HARBOR v. DEUKMEJIAN

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Court of Appeal, First District, Division 3, California.

Joyce HARBOR et al., Petitioners, v. George DEUKMEJIAN, as Governor, etc., et al., Respondents.

A029066.

Decided: January 17, 1986

Sarah E. Kurtz, Peter H. Reid, Tricia Margot Berke, Legal Aid Society of San Mateo County, Redwood City, Casey S. McKeever, Western Center on Law & Poverty, Inc., Sacramento, for petitioners. Bion M. Gregory, Legislative Counsel, Jack I. Horton, Chief Deputy Legislative Counsel, James L. Ashford, Principal Deputy Legislative Counsel, Mark Franklin Terry, Deputy Legislative Counsel, Sacramento, for amicus curiae Legislature on behalf of petitioners. John K. Van de Kamp, Atty. Gen., Richard D. Martland, Chief Asst. Atty. Gen., N. Eugene Hill, Asst. Atty. Gen., Robert E. Murphy, Deputy Atty. Gen., San Francisco, for respondents.

We are asked here to resolve a conflict between the State Legislature and the Governor of California.   Petitioners, welfare applicants and welfare rights organizations, challenge the Governor's veto of a portion of a budget implementation bill that would have authorized Aid to Families with Dependent Children (AFDC) payments to commence as early as the date of the application.   The Governor's veto had the effect of authorizing aid from the date of eligibility rather than the date of application, resulting in a $9,776,000 savings.   The question is whether the Governor could properly veto selected portions of a lengthy budget implementation bill.   He contends that his veto was proper either as an “item veto” of an appropriation or as a remedy for the Legislature's violation of the “one subject” rule.   We conclude that the Governor's veto was effective as an “item veto” of an appropriation.

On January 10, 1984, the Governor submitted to the Legislature a budget for the 1984–1985 fiscal year and a budget bill itemizing recommended expenditures.   During the next few months, the budget bill underwent various legislative changes, including the changes involved in this action.   The Legislature's final version provided, in item No. 5180–101–001, the sum of $1,553,282,000 for “Local Assistance, Department of Social Services, Program 10.04—Payments for Children.”   That appropriation was further broken down into three categories, including “(a) 10.04.005–Aid to Families with Dependent Children ․ [$]1,536,163,000.”  (Stats.1984, ch. 258, § 2.00, No. 6 West's Cal.Legis.Service, p. 463.)   This amount included the $9,776,000 in question here, which was not separately set forth in the budget bill.

While considering the budget bill, the Legislature also considered and adopted Senate Bill No. 1379, entitled “Fiscal Affairs—Implementation of Budget Act” (Stats.1984, ch. 268, §§ 0.1–71, No. 7 West's Cal.Legis.Service, pp. 19–139), which was designed to “provide necessary statutory adjustments to implement the Budget Act of 1984.”  (Stats.1984, ch. 268, § 71, No. 7 West's Cal.Legis.Service, p. 139.)   This implementation bill was not to become operative unless and until the Budget Act of 1984 became law.  (Stats.1984, ch. 268, § 70, No. 7 West's Cal.Legis.Service, p. 139.)   Included in that bill was an amendment to Welfare and Institutions Code section 11056 providing that AFDC payments would commence on the date of the application if approved in the month of the application and on the first day of the next month if not approved in the month of the application.  (Stats.1984, ch. 268, § 45.5, No. 7 West's Cal.Legis.Service, pp. 116–117.)

When the budget bill and implementation bill were presented to the Governor, he made various changes to both.   He reduced item No. 5180–101–001 of the budget by $9,776,000, with the following message: 1  “Item 5180–101–001—For Local Assistance, Department of Social Services.   I reduce this item from $1,553,282,000 to $1,543,506,000 by reducing:

“(a) 10.04.005—Aid to Families with Dependent Children from $1,536,163,000 to $1,526,387,000.

“I am reducing this item by $9,776,000.   This augmentation would have reversed current State policy and regulations regarding the effective date of the first Aid to Families with Dependent Children (AFDC) aid payment.   Current law provides that the beginning date-of-aid for an AFDC recipient is the day of eligibility or the first of the following month, but not later than 30 days from the date of application.   The intent of the AFDC program is to provide for cash assistance to meet current need.   Since no payment is made to an AFDC recipient until eligibility is determined, aid payment would not begin any sooner under the legislative proposal.   However, in the event an AFDC recipient has a demonstrated need, prior to authorization, the program can provide for immediate need payments for eligibles before the date of authorization.”  (Stats.1984, ch. 258, No. 6 West's Cal.Legis.Service, p. 230, emphasis added.)

