Title: White v. Davis
Citation: N/A
Docket Number: S108099
State: California
Issuer: California Supreme Court
Date: May 1, 2003

Filed 5/1/03 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
STEVEN WHITE, 
) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S108099 
 
v. 
) 
 
 
) 
Ct.App. 2/4 B122178 
GRAY DAVIS, as Governor, etc., et al., 
) 
 
) 
Los Angeles County 
 
Defendants and Respondents. ) 
Super. Ct. No. BC175284 
___________________________________ ) 
 
 
) 
HOWARD JARVIS TAXPAYERS 
) 
ASSOCIATION et al., 
) 
 
 
) 
 
Plaintiffs and Respondents, 
) 
 
 
) 
 
 
v. 
) 
 
 
) 
Ct.App. 2/4 B123992 
STEVE WESTLY, as Controller, etc. 
) 
 
) 
Los Angeles County 
 
Defendant and Appellant; 
) 
Super. Ct. No. BC193174 
 
 
) 
CALIFORNIA STATE EMPLOYEES 
) 
ASSOCIATION, LOCAL 1000, SEIU,  
) 
AFL-CIO, CCL, et al., 
) 
 
 
) 
 
Intervenors and Appellants. 
) 
___________________________________ ) 
 
 
Article IV, section 12 of the California Constitution provides in part that 
“[t]he Legislature shall pass the budget bill by midnight on June 15 of each year,” 
but in recent years the timely adoption of the budget bill in California has proven 
to be the exception, rather than the rule.  This proceeding arises out of two 
 
2
taxpayer actions that were filed in the wake of budget impasses that occurred in 
1997 and 1998.1  In the action filed in 1998, the trial court issued a preliminary 
injunction broadly barring the Controller from making payments from the state 
treasury in the absence of passage of the budget bill or an emergency 
appropriation ― a preliminary injunction that largely would have shut down 
government operations in California, but for the Legislature’s prompt enactment 
of an emergency appropriation and the Court of Appeal’s subsequent order staying 
the effect of the preliminary injunction.  In the Court of Appeal, the Controller 
contended that, contrary to the trial court’s ruling in the 1998 case, a variety of 
payments lawfully may be made from the treasury during a budget impasse.  
Although the ultimate passage of budget bills in 1997 and 1998 rendered the 
appeals in these cases moot, the Court of Appeal  concluding that the issues 
presented by this proceeding are important and likely to recur, but will regularly 
evade timely appellate review  retained the matter to consider this contention. 
After briefing and argument, the Court of Appeal, in a lengthy decision, 
ultimately concluded that the Controller may authorize the payment of state funds 
during a budget impasse in a variety of circumstances, including (1) when 
payment is authorized by a “continuing appropriation” enacted by the Legislature, 
(2) when payment is authorized by a self-executing provision of the California 
Constitution (for example, the payment of certain funds for public schools under 
article XVI, section 8.5 of the Constitution, and the payment of elected state 
officers’ salaries under article III, section 4 of the California Constitution), and 
                                             
 
1  
For convenience, we use the term “budget impasse” to refer, with regard to 
any year in which the budget bill has not been enacted into law before July 1 (the 
beginning of the state’s fiscal year), to the situation that exists between July 1 and 
the date the budget bill is enacted into law. 
 
3
(3) when payment is mandated by federal law (for example, the prompt payment 
of those wages mandated by the federal Fair Labor Standards Act, and the prompt 
payment of benefits mandated under federal food stamp, foster care and adoption, 
child support, and child welfare programs).  (White v. Davis (2002) 98 
Cal.App.4th 969 (White v. Davis I); see fn. 14, post.)  The Court of Appeal 
reversed the trial court’s judgment granting a preliminary injunction insofar as the 
injunction applied to these categories of payments, but otherwise affirmed the 
order. 
 
The Controller and a number of state employee unions and associations that 
had intervened in the lower court actions (hereafter referred to as state employee 
intervenors) filed petitions for review in this court, but the petitions challenged 
only two aspects of the Court of Appeal’s decision.  First, both the Controller and 
the state employee intervenors, contending that the Court of Appeal erred in 
affirming in any respect the trial court’s 1998 order granting the preliminary 
injunction, maintained that the trial court’s issuance of a preliminary injunction in 
this action constituted a clear abuse of discretion in light of (1) prior case law 
holding that the alleged harm to a taxpayer’s interest in the public treasury is 
insufficient to support the issuance of a preliminary injunction to bar the alleged 
improper expenditure of public funds, and (2) the circumstance that the harm 
posed by granting the broad preliminary injunctive relief sought by plaintiffs 
greatly outweighed the potential harm that would have resulted from denying such 
injunctive relief pending a full adjudication on the merits.  Second, the state 
employee intervenors challenged the Court of Appeal’s conclusions regarding the 
payment of state employee salaries during a budget impasse, contending that the 
Court of Appeal erred in determining that state law did not authorize the 
Controller to pay all state employees their full and regular salaries in the absence 
of a duly enacted budget bill, and erred additionally in concluding that the federal 
 
