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State Superior Court in Sacramento Decides for State in VLF Diversion Lawsuit

March 19, 2013
The League was disappointed to learn that Sacramento County Superior Court Judge Lloyd Connelly issued an opinion on Monday, March 18, denying the League’s petition challenging the constitutionality of the Legislature’s 2011 decision to fund the criminal justice realignment program in part with vehicle license fee (VLF) revenues.
These funds had been previously allocated to cities on an unrestricted basis. The League’s legal counsel is currently reviewing the decision. The board of directors will be advised on the matter, including its options to appeal. A full copy of Judge Connelly’s decision is available on the League’s website.

The League filed its challenge to the VLF diversion on Sept. 28, 2011. This action was taken after the Legislature passed and the Gov. Jerry Brown signed the FY 2011–12 state budget, which included two budget trailer bills that diverted more than $200 million in annual city VLF funds to pay for public safety programs (e.g., COPS, Booking Fees, etc.). These programs were funded formerly with state revenues but were declared in these bills to be part of the criminal justice realignment program. In an apparent violation of the constitution, the funds were also distributed to certain non-city and county entities such as district attorneys, certain law enforcement community service districts and the California Emergency Management Agency.
The loss of these general-purpose VLF revenues was difficult for all cities, but it was particularly challenging for the four new cities that had recently incorporated in Riverside County. These cities relied on prior statutes boosting their VLF funds, because, due to their dates of incorporation, they were not eligible for funding from the 2004 VLF-property tax swap. Also seriously hurt were cities (like Chico and Porterville that were co-petitioners in the case) that had recently annexed substantial inhabited areas with the assurance of receiving enhanced VLF funding.
The voters on Nov. 5, 2012, approved Prop. 30 following the filing of the League’s petition and oral argument in the case. The initiative contains provisions that constitutionally guarantee the funding provided by the 2011 criminal justice realignment and the FY 2011–12 budget trailer bills, including that portion funded with VLF. Judge Connelly requested supplemental briefing on the impact of Prop. 30.
The League argued that Prop. 30 did not explicitly amend or repeal any of the constitutional provisions relied upon by the League in challenging the budget trailer bills. Therefore the court was required to harmonize Prop. 30 with these existing constitutional provisions. The state argued that these provisions of Prop. 30 effectively validated the Legislature’s diversion of VLF revenues.
Judge Connelly appears to have largely agreed with the state and upheld the power of the Legislature under both pre- and post-Prop. 30 constitutional provisions to restrict the use of VLF funds by cities and counties as it did in the FY 2011–12 budget legislation. The court preserved one mandate-related claim by the League, but said it must first be pursued with the Commission on State Mandates.

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