The Governor also took the following action with respect to section 45.5 of the budget implementation bill:  “Section 45.5

“I am eliminating the adjustment relating to beginning date of aid for AFDC recipients.

“I have reduced Budget Act Item 5180–101–001 by $9,776,000 and Budget Act Item 5180–101–866 by $10,385,000 to maintain current policies regarding effective date of aid.

“Current law provides that the beginning date of aid for an AFDC recipient is the day of eligibility or the first of the following month, but not later than 30 days from the date of application.   The intent of the AFDC Program is to provide for cash assistance to meet current needs.   As a matter of fact no payment is made to an AFDC recipient until eligibility is determined, aid payments would not begin any sooner under the legislative proposal.

“The elimination of this section [amendment to Welf. & Inst.Code, § 11056] conforms to my actions on the Budget.”  (Stats.1984, ch. 268, No. 7 West's Cal.Legis.Service, p. 21.)

These actions by the Governor were taken on June 29, 1984.   On August 7, 1984, petitioners sent a letter to Linda McMahon, Director of the State Department of Social Services, describing the veto as “ineffective” and demanding that she take all necessary steps immediately to implement Welfare and Institutions Code section 11056 as amended.   Her office responded by letter, disagreeing with petitioners' assertion that the Governor's veto of section 45.5 of the implementation bill was ineffective.

This petition followed.   The California Legislature has filed a brief as amicus curiae in support of petitioners.

Was the Governor's “item veto” invalid because the measure was not an “appropriation” within the meaning of article IV, section 10, subdivision (b), of the California Constitution?

Article IV, section 10 of the California Constitution provides in part:  “(a) Each bill passed by the Legislature shall be presented to the Governor.   It becomes a statute if it is signed by the Governor.   The Governor may veto it by returning it with any objections to the house of origin, which shall enter the objections in the journal and proceed to reconsider it․

“(b) The Governor may reduce or eliminate one or more items of appropriation while approving other portions of a bill․”

Petitioners contend that while the Governor acted properly in reducing the appropriations in the budget bill, his purported veto of a portion of the budget implementation bill changing the beginning date for benefits from date of eligibility to date of application was invalid.   They argue that section 45.5 of the implementation bill (amending Welf. & Inst.Code, § 11056) is not an item of “appropriation” and that it therefore may not be eliminated while approving other portions of the bill.

The parties agree that the issue posed is one of first impression.   Respondents urge the court to uphold the Governor's action in order to preserve the effectiveness of the veto power.   They suggest that the Legislature has deliberately structured this legislation in an attempt to make it veto-proof and that our system of checks and balances is threatened by the Legislature's action unless the Governor is permitted to use the veto in this way.

Petitioners cite Wood v. Riley (1923) 192 Cal. 293, 219 Pac. 966 for the definition of an “item of appropriation.”   In Wood, the Governor's budget had appropriated money for various educational purposes, but had not appropriated money for the newly created Department of Education or its director.   The Legislature added a proviso that the State Controller set aside 1 percent of the appropriated educational money as the administrative allotment of the State Department of Education.   The Governor refused to approve the proviso on the ground that “ ‘such appropriation was unnecessary’ ” because the Director of Education had an ample allowance for running his department.   (Id., at pp. 296–297, 219 Pac. 966.)

When the Director of Education demanded transfer of funds, the Controller refused.   The director sought writ of mandate, claiming that the proviso was not an appropriation and that the purported veto was nugatory.   After extensive discussion of decisions from other states, the Supreme Court ruled that an appropriation had been made and properly vetoed.   The court rejected a contention that the proviso was not an appropriation because it took no money from the state treasury.   It adopted the definition of “appropriation” used in Stratton v. Green (1872) 45 Cal. 149, 151:  “This court has held that ‘by a specific appropriation’ was understood ‘an Act by which a named sum of money has been set apart in the treasury and devoted to the payment of a particular claim or demand ․  The Fund upon which a warrant must be drawn must be one the amount of which is designated by law, and therefore capable of definitive exhaustion—a Fund in which an ascertained sum of money was originally placed, and a portion of that sum being drawn an unexhausted balance remains, which balance cannot be thereafter increased except by further legislative appropriation.’  [Citations.]”  (Wood v. Riley, supra, 192 Cal. 293, 303, 219 Pac. 966.)