4
Fair Labor Standards Act required the Controller, during a budget impasse, to pay 
state employees covered by that law only at the minimum wage rate for hours 
worked during the impasse. 
We granted review to address only the two matters raised in the petitions 
for review:  (1) the procedural question whether the trial court erred in granting a 
preliminary injunction in the underlying taxpayer action, and (2) the substantive 
question whether the Controller is authorized to pay state employees their full and 
regular salaries during a budget impasse. 
With regard to the first issue, we conclude that the trial court in the 1998 
action abused its discretion in granting a preliminary injunction and that the Court 
of Appeal erred in affirming in any respect the order granting the preliminary 
injunction.   
With regard to the second issue, we conclude that the trial court erred in 
ruling that state employees who work during a budget impasse properly may be 
considered “volunteers” who obtain no right to the payment of salary or wages 
either under state or federal law, and also that the Court of Appeal erred insofar as 
that court concluded that state employees’ entitlement “to compensation for work 
performed during a budget impasse does not accrue until the enactment of a 
budget or other proper appropriation.”  (White v. Davis I, supra, 98 Cal.App.4th 
969, 998.)  Instead, we conclude that under the applicable California statutes, state 
employees who work during a budget impasse obtain the right, protected by the 
contract clauses of the federal and state Constitutions, to the state’s ultimate 
payment of their full salary for work performed during the budget impasse; that is, 
when state employees work during a budget impasse, the state becomes 
contractually obligated ultimately to pay employees the full salary they have 
earned.  At the same time, however, we conclude that the Court of Appeal was 
correct in determining that state employees do not have a contractual right actually 
 
5
to receive the payment of salary prior to the enactment of an applicable 
appropriation, and that the Controller is not authorized under state law to pay 
those salaries prior to such an appropriation.  Thus, state law contractually 
guarantees that state employees ultimately will receive their full salary for work 
performed during a budget impasse, but state law does not authorize the Controller 
to disburse state funds to the employees until an applicable appropriation has been 
enacted. 
In addition, we conclude that, in light of the requirements of federal law, 
the Controller is required, notwithstanding a budget impasse and the limitations 
imposed by state law, to timely pay those state employees who are subject to the 
minimum wage and overtime compensation provisions of the federal Fair Labor 
Standards Act — a category that includes many, but not all, state employees — the 
wages required by that act.   
I 
As noted, this case arises out of two separate taxpayer actions, the first filed 
in 1997 concerning the 1997-1998 budget impasse (hereafter, the 1997 action), 
and the second filed in 1998 related to the 1998-1999 budget impasse (hereafter, 
the 1998 action).  We briefly describe each of the actions. 
A 
 
On July 25, 1997, Steven White filed the 1997 action against the Governor 
and numerous other state officials, a taxpayer action alleging the improper 
expenditure of public funds.  On September 22, 1997, White filed a first amended 
complaint, alleging that the Legislature had failed to pass a budget for the 1997-
1998 fiscal year by the constitutionally required date of June 15, 1997, and that 
from June 15 to August 18, 1997, when a budget finally was enacted, the 
Controller improperly had disbursed funds from the state treasury to welfare 
recipients, state employees, members of the Legislature, and other individuals 
 
6
without the enactment of an emergency appropriation bill.  The complaint 
maintained that “[w]ithout any appropriations, the government of the State of 
California should have closed,” and sought declaratory and injunctive relief. 
Defendants filed a demurrer to the complaint, and on March 13, 1998, the 
trial court sustained the demurrer without leave to amend, concluding that the 
action was moot as to the 1997-1998 fiscal year because a budget for that year had 
been enacted, and that the action was premature as to the following fiscal year.  
White filed an appeal from the dismissal of the 1997 action. 
 
