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Attorney general's office questions legality of Assembly budget plan [Updated]

June 17, 2010 | 12:11 pm

Atty. Gen. Jerry Brown's office has waded into the fight over California’s budget, writing in a letter to the governor's office this week that a borrowing plan hatched by Assembly Democrats might not pass legal muster.

Gov. Arnold Schwarzenegger declared the plan “illegal” earlier this week, citing Proposition 58, a ballot measure he championed in his first year in office that prohibits borrowing to “to fund a year-end state budget deficit.”

Constance LeLouis, a deputy in Brown’s office, wrote that the Democrats’ plan, which calls for borrowing $9 billion from the state’s bottle deposits fund to be repaid with a new tax on oil extraction, “could be suspect” in court. Specifically, Schwarzenegger asked the attorney general if he could provide “unqualified approving opinion” of the plan. LeLouis said the office could not, taking a “conservative approach.”

“We conclude that a court could reasonably determine that the proposed transaction violates Proposition 58,” she wrote.

The legality question is crucial. The Assembly plan centers on borrowing $9 billion to fund programs this year. If a court were to rule against the plan after it went into effect, more than 10% of California’s spending plan would be thrown into limbo.

“If the speaker’s budget proposal, according to the attorney general, is unworkable, then we need to move forward with workable solutions,” said Aaron McLear, a Schwarzenegger spokesman. The speaker’s office did not immediately return a call for comment.

[Updated at 2:30 p.m.: A memo from the office to Assembly Speaker John A. Perez (D-Los Angeles), distributed to Democratic lawmakers and reporters, argues that the Assembly Democrats “remain confident the [plan] … is legally sound.” The memo says the proposal will be structured to avoid the legal pitfalls of Proposition 58. “With even the threat of litigation meaning potential delays and uncertainties, we are crossing every ‘t’ and dotting every ‘i,’” the memo says.

“Our careful actions mean there would be little real concern of legal challenges delaying the job protection and creation benefits found in – and only in – the Assembly’s…budget,” the memo says.]

-- Shane Goldmacher in Sacramento