional Peace Officers' Assn. to file the opening brief on the merits, to 10/15
Aug 30 2002Extension of time granted
  to 10-15-02 for all aplts to file the opening briefs on the merits.
Oct 15 2002Opening brief on the merits filed
  by aplt State Controller.
Oct 15 2002Request for judicial notice filed (in non-AA proceeding)
  by aplt State Controller
Oct 15 2002Opening brief on the merits filed
  by aplt Calif. State Employees Assn.
Oct 15 2002Opening brief on the merits filed
  Appellants California Union of Safety Employees and California Correctional Peace Officers' Association
Oct 15 2002Request for judicial notice filed (in non-AA proceeding)
  by Appellants Calif. Union of Safety Employees and Calif. Correctional Peace Officers' Association Exhibit "A" attached (original)
Nov 25 2002Received:
  answer brief/merits--late>>respondents Howard Jarvis Taxpayers Assn and Steven White
Dec 2 2002Application filed to:
  file late answer brief/merits>>respondents Howard Jarvis Taxpayers Assn & Steven White
Dec 4 2002Answer brief on the merits filed
  by resps Howard Jarvis Taxpayers and Steven White (Ct's permission for late filing)
Dec 17 2002Received letter from:
  respondents Howard Jarvis Taxpayers Assn and Steven White
Dec 23 2002Reply brief filed (case not yet fully briefed)
  by attorneys for Intervenors and Appellants CSEA, Local 1000, SFL-CIO, CLC, Gary Gavinski, Tim Behrens and David K. Okumura.
Dec 23 2002Reply brief filed (case fully briefed)
  by appellants California Union of Safety Employees and California Correctional Peace Officers' Association.
Dec 24 2002Reply brief filed (case fully briefed)
  by aplt State Controller
Dec 27 2002Received:
  errata to aplt State Controller's reply brief.
Jan 22 2003Received application to file amicus curiae brief; with brief
  California Appellate Defense Counsel
Jan 22 2003Additional issues ordered
  The parties are directed to file supplemental briefs addressing the following issue: Assuming, solely for purposes of this question, that the various provisions of state law relied upon by the public employee organizations do not provide a basis upon which the Controller may pay a state employee his or her full and regular salary during a budget impasse, and assuming further, again solely for purposes of this question, that the state could satisfy the requirements imposed by the federal Fair Labor Standards Act (FLSA) simply by timely paying an employee covered by that act who does not work overtime a sum based on the minimum wage rate for hours worked, does the Controller nonetheless have the authority to pay such a covered employee his or her full and regular salary during a budget impasse if the Controller determines (1) that in light of the logistics entailed in obtaining the data and making the adjustments that would be required to pay such employees only the minimum sum required by the FLSA, it would be administratively infeasible for the state to make such adjustments within the time necessary to ensure the prompt payment of wages required by the FLSA, or, alternatively, (2) that in view of the additional administrative expense that would be entailed in making the necessary adjustments in a timely fashion, it would be less costly for the state to comply with the requirements of the FLSA simply by paying the full and regular salaries of state employees covered by that legislation? The parties shall file simultaneous supplemental letter briefs on this issue on or before February 6, 2003, and any party may file a reply letter brief on or before February 11, 2003.
Jan 24 2003Permission to file amicus curiae brief granted
  by Calif. Appellate Defense Counsel. Any answers may be filed w/in 20 days.
Jan 24 2003Amicus Curiae Brief filed by:
  Calif. Appellate Defense Counsel.
Feb 4 2003Received application to file amicus curiae brief; with brief
  by Frederick S. Mayer.
Feb 6 2003Filed:
  Supplemental brief of aplt State Controller, by A.G. (filed in Sac)
Feb 6 2003Filed:
  Supplemental brief by intervenor-aplt Calif. State Employees Assn. (filed in sac)
Feb 6 2003Filed:
  Supplemental Brief of intervenor-aplts Cal. Union of Safety Employees and Cal. Correctional Peace Officers Assn.
Feb 6 2003Filed:
  supplemental brief by counsel for resp Howard Jarvis Taxpayers Assoc. & Steven White
Feb 10 2003Permission to file amicus curiae brief granted
  by Frederick S. Mayer. Any answer due w/in 20 days.
Feb 10 2003Amicus Curiae Brief filed by:
  Frederick S. Mayer.
Feb 11 2003Filed:
  letter reply brief by counsel for appellants' Howard Jarvis Taxpayers Assoc. to suplemental letter briefs filed w/ the court by the Controller, CSEA, CCPOA
Feb 11 2003Filed:
  Letter reply brief of intervenor-aplts Calif. Union of Safety Employees and Calif. Correctional Peace Officers Assn. to the letter brief of Howard Jarvis Taxpayers Assn.
Feb 13 2003Filed:
  Letter reply brief of aplt Controller to the letter brief of aplts White and Howard Jarvis Taxpayers. (timely per CRC 40k)
Mar 3 2003Response to amicus curiae brief filed
  by aplts H.J. Taxpayers Assn. and White to the A/C briefs of Calif. defense Counsel and F. Mayer
Mar 3 2003Received:
  one brief responding to a/c briefs of Califonia Appelalte Defense Counsel and Frederick Mayer received by appellants Howard Jarvis Taxpayers Assoc., Steven White..
Mar 6 2003Case ordered on calendar
  4-1-03, 9am, L.A.
Mar 12 2003Received document entitled:
  Application of Frederick S. Meyer for permission to present oral argument.
Mar 17 2003Filed:
  Aplts' joint appln to divide oral argument time, for five additional minutes and in opposition to appln of A/C Frederick Mayer.
Mar 20 2003Order filed
  The court has received appellants' joint application to split oral argument into three segments and for the allocation of five additional minutes for oral argument. Appellants' request for additional time for oral argument is denied. The court is primarily interested in hearing argument on the questions whether the preliminary injunction was properly issued in this case and whether state or federal law authorizes the Controller to pay state employees who do not work overtime their full regular salary in the absence of the enactment of an applicable appropriation, and it expects all counsel who argue in this case to be prepared to address these points and to answer questions directed to these issues. On that understanding, the request to divide appellants' 30 minutes of oral argument into three segments of 10 minutes each is granted. If appellants wish to reconsider the division of time in light of this order, appellants should advise the court of that circumstance on or before March 26, 2003. The application of amicus curiae Frederick S. Mayer for permission to present oral argument is denied. (See Cal. Rules of Court, rule 29.2(g).)
Mar 25 2003Received letter from:
  A/C Calif Appellate Defense Counsel
Apr 1 2003Cause argued and submitted
 