 
B 
On June 24, 1998, the Howard Jarvis Taxpayers Association and Steven 
White (hereafter plaintiffs) initiated the 1998 action, another taxpayer action 
seeking declaratory and injunctive relief against the Controller.  The complaint 
stated that the Legislature had not passed a budget by June 15, 1998, and asserted 
that “[t]he Constitution of the State of California does not have any provision to 
allow the state government to function without a budget, absent emergency bills.  
Under the Constitution . . . , without an emergency bill, the state government must 
close.”  The complaint further alleged that the Controller was likely to disburse 
funds despite this asserted constitutional restriction, and sought both interim and 
permanent injunctive relief. 
On July 9, 1998, the trial court issued a temporary restraining order barring 
the Controller from paying out funds absent the enactment of a budget or an 
emergency appropriation, unless payments were authorized by a continuing 
appropriation or federal law.  Thereafter, the trial court granted intervenor status to 
 
7
several state employee unions and associations as well as several individual state 
employees.2 
On July 21, 1998, after conducting a hearing, the trial court granted a 
preliminary injunction barring the Controller from disbursing any funds in the 
absence of a budget, with the exception of (1) funds properly appropriated prior to 
July 1, 1998, for expenditure in the 1998-1999 fiscal year, (2) funds properly 
appropriated pursuant to emergency bills, and (3) payments of minimum wages 
and overtime compensation required under the federal Fair Labor Standards Act 
for work performed prior to July 21, 1998.  In the course of its decision, the trial 
court determined that state employees who continued to work during the budget 
impasse after the entry of its order did so as “volunteers,” and prohibited the 
Controller from making any payments for such work.  The trial court also found 
that continuing appropriations “have no constitutional basis and simply represent 
examples of expenditures from the state treasury that have no unique position over 
other required expenditures.”  As part of its injunctive order, the trial court also 
ordered plaintiffs to post a $100,000 bond. 
The Controller and the state employee intervenors immediately appealed 
from the order granting the preliminary injunction, and requested the Court of 
Appeal to stay the preliminary injunction by supersedeas.3  On July 22, 1998 — 
                                             
 
2  
The following state employee unions and associations were granted 
intervenor status: California State Employees Association, Service Employees 
International Union, Local 1000, AFL-CIO, CLC ; Professional Engineers in 
California Government; California Association of Professional Scientists; 
California Correctional Peace Officers Association; and California Union of 
Safety Employees. 
3  
At the same time, the Controller and intervenors filed petitions for an 
original writ of mandate in the Supreme Court.  This court transferred the petitions 
to the Court of Appeal, which consolidated them with the appeals in this 
(footnote continued on next page) 
 
8
the day after the trial court issued its preliminary injunction — the Legislature 
enacted an emergency appropriation to fund vital services and pay the salaries of 
state employees through August 5, 1998.  On July 28, 1998, the Court of Appeal 
issued a writ of supersedeas staying the trial court’s preliminary injunction 
pending consideration of the appeal.  That stay has remained in effect throughout 
the pendency of the appeal.  The 1998-1999 budget bill ultimately was passed and 
signed into law on August 21, 1998. 
 
 
C 
The Court of Appeal consolidated the appeals from the 1997 and 1998 
actions and decided the cases in a single opinion.  (White v. Davis I, supra, 98 
Cal.App.4th 969.)  Because the budget bills for both the 1997-1998 and 1998-
1999 fiscal years had been enacted prior to the resolution of the appeal, the Court 
of Appeal turned first to the issue of mootness, dismissing the appeal from the 
1997 action as moot but retaining the appeal from the 1998 action for decision.  
The Court of Appeal explained that an appellate court has “ ‘discretion to decide 
otherwise moot cases presenting important issues that are capable of repetition yet 
tend to evade review’ ” (98 Cal.App.4th at p. 980, quoting Conservatorship of 
Wendland (2001) 26 Cal.4th 519, 524, fn. 1), and that the issues presented here 
“are of profound public significance and arise with some frequency, but escape 
review with the enactment of a budget.”  (98 Cal.App.4th at p. 980.) 
In addressing the validity of the broad preliminary injunction issued by the 
trial court in the 1998 action, the Court of Appeal noted that the Controller 
contended in the trial court and on appeal that there are numerous circumstances 
                                                                                                                                                              
(footnote continued from previous page) 
proceeding and ultimately dismissed the petitions as moot.  No one has challenged 
the Court of Appeal’s disposition of those mandate actions.   
 