Elsewhere in the opinion, the Wood court acknowledged the two aspects of an appropriation, subject and amount:  “ ‘ “․ every appropriation, though it be for a single purpose, necessarily presents two considerations almost equally material, namely, the subject and the amount․” ’ ”  (Id., at p. 304, 219 Pac. 966, quoting from Fairfield v. Foster (1923) 25 Ariz. 146 [214 Pac. 319], and Commonwealth v. Barnett (1901) 199 Pa. 161 [48 A. 976].)  Respondents contend that the Legislature here has merely separated subject from amount and that it was proper for the Governor to exercise item veto powers over both portions of the appropriation.

The operation of the item veto has been considered by the California Supreme Court in Reardon v. Riley (1938) 10 Cal.2d 531, 76 P.2d 101 and Railroad Commission v. Riley (1938) 12 Cal.2d 48, 82 P.2d 394.   In Reardon, the Governor's budget appropriated $1,297,185 to the Department of Industrial Relations, but the Legislature passed a budget or appropriation bill providing the department with $1,625,185, with designations for how $328,000 and $20,000 of that amount should be spent.   The Governor reduced the total amount to $1,397,185 and vetoed the items of $328,000 and $20,000.   The Supreme Court was asked to determine the effect of the Governor's actions.   The court determined that each of the specified amounts was an “appropriation” and that the Governor could properly veto the two smallest amounts and reduce the total appropriations.   The court rejected an argument that vetoing the two smallest amounts automatically reduced the total to a sum less than the Governor's reduced amount.  (Reardon, supra, 10 Cal.2d at pp. 534–536, 76 P.2d 101.)

In Railroad Commission v. Riley, supra, 12 Cal.2d 48, 82 P.2d 394, the Governor approved the total amount of $857,601 for the Railroad Commission, but vetoed the designation of $34,160 of that amount for support of the safety section of the commission.   The State Controller then refused to allot to the commission any greater amount than the sum of $857,601 less the sum of $34,160.   The Supreme Court concluded, as it had done in Reardon v. Riley, supra, 10 Cal.2d 531, 76 P.2d 101, that elimination of the specific item of $34,160 did not affect the general appropriation of $857,601 for the support of the Railroad Commission.  (Railroad Commission, supra, 12 Cal.2d at p. 53, 82 P.2d 394.)

These two decisions demonstrate how the item veto works in a budget bill where the Legisalture has specified amounts and subjects in the same bill and the Governor has disapproved those amounts and subjects.   This case presents the more difficult question of whether the Governor may veto a subject stated in one bill in order to conform with a reduction of the amount appropriated in another.

There are actually two distinct differences between the veto here and those in Railroad Commission and Reardon:  (1) subject and amount are in two different bills, and (2) the budget bill does not contain a line item appropriation for the subject vetoed;  instead, the veto purports to correspond with a reduction in a broader line item.

 The first of those two distinctions is of minor importance.   It cannot be argued seriously that the Legislature could negate the item veto by merely separating amount from subject and demanding an all-or-nothing veto of the bill containing the statement of subject.2  If a specified appropriation is directly linked to a particular subject, both the amount and subject could be eliminated by item vetoes.   If the budget bill here specified $9,776,000 to finance a change in beginning date of aid, the Governor could eliminate both the funding and the change in beginning date by line item veto.

 The second distinction presents a more troubling feature of this case:  the Legislature has appropriated a lump sum for AFDC, not a specific amount to finance the change in beginning date of aid.   Thus, the amount of the appropriation is $1,536,163,000, and its subject is AFDC.   The Governor's action has purported to divide the appropriation into smaller amounts and identify the subject matter of one such smaller amount.   The Governor's authority to reduce the lump sum amount for AFDC is unquestioned.   We have found no precedent authorizing his dividing that amount into its component parts and using the line item veto to eliminate discrete activities financed under the AFDC lump sum appropriation.   We conclude, however, that under the circumstances of this case the Governor's action was proper.

