California Supreme Court: Past State Employee Furloughs Legal

Professional Engineers in California Govt. v. Schwarzenegger (Supreme Court Case No. S183411)

The Supreme Court issued its decision today on the legality of the state employee furloughs imposed by the Governor. If you haven’t been following this issue, here’s a brief summary of the facts. On December 1, 2008, the Governor declared a fiscal emergency and called the Legislature into special session to address a projected $40 billion deficit by the end of fiscal year 2009-2010. On December 19, 2008, the Governor issued an executive order imposing 2-day per month furloughs on state employees. Several employee unions sued the Governor challenging his authority to unilaterally impose furloughs. In mid-February 2009, the Legislature passed and the Governor signed the revised Budget Act of 2008, which included the savings attributable to the 2-day per month furlough program.

Supreme Court’s Decision

In an 81-page decision authored by Chief Justice Ron George, the Supreme Court concluded that the Governor did not have unilateral authority to impose furloughs on state employees, but that the furloughs were nevertheless legal because they were “ratified” by the Legislature via the revised Budget Act of 2008. In its analysis, the Court considered two broad questions: 1) On December 19, 2008, did the Governor possess authority to impose unilaterally a mandatory two-day-a-month unpaid furlough for state employees by issuing an executive order? 2) Did the Legislature’s enactment in February 2009 of the revised 2008 Budget Act and the initial 2009 Budget Act affect the validity of the Governor’s executive order or the remedy that the employee organizations may be entitled to obtain in the present proceeding?

Issue 1: Did Governor Possess Authority to Unilateral to Impose Furloughs?

Court’s Answer: No.

The Court quickly rejected the Governor’s contention that he possessed inherent authority to impose furloughs on state employees as a function of his constitutional powers. The Court affirmed that under the state constitution, “it is the Legislature, rather than the Governor, that generally possess the ultimate authority to establish or revise the terms and conditions of state employment through legislative enactments.” The Court also rejected the Governor’s argument that the Legislature had delegated to the Governor the power to impose furloughs through specific statutory provisions—specifically, Government Code sections 19851, 19849, and 3516.5. The Court held that section 19851 was not relevant to furloughs as imposed and that 19849 did not confer any substantive authority to the Governor. Similarly, the Court held that section 3516.5 of the Dills Act did not give the Governor authority to impose furloughs; it merely provided a method to avoid the collective bargaining process.

In conclusion, the Court held that:

“[W]ith regard to represented employees we are of the view that clearly, unless the Governor or the DPA had been granted the authority unilaterally to impose a mandatory unpaid furlough on affected represented employees by the terms of an applicable MOU, the Governor and the DPA lacked authority unilaterally to institute such a furlough through the December 19, 2008, executive order with respect to those employees.”

“Accordingly, unless the MOU’s specifically authorized the mandatory unpaid furlough imposed by the executive order, it would appear that at that time the executive order was not valid.”

Issue 2: Did the Legislature “Ratify” the Furloughs in the revised Budget Act of 2008

Court’s Answer: Yes.

After concluding that the Governor did not have the authority to unilaterally impose furloughs in December 2008, the Court examined the language of the revised Budget Act of 2008. Section 3.90 of the Budget Act of 2008 provided:

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

In examining the impact of this language, the Court found that the amount of reduction in employee compensation clearly included the savings from 2-day per month furloughs. The Court then cited several budget documents that referenced the continuing furloughs imposed on state employees. Based on these facts, the Court concluded that:

“[I]n view of the exigent circumstances facing the Legislature, it intended to permit the then-existing furlough program to be used as an alternative to other means that might be agreed upon through the collective bargaining process, without regard to whether the appellate courts ultimately determined that the Governor or the DPA possessed the authority to impose an unpaid furlough program unilaterally.”

“Accordingly, we conclude that the phrase “existing administration authority” — as used in section 36 of Senate Bill 3X 2 — was intended to encompass the then-existing furlough program. By enacting this provision, the Legislature, through the exercise of its own legislative prerogative, authorized the substantial reduction in the appropriations for employee compensation, mandated in the revised budget legislation, to be achieved through the two-day-a-month furlough plan.”

Thus, even though the Governor lacked the authority to impose furloughs initially, the Court concluded that the Legislature approved the furloughs when it enacted the revised Budget Act of 2008.

Comments

As expected, the decision was authored by Chief Justice Ron George. There was a concurrence by Justice Corrigan regarding a technical issue on the “single-subject” rule but she ultimately joined in the majority’s conclusion that the Legislature ratified the furloughs in the revised Budget Act of 2008. Notably, the decision was issued less than a month after oral arguments; an indication, I believe, of the importance of this decision.
The majority decision was 81 pages long and Justice Corrigan’s concurrence another 3 pages. I thought the court’s discussion of the Governor’s powers under the constitution and various statutes was extremely thorough. Indeed, the Court spent the first 67 pages of the decision explaining why the Governor does not have the unilaterally authority to furlough state employees. In contrast, the portion of the decision analyzing the language of the revised Budget Act of 2008 only took 13 pages. I believe that’s due largely to the lack of much evidence as to the Legislature’s intent in enacting section 3.90. Further, I don’t believe either of the parties imagined that the case would turn on the language of section 3.90.
What is the effect of this decision? Because the 2-day per month furloughs were ratified by the Legislature, they were legal. So state employees will not be getting any back-pay for those furlough days.
What about the 3rd furlough day? On July 1, 2009, the Governor issued another executive order imposing a 3rd furlough day on state employees. The Court’s decision did not rule on the validity of this 3rd furlough day. However, the decision noted that on July 24, 2009, the Legislature passed the revised Budget Act of 2009 which contained the same “existing administration authority” language as section 3.90 of the revised Budget Act of 2008. Therefore, even though this decision did not directly rule on the legality of the 3rd furlough day, it’s clear that the 3rd furlough day was also ratified by the Legislature and thus will be found legal.
What about the current furloughs? On July 28, 2010, the Governor issued yet another executive order. This order reinstituted 3-day per months furloughs for fiscal year 2009-2010. The Court’s decision expressly does not address the legality of the current furloughs. However, unlike the furloughs in fiscal year 2008-09 and 2009-10, the current furloughs have not been ratified by the Legislature. Thus, I have to assume that the current furloughs will be found to be illegal unless ratified by the Legislature. Whether the Legislature will do so in the Budget Act of 2010 remains to be seen.
What didn’t the court address? Although the Court addressed several key issues related to the Governor’s authority, it expressly declined to address others. These include:

Whether Government Code section 19581 might allow the Governor to impose furloughs at selected agencies for selected employees based on specific needs. The Court concluded only that section 19581 did not authorize “across-the-board” furloughs.
Whether section 3516.5 of the Dills Act—which provides an emergency exception to the collective bargaining requirement—applies to “fiscal” emergencies, as opposed to only natural disasters such as an earthquake or flood.
Whether the Governor has the authority to impose furloughs or simlar measures on nonrepresented employees (although the Court strongly suggested that there would be similar limitations with respect to nonrepresented employees).