9
under which payment of public funds is authorized even in the absence of the 
enactment of the annual budget act:  (1) when payment is authorized by a 
“continuing appropriation” enacted by the Legislature, (2) when payment is 
authorized by a self-executing provision of the California Constitution, and 
(3) when payment is required by federal law.  The Court of Appeal proceeded to 
address each of these categories, emphasizing that its decision was limited to the 
provisions of law discussed by the parties on appeal, and that its decision did not 
purport to determine “whether other provisions of law may authorize or mandate 
the disbursement of funds during a budget impasse.”  (White v. Davis I, supra, 98 
Cal.App.4th 969, 978, fn. 1.) 
Because the Court of Appeal’s discussion of the numerous issues before it 
reveals the complexity of the task of determining which payments of public funds 
lawfully may be made during a budget impasse, we believe it is useful to review at 
some length that court’s analysis and conclusions. 
1.  Continuing Appropriations 
The Court of Appeal initially scrutinized the category of “continuing 
appropriations.”  In California Assn. for Safety Education v. Brown (1994) 30 
Cal.App.4th 1264, 1282, the court explained that “[a]n appropriation is a 
legislative act setting aside ‘a certain sum of money for a specified object in such 
manner that the executive officers are authorized to use that money and no more 
for such specified purpose.’  [Citation.]  A continuous [or continuing] 
appropriation runs from year to year without the need for further authorization in 
the budget act.  [Citations.]”  (Fn. omitted, italics added.)  Government Code 
section 16304 evidences the Legislature’s approval of such appropriations.4 
                                             
 
4  
Government Code section 16304 provides in relevant part: “An 
appropriation shall be available for encumbrance during the period specified 
(footnote continued on next page) 
 
10
As the Court of Appeal noted, the Controller’s brief cited a considerable 
number of statutes and voter-approved initiatives that establish continuing 
appropriations independent of the budget act, authorizing payments for items such 
as tax refunds, disability and retirement payments, and payments to bond holders.5 
                                                                                                                                                              
(footnote continued from previous page) 
therein, or, if not otherwise limited by law, for three years after the date upon 
which it first became available for encumbrance.  An appropriation containing the 
term ‘without regard to fiscal years’ shall be available for encumbrance from year 
to year until expended.  [¶] . . . [¶]  
 
“Appropriations for the following purposes are exempt from limitations as 
to period of availability in any appropriation, and shall remain available from year 
to year until expended: 
 
“(a) Payment of interest and redemption charges on any portion of the 
bonded debt of the state. 
 
“(b) Transfers of money from any fund for the benefit of elementary 
schools, high schools, community colleges, the University of California, or any 
interest and sinking fund in the State Treasury. 
 
“(c) Money transferred to revolving funds specifically created by law, 
including, but not limited to, the Architecture Revolving Fund and the Water 
Resources Revolving Fund. 
 
“(d) Appropriations available for the acquisition of real property to the 
extent that such appropriations have been encumbered by the filing of 
condemnation proceedings on behalf of the State of California prior to the 
expiration of the period of availability of the appropriation. 
 
“(e) Money transferred to and expendable from funds other than the fund in 
which originally deposited, pursuant to the provisions of law earmarking or 
appropriating for expenditure certain classes of revenue or other receipts. 
 
“(f) Continuing provisions of law appropriating for specific purposes 
certain classes of revenue or other receipts, upon their deposit in a particular fund 
in the State Treasury or upon their collection by an agency of this state.” 
5  
In a brief filed in the Court of Appeal, the Controller cited, as a “small 
sampling” of current enactments authorizing continuing appropriations, the 
following provisions authorizing continuing appropriations for (1) disability 
income payments (Unemploy. Ins. Code, § 3012), (2) income tax refunds (Rev. & 
Tax. Code, § 19611), (3) the Local Revenue Fund (Welf. & Inst. Code, § 17600), 
(4) the Local Public Safety Account (Gov. Code, § 300052, subd. (a)), 
(5) contributions to the Teachers Retirement Fund (Ed. Code, § 22955), 
(footnote continued on next page) 
 
11
Plaintiffs did not claim in the trial court or in the Court of Appeal that any of the 
provisions cited by the Controller were not intended to create continuing 
appropriations, but rather argued that, as a general matter, continuing 
appropriations are not constitutionally permissible.  The trial court agreed with 
plaintiffs, and its preliminary injunction barred the Controller from making 
payments during a budget impasse pursuant to any continuing appropriation.  The 
Court of Appeal disagreed with the trial court on this fundamental issue, holding 
that legislative or voter-approved measures authorizing continuing appropriations 
independent of the budget act are constitutionally valid. 
In reaching this conclusion, the Court of Appeal began by observing that 
under the California Constitution “[g]enerally, the Legislature ‘may exercise any 
and all legislative powers which are not expressly or by necessary implication 
denied to it by the Constitution.’ (Methodist Hosp. of Sacramento v. Saylor (1971) 
5 Cal.3d 685, 691.)”  (White v. Davis I, supra, 98 Cal.App.4th 969, 983-984.)  In 
Methodist Hosp. of Sacramento, our court explained this fundamental point at 
greater length:  “Unlike the federal Constitution, which is a grant of power to 
Congress, the California Constitution is a limitation or restriction on the powers of 
the Legislature. [Citations.]  Two important consequences flow from this fact.  
First, the entire law-making authority of the state, except the people’s right of 
initiative and referendum, is vested in the Legislature, and that body may exercise 
                                                                                                                                                              
