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To litigate, or not to litigate, that is the question

The OHV Program is user funded (self-funded) and receives no general fund supporting revenue.

The 2013 Fiscal Year is the fourth consecutive year where substantial funding has been diverted from the OHV Trust Fund to other sources.  Since 1974, approximately $188 million has been diverted from the OHV Trust Fund to the General Fund and State Parks and Recreation Fund.  Of that total amount, $129 million has been diverted from the self-funded OHV Trust Fund within the last four state budget cycles. 

The State of California government structure follows the federal model with three branches of government: legislative, administrative and judicial.  Within that structure, the legislative branch begins with a bill submitted to the Assembly or State Senate and converts that into a law which is signed by the governor.

The Administrative branch carries out the actions described in the law.  Frequently, the administrative branch is required to determine the legislative intent.

The Judicial branch will review objections (lawsuits) to actions brought forward that may be in violation of other statute, state constitution, initiative of the people, or legislative intent. 

One branch cannot engage in “...the powers vested in another branch...” - “separation of powers”.

The legislature "appropriates" money to the agencies for specific program purposes. The state agencies cannot spend money on programs not authorized by the legislature through an “appropriation”.  The agency cannot re-program the legislature appropriated funding without approval of the legislature.

With each Budget Year, the Legislature provides Assembly and Senate Bills that are incorporated into the final budget submitted to the Governor for signature.  The final budget identifies legislative approved appropriations (authorizations) for the administrative agency to spend on approved programs.

As previously noted, the legislature has diverted funds from the OHV Trust Fund to other sources.  The legality of this action has been subject to debate and a lawsuit filed in 1995.

State law does allow for “loans” from one agency to another as enacted by the legislature.  Typically, the “loans” are to be repaid within two fiscal years and may or may not have a repayment date.  Specific to the OHV Trust Fund, such loans are required by law to be repaid within two fiscal years or "...when the program becomes encumbered".

However, the legislature initiates the "loan" and repayment provisions are not enforceable.

The use of the caveat "...when the program becomes encumbered" is interesting.

Basically, an agency cannot submit a budget that is "encumbered"; meaning in a deficient.  

The real issue lies with the use of appropriated funds for the intended legislative purpose.  That is an issue the court has jurisdiction over.  That does not fall under separation of powers doctrine.  There is an exception to the constitutional prohibition that prevents the court from interfering with the budget or ordering the legislature to appropriate money outside of the purposes for which an appropriation was reserved, i.e. to pay back a loan.  “As long as that body does not exceed its powers, and its judgment is not influenced by corruption, a court cannot substitute its judgment for that of the Legislature.” (County of San Diego v. State of California (2008) 164 Cal.App.4th 580).

The below table displays details about the eleven “takings” identified over the life of the OHV Program.

Budget Years Transfer Amount
1974 $1,500,000
1982 $8,500,000
1983 $13,000,000
1990 $3,000,000
1992 $10,244,000
1993 $16,046,000
1995 $4,522,000
2009 $90,000,000
2010 $22,000,000
2011 $10,000,000
2012 $7,000,000

In 1995, litigation was filed to recover some of the funding ($22.5 million) transferred from the OHV Trust Fund to the General Fund. 

These transfers were determined to be a loan and subject to state law for tracking and repayment.

Existing records indicate that two lawsuits were filed and combined into a single lawsuit.  The initial ruling was in favor of the plaintiffs and the State was ordered to repay the loans. This case did involve funds that were transferred directly from the OHV Trust Funds along with funds that were transferred from the Motor Vehicle Use Fund to the General Fund in lieu of transferring to the OHV Trust Fund.

On appeal in 1999, the decision in favor of the plaintiffs was reversed.  This is an unpublished decision out of the 2nd Appellate Court.  It is a valid decision; however, as it is unpublished, it cannot be used as precedence in other cases.  However, the legal arguments supporting overturning the original decision underscore the legal issues faced to prevail in a lawsuit concerning the state transfer of funding from the OHV Trust Fund.

The critical legal argument involves the "separation of powers" doctrine.  Under that doctrine, the Court cannot compel the legislature to fund a program that is not mandated by constitution or initiative from the people.  Note: an “initiative from the people” carries a higher level of protection than “mandated by constitution”.

The only constitutionally protected program is one approved by initiative because the constitution says that initiative funding cannot be overturned by the legislature unless the initiative specifically permits the legislature to do so.

In fact, "[t]he people's reserved power of initiative is greater than the power of the legislative body. The latter may not bind future Legislatures [citation], but by constitutional and charter mandate, unless an initiative measure expressly provides otherwise, an initiative measure may be amended or repealed only by the electorate. Thus, through exercise of the initiative power the people may bind future legislative bodies other than the people themselves." (Shaw supra at pp. 715-716.”)  See: Shaw v People, ex rel. Chiang (2009) 175 Cal.App.4th 577

In other words the only express constitutional protection is the initiative process which explicitly overcomes the constitutional separation of powers doctrine in California. Other constitutional protections like the right to an education to not overcome the idea that the court cannot interfere with the budgetary process due to the constitutionally mandated doctrine of the separation of powers.

This is underscored by several court decisions, one of which is County of San Diego vs State (2008) 164 Cal App 4th 580.  In this decision, it was argued that a court could not order the repayment of a loan from a special fund unless the Legislature appropriates money in the budget for the purpose of making the repayment.  Under Civil Code Section 3523, “...for every wrong there is a remedy.... However, statute does not permit a judicial remedy when the remedy is with legislation”.

The court concluded that when the legislature fails to make an appropriation, the court cannot remedy that action.  It is a discretion specially confided by the Constitution to the body possessing the power of taxation.

Most of the takings have occurred before money related to OHV use was transferred from the Motor Vehicle Fuel Account to the OHV Trust Fund. This was an apparent move by the legislature to avoid being accused of taking money from a special fund, or more specifically a “trust fund”.  This section from the Revenue and Taxation Code, Section 8352 provides the justification for the transfer. 

Subject to the provisions of any budget bill heretofore or hereafter enacted, the money deposited to the credit of the Motor Vehicle Fuel Account is hereby appropriated for expenditure, allocation, or transfer as provided in this chapter.

This gives the legislature the power to take money  from the Motor Vehicle Fuel Account before it is transferred to any of the special funds where it is appropriated in this chapter. This provision has been in place ever since the Motor Vehicle Fuel Account was created.

The OHV Program is a legislative mandate without the constitution or initiative protection.

Hence, a legal case can be brought forward and prevail.  However, the courts cannot compel the legislature to restore the funding due to the separation of powers doctrine.

According to State Law, the transfers (loans) are subject to return/repayment within two fiscal years or at a time when the program becomes encumbered and cannot meet obligations.  To date, the transfers of OHV Trust Funds have been legislative directed and only one (the Department of Fish and Game loan for $3 million) has been repaid. And, the OHV Program has not become encumbered and unable to meet its obligations.

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