Apr 7 2003Filed:
  Request from aplts Safety Employees, Correctional Peace Officers and State Employees Assn. to file supplemental letter brief.
Apr 8 2003Received letter from:
  California State Employees Association, dated April 4, 2003, re: attorney of record for {"CSEA"] faxed to sf.
Apr 16 2003Order filed
  The request, submitted by state employee intervenors on April 7, 2003, that the court accept for filing a supplemental brief regarding a case upon which counsel was questioned at oral argument is granted. Any other party may file a reply by letter on or before April 21, 2003, in the San Francisco office of the Supreme Court. The filing of the letter brief and any reply chall not affect the date of submission of this matter. The matter remains submitted as of April 1, 2003.
May 1 2003Order filed
  Pursuant to rule 976(d) of the California Rules of Court, the Reporter of Decisions is directed to publish in the Official Reports the Court of Appeal opinion in the above entitled case (that is, the Court of Appeal opinion that was previously published at 98 Cal.App.4th 969).
May 1 2003Opinion filed: Judgment reversed
  insofar as it upheld in part the preliminary injunction, and the matter is remanded to the Court of Appeal with directions to set asided the preliminary injunction in its entirety. Further, as explained above (See fn. 14, ante, p. 45), without ruling on the addtitional issues resolved by the Court of Appeal that we have not addresses in our present opinion, we order that the Court of Appeal's opinion be published in the Ofiicial Reports. (Cal. Rules of Court, Rule 976(d).). Majority Opinion by George, CJ., ------Joined by Kennard, Baxter, Werdegar, Chin, Brown and Moreno, JJ.
Jun 11 2003Remittitur issued (civil case)
 
Dec 18 2003Note:
  transmitted case record to L.A. (Supreme Ct.) for delivery to Court of Appeal

Briefs
Oct 15 2002Opening brief on the merits filed
 
Oct 15 2002Opening brief on the merits filed
 
Oct 15 2002Opening brief on the merits filed
 
Dec 4 2002Answer brief on the merits filed
 
Dec 23 2002Reply brief filed (case not yet fully briefed)
 
Dec 23 2002Reply brief filed (case fully briefed)
 
Dec 24 2002Reply brief filed (case fully briefed)
 
Jan 24 2003Amicus Curiae Brief filed by:
 
Feb 10 2003Amicus Curiae Brief filed by:
 
Mar 3 2003Response to amicus curiae brief filed
 
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website