(footnote continued from previous page) 
(6) retirement and disability payments (Ed. Code, § 22307), (7) the operations of 
the California Highway and Infrastructure Finance Agency (Health & Saf. Code, 
§§ 51000, 50154), (8) the Local Agency Investment Fund ( Gov. Code, 
§ 16429.1), (9) bond-related payments (Gov. Code, §§ 15814.16, 15814. 48), and 
(10) voter-approved general obligation bond payments (Gov. Code, § 8879.10; 
Pen. Code, § 7428; Pub. Util. Code, § 99693.) 
 
12
any and all legislative powers which are not expressly or by necessary implication 
denied to it by the Constitution. [Citations.]  In other words, ‘we do not look to the 
Constitution to determine whether the legislature is authorized to do an act, but 
only to see if it is prohibited.’  [Citation.]  [¶]  Secondly, all intendments favor the 
exercise of the Legislature’s plenary authority:  ‘If there is any doubt as to the 
Legislature’s power to act in any given case, the doubt should be resolved in favor 
of the Legislature’s action.  Such restrictions and limitations [imposed by the 
Constitution] are to be construed strictly, and are not to be extended to include 
matters not covered by the language used.’  [Citation.]”  (Methodist Hosp. of 
Sacramento v. Saylor, supra, 5 Cal.3d at p. 691.) 
The Court of Appeal then turned to the terms of the two state constitutional 
provisions upon which plaintiffs relied.  Article IV, section 12, subdivision (c) of 
the California Constitution provides in relevant part:  “The Legislature shall pass 
the budget bill by midnight on June 15 of each year.  Until the budget bill has been 
enacted, the Legislature shall not send to the Governor for consideration any bill 
appropriating funds for expenditure during the fiscal year for which the budget bill 
is to be enacted, except emergency bills recommended by the Governor or 
appropriations for the salaries and expenses of the Legislature.”  Article XVI, 
section 7, provides: “Money may be drawn from the Treasury only through an 
appropriation made by law and upon a Controller’s duly drawn warrant.” 
The Court of Appeal observed that “nothing in . . . article IV, section 12, 
expressly bars continuing appropriations.  On its face, section 12 prohibits the 
Legislature from sending specified appropriation bills to the Governor prior to the 
enactment of a budget, and it provides for exceptions to this prohibition; it does 
not otherwise limit the Legislature’s authority to enact appropriations.”  (White v. 
Davis I, supra, 98 Cal.App.4th 969, 984.)  Similarly, article XVI, section 7, simply 
provides that money may be drawn from the Treasury “only through an 
 
13
appropriation made by law . . . .”  (Italics added.)  That provision does not limit the 
form in which an appropriation may be adopted. 
In addition to noting that the relevant constitutional provisions do not on 
their face preclude the Legislature from enacting continuing appropriations, the 
Court of Appeal further explained that the predecessor to current article IV, 
section 12 — former article IV, section 34 — had been interpreted by this court to 
permit the Legislature to enact continuing appropriations that are available for 
expenditure independent of the budget act (see, e.g., Gillum v. Johnson (1936) 7 
Cal.2d 744, 758; Railroad Commission v. Riley (1923) 192 Cal. 54, 56-58), that 
there was no indication that the drafters or the voters intended any change in 
meaning in this regard when article IV was substantially revised in 1966 and the 
current provisions of article IV, section 12, were adopted, and that subsequent 
Court of Appeal opinions have recognized the existence of continuing 
appropriations (see, e.g., California Assn. for Safety Education v. Brown, supra, 
30 Cal.App.4th 1264, 1283).  (White v. Davis I, supra, 98 Cal.App.4th 969, 984-
988.)  Accordingly, the Court of Appeal concluded that continuing appropriations 
are constitutionally permissible, and it set aside the preliminary injunction insofar 
as it rested on the trial court’s contrary determination.6 
                                             
 
6  
The Court of Appeal noted that because the trial court had concluded that 
continuing appropriations as a general matter are constitutionally impermissible, 
the trial court did not make individual determinations as to whether each of the 
particular statutes or laws cited by the Controller validly establish a continuing 
appropriation.  The Court of Appeal further explained that because the trial court 
did not address the individual continuing appropriations, and because a full 
showing had not been made regarding those measures, the Court of Appeal would 
not itself address whether any of the provisions establish continuing appropriations 
independent of the budget act.  (White v. Davis I, supra, 98 Cal.App.4th 969, 982.) 
 
