Reporting from Sacramento — State officials dodged a $2-billion bullet Tuesday when a judge ruled that last year's shift of funds away from redevelopment agencies to pay for schools was legal.
In a 26-page ruling, Sacramento County Superior Court Judge Lloyd Connelly said the state was within its rights to move the money. The maneuver saves more than $1.7 billion in the current budget year and $350 million for the 2010-2011 budget year.
Legislators have been trying to borrow from and shift various pots of money as part of their continuing effort to balance the state's books, which are more than $18 billion out of whack. The moves have prompted lawsuits, some of which have ended in rulings that the state acted illegally.
Connelly said payments to schools "benefit redevelopment" and therefore are a valid use of redevelopment funds.
"Under that logic, any state program could be called redevelopment," said John Shirey, executive director of the California Redevelopment Assn. "The Legislature needs to deal with its budget problems by making hard decisions using its own limited resources, not by taking away local government funds."
The association will appeal the ruling and ask for a stay on the $1.7-billion payment due May 10.
Aaron McLear, a spokesman for Gov. Arnold Schwarzenegger, applauded the judge's ruling, saying that a reversal of the Legislature's action would have increased the state's budget deficit.
Last year, Connelly ruled that a similar taking of redevelopment funds was illegal. That left the state on the hook to repay $350 million. Lawmakers used Connelly's ruling from that case to craft a proposal for this fiscal year's budget that would pass legal muster.