Here the Legislature has adjusted an on-going program and has left clear evidence of how much it expected those adjustments to cost.   Respondents offer evidence showing that the Assembly-Senate Conference Committee had estimated that its change in beginning date of aid would add $9,776,000 to the Governor's budget for item No. 5180–101–001.   Thus, the amount reduced by the Governor directly corresponded to the portion of the budget implementation bill vetoed.   Change in the beginning date of aid was the subject, and $9,776,000 was the amount of the appropriation.   The Legislature could not negate the item veto of an appropriation of $9,776,000 for a change in the beginning date of aid by merely separating amount from subject and demanding an all-or-nothing veto of the bill containing the statement of subject.   We conclude that the budget bill and the budget implementation bill are so intimately related that when the Governor vetoes a part of the latter to conform with a reduction in the former, he or she vetoes an “item of appropriation.”

Therefore, the Governor's veto of section 45.5 of the budget implementation bill was effective.3  The alternative writ is discharged, and the petition for a peremptory writ is denied.

I dissent.   In my view, the Governor's line item veto is more limited than the majority suggests.   It may be used to reduce the amount of an appropriation or to eliminate an item of appropriation and its corresponding subject matter (even if the subject matter is contained in a separate bill, such as the budget implementation bill).   But where the Legislature has adopted a lump sum appropriation, the Governor may only reduce the amount of the lump sum, not divide the lump sum into its supposed component parts and item veto the substantive legislation describing those component parts.

The majority admits that there is no precedent authorizing the Governor to divide a lump sum amount into its component parts and use the line item veto to eliminate discrete activities financed by the lump sum appropriation.   But they create precedent which gives the Governor potentially limitless authority to use the line item veto to strike substantive programs.   They justify their decision by pointing to the Conference Committee's estimate that the change in beginning date of aid would add $9,776,000 to the Governor's budget.   Does this mean the Governor may veto substantive legislation only when the Legislature has expressly stated the cost of the legislation?   What may a Governor do the next time if the Legislature only leaves hints about the cost of the program?   Or the time after that if no hints are left but a Governor's staff is able to estimate the cost of the legislative change?   Surely, the Governor's veto power cannot depend upon how easy it is for the Governor to identify or estimate the cost of the component programs or activities.

In my view, if the Legislature chooses to budget by lump sum appropriations, the Governor must be satisfied with the power to reduce the amount.   His or her actions with respect to the programs funded by the lump sum amount should be subject to the same restrictions as apply to any substantive legislation.   If the Legislature has made a measure more difficult to veto by placing it in a bill which includes legislation the Governor would prefer not to veto, the Governor must make the hard choice of letting the undesired measure go through or vetoing the entire bill.   The majority's alternative of letting the Governor excise the offending part of the substantive bill is both unprecedented and unnecessary.

The majority may be concerned that if the Governor's veto were not effective the AFDC program could run out of funds during the budget year.   The combination of improved benefits and a reduced budget might seem destined to cause a squeeze and perhaps to require further appropriation.   But this court should not be influenced by the possibility that the Governor may later find it difficult to veto a bail-out appropriation for the AFDC program.   For one thing, the AFDC administrator might find a way to accomplish the Legislature's program on the Governor's budget or economic conditions might make the AFDC program less expensive.   But more importantly, the precedent set by the majority's ruling dramatically alters the delicate balance of power between the Legislature and the Executive.   The potential for direct legislation by the Governor is unleashed with no standards to restrain future chief executives.   That prospect is alarming.   I would grant the writ.

FOOTNOTES

1.   He made a similar reduction to item No. 5180–101–866, to take into account a reduction in federal support flowing from the change in beginning date of aid.

2.   Actually, it would be difficult or impossible to completely separate amount from subject.   An amount without any label would be useless in the budget, and the label itself is a statement of the subject.   However, if a more detailed explanation were contained in another bill, it should also be considered part of the appropriation for purposes of the item veto.

3.   Because of our conclusion that section 45.5 was an integral part of an item of appropriation, we need not address respondents' argument that the Governor's veto was an appropriate remedy for the Legislature's violation of the “one subject” rule.

BARRY–DEAL, Associate Justice.

SCOTT, J., concurs.

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