14
2.  Payments Authorized by the State Constitution 
The Court of Appeal next considered the Controller’s contentions that a 
number of provisions of the California Constitution authorize the payment of 
funds from the state treasury independent of the budget act. 
(a) Article III, section 4 
The Court of Appeal first addressed the Controller’s contention that the 
payment of salaries of elected state officers is authorized by article III, section 4, 
of the California Constitution without a specific budget act appropriation.  That 
constitutional provision states in relevant part:  “[S]alaries of elected state officers 
may not be reduced during their term of office.  Laws that set these salaries are 
appropriations.”  (Italics added.)  The Controller maintained that because the 
salaries of state officers are set by statute, the Controller may authorize the 
payment of these salaries independent of a budget act or emergency appropriation. 
The Court of Appeal agreed with the Controller’s position, explaining that 
not only did the explicit constitutional language of article III, section 4, establish 
that the statutes setting those salaries themselves operate as appropriations for 
purposes of the Constitution, but that this conclusion found support in the decision 
of Brown v. Superior Court (1982) 33 Cal.3d 242, which states that “though a bill 
setting salaries of elected state officers is not an appropriation bill it nonetheless 
takes effect as an appropriation once it has been enacted.”  (33 Cal.3d at pp. 249-
250, fn. 6.)    
(b) Article XVI, Section 8 
The Court of Appeal next addressed the Controller’s contention that article 
XVI, section 8 of the California Constitution — a provision establishing a 
minimum level of education funding enacted as part of the voter initiative 
popularly known as Proposition 98 — authorizes the disbursement of funds 
independent of a budget act or emergency appropriation.  On this point, the Court 
 
15
of Appeal rejected the Controller’s contention and agreed with the earlier decision 
of County of Sonoma v. Commission on State Mandates (2000) 84 Cal.App.4th 
1264, 1290, that “Proposition 98 does not appropriate funds. . . .  The power to 
appropriate funds was left in the hands of the Legislature.  Proposition 98 merely 
provides formulas for determining the minimum to be appropriated every budget 
year.  The state’s obligation is to ensure specific amounts of moneys are applied 
by the state for education.”  Accordingly, the Court of Appeal concluded that the 
provisions of article XVI, section 8 “do not constitute a self-executing 
authorization to disburse funds.”  (White v. Davis I, supra, 98 Cal.App.4th 969, 
993.)   
(c)  Article XVI, Section 8.5 
The Court of Appeal next addressed the Controller’s argument that article 
XVI, section 8.5, of the California Constitution — an additional educational 
funding provision, also adopted as part of Proposition 98 —  authorizes the 
disbursement of funds independent of a budget act or emergency appropriation.  
After analyzing the somewhat complex features of this provision, the Court of 
Appeal ultimately agreed with the Controller that article XVI, section 8.5 provides 
an independent basis for the disbursement of funds.   
As the Court of Appeal explained, article XVI, section 8.5 operates in 
conjunction with another provision of the California Constitution, article XIII B, 
which generally limits governmental spending.  “As originally enacted, article 
XIII B required that all governmental entities return revenues in excess of their 
appropriation limits to the taxpayers through tax rate or fee schedule revisions.  In 
Proposition 98, . . . article XIII B was amended to provide that half of state excess 
revenues would be transferred to the state school fund for the support of school 
districts and community college districts.” (Hayes v. Commission on State 
Mandates (1992) 11 Cal.App.4th 1564, 1580, fn. 7.) 
 
16
Along with the amendment of article XIII B in Proposition 98, the voters 
adopted article XVI, section 8.5.  Article XVI, section 8.5, subdivision (a) 
provides that in addition to the education funding required under article XVI, 
section 8, “the Controller shall during each fiscal year transfer and allocate all 
revenues available [under the relevant provisions] of article XIII B to that portion 
of the State School Fund restricted for elementary and high school purposes, and 
to that portion of the State School Fund restricted for community college purposes, 
respectively, in proportion to the enrollment in school districts and community 
college districts respectively.”  Article XVI, section 8.5, subdivision (c), in turn, 
provides that “[f]rom any funds transferred to the State School Fund pursuant to 
subdivision (a), the Controller shall each year allocate to each school district and 
community college district an equal amount per enrollment in school districts from 
the amount in that portion of the State School Fund restricted for elementary and 
high school purposes and an equal amount per enrollment in community college 
districts from that portion of the State School Fund restricted for community 
college purposes.” Finally, article XVI, section 8.5, subdivision (d) provides that 
“[a]ll revenues allocated pursuant to subdivision (a) shall be expended solely for 
the purposes of instructional improvement and accountability as required by law.” 
In analyzing whether the provisions of article XVI, section 8.5 authorize 
the disbursement of funds without the need for a legislative appropriation, the 
Court of Appeal noted that in California Teachers Assn. v. Hayes (1992) 5 
Cal.App.4th 1513, the appellate court, in discussing this constitutional provision, 
declared:  “The measure is self-executing; it requires no legislative action. . . . [¶]  
. . .  Section 8.5 does not extend the Legislature’s spending power to excess 
revenues; rather it imposes a self-executing, ministerial duty upon the Controller 
to transfer such excess revenues to a restricted portion of the school fund and 
thence to allocate such revenues to school districts and community college 
 
17
districts on a per-enrollment basis.  Section 8.5 specifically restricts the purposes 
for which those funds may be expended.”  (5 Cal.App.4th at p. 1530.) 
The Court of Appeal below agreed with California Teachers Assn.’s 
description of the effect of this provision, and held that “[a]s such, article XVI, 
section 8.5, bears the earmarks of a continuing appropriation entrenched by the 
voters in the state Constitution.  We therefore conclude that this provision contains 
a self-executing authorization to disburse funds.”  (White v. Davis I, supra, 98 
Cal.App.4th 969, 995.)   
3.  Payments Pursuant to Federal Law 
After addressing the Controller’s contentions regarding the permissibility of 
authorizing payments from the treasury absent a budget bill or emergency 
appropriation, pursuant to continuing appropriations and various provisions of the 
California Constitution, the Court of Appeal turned to the third general category 
asserted by the Controller as providing a basis for the payment of state funds 
during a budget impasse — payments that are required to comply with federal law. 
In analyzing this claim, the Court of Appeal recognized at the outset that in 
light of the supremacy clause of the federal Constitution (U.S. Const., art. VI, cl. 2 
[“Laws of the United States . . . shall be the supreme Law of the Land; and the 
Judges of every State shall be bound thereby, any Thing in the Constitution or 
Laws of any State to the Contrary notwithstanding”]), the requirements of federal 
law necessarily prevail over any restrictions that state law may place on the 
disbursement of state funds.  (See, e.g., McCulloch v. Maryland (1819) 17 U.S. (4 
Wheat.) 316, 427; Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 516 
[“state law that conflicts with federal law is ‘without effect’”].)  Thus, the Court of 
Appeal concluded that when federal law places an obligation upon the state 
promptly to make payments of public funds, the Controller is authorized to make 
such payments independent of the enactment of a budget bill or emergency 
 
18
appropriation.  The Court of Appeal held that the pertinent question in each 
instance is whether the applicable federal law in fact requires the state to make the 
payment or payments during the time period in question. 
The Court of Appeal then discussed a number of federal statutes asserted by 
the Controller to require the disbursement of public funds notwithstanding a 
budget impasse. 
(a)  Fair Labor Standards Act 
The Court of Appeal first addressed the question whether the Controller is 
required under the Fair Labor Standards Act (29 U.S.C. § 201 et seq.) (FLSA) to 
disburse funds to pay the salaries of state employees during a budget impasse.  
The trial court had concluded that the state was required by the FLSA to pay the 
wages required by that act only for work performed prior to the date of the trial 
court’s preliminary injunction — determining that state employees would be 
“volunteers” not entitled to compensation with regard to work performed after the 
trial court issued its injunction.  The Court of Appeal rejected this conclusion, 
determining that the state is obligated to pay in a timely fashion the wages 
required by the FLSA for all work performed during a budget impasse.  That court 
also concluded, however, that, contrary to the arguments set forth by the state 
employee intervenors, state employees “do not have an entitlement to their full 
salaries (over and above the compensation required under the FLSA) pursuant to 
the contract clauses of the United States and California Constitutions.”  (White v. 
Davis I, supra, 98 Cal.App.4th 969, 995.)   
Because the question of the payment of state employee salaries during a 
budget impasse is one of the issues upon which review was sought and granted, 
we describe in detail the Court of Appeal’s resolution of the salary issue. 
The Court of Appeal began its analysis by explaining that the FLSA — 
which by its terms applies to public employers, including a state (29 U.S.C. 
 
19
§ 203(d), (e)(2)(C)) — requires an employer to pay minimum wages (29 U.S.C. 
§ 206(a)) and overtime compensation (29 U.S.C. § 207(a)(1)) to those employees 
to whom those provisions apply, and provides for the recovery of unpaid 
minimum wages, unpaid overtime compensation, and liquidated damages.  
(29 U.S.C. § 216(b).)7  The Court of Appeal also noted that the federal courts have 
held that, as a general matter, “ ‘the FLSA is violated unless the minimum wage is 
paid on the employee’s regular payday . . . .’  (Biggs v. Wilson (9th Cir. 1993) 1 
F.3d 1537, 1541 [cert. den. (1994) 510 U.S. 1081].)”  (White v. Davis I, supra, 98 
Cal.App.4th 969, 996, italics added.)   
Although nothing in the FLSA specifically addresses a state’s obligation to 
pay wages required under the act during a budget impasse, the Court of Appeal 
explained that in Biggs v. Wilson, supra, 1 F.3d 1537, the Ninth Circuit squarely 
held that California had violated the FLSA in July 1990 by failing to pay the 
wages owed to public transportation employees under the FLSA during a budget 
impasse.  In this proceeding, no one has questioned the validity of the 
interpretation or application of the FLSA set forth in Biggs — namely that under 
                                             
 
7  
The Court of Appeal recognized that the United States Supreme Court 
recently held that individual employees may not initiate actions under the FLSA 
against a state that has not waived its immunity under the Eleventh Amendment to 
the United States Constitution (see Alden v. Maine (1999) 527 U.S. 706, 754), and 
that a lower federal court had held that California has not waived this immunity 
(Baird v. Kessler (E.D.Cal. 2001) 172 F.Supp.2d 1305, 1312).  The Court of 
Appeal nonetheless pointed out that the FLSA authorizes the Secretary of Labor to 
seek the payment of minimum wages and overtime compensation “owing to any 
employee or employees” under the FLSA (29 U.S.C. § 216(c)) and thus that the 
state remains obligated to comply with the provisions of the FLSA.  (White v. 
Davis I, supra, 98 Cal.App.4th 969, 996, fn. 10; see also Alden v. Maine, supra, 
527 U.S. at p. 755 [explaining that the high court’s holding in that case “does not 
confer upon the State a . . . right to disregard the Constitution or valid federal 
law”].) 
 
20
the FLSA, the state is required to pay the wages owed under that act on the 
employees’ regular payday, notwithstanding the existence of a budget impasse. 
The Court of Appeal noted that although the trial court in this case had 
acknowledged the Biggs decision, the trial court had concluded that under that 
decision the Controller was authorized to pay the minimum wages and overtime 
compensation required under the FLSA only for work performed prior to the date 
of the preliminary injunction, because state employees who continued to work 
after that date were “volunteers” not entitled to compensation under the FLSA.  
The Court of Appeal reasoned that the trial court apparently had concluded “that a 
budget impasse nullifies the relationship between the state and its employees, and 
that employees who continued to work despite notification of this nullification fall 
outside the protection of the FLSA.”  (White v. Davis I, supra, 98 Cal.App.4th 
969, 996.)  The Court of Appeal treated the trial court’s ruling as raising three 
issues:  “(1) whether there is a continuing employment relationship between the 
state and its employees during a budget impasse; (2) whether this relationship, if it 
exists, falls within the scope of the FLSA; and (3) whether state employees are 
entitled to payment of their salaries during a budget impasse absent an 
appropriation, over and above the compensation requirements found in the FLSA.”  
(Ibid.)  The appellate court proceeded to address each of those issues. 
(i)  Continuing Employment Relationship 
In discussing this issue, the Court of Appeal first recognized that although 
“ ‘[p]ublic employment, by and large, is not held by contract, but by statute,’ ” 
“public employment [nonetheless] may give rise to obligations regarding 
compensation treated as contractual under the contract clauses of the federal and 
state Constitutions.”  (White v. Davis I, supra, 98 Cal.App.4th 969, 996, citation 
omitted.)   
 
21
The Court of Appeal noted that the Legislature had enacted two statutes — 
Government Code sections 1231 and 1231.1  relating to the status of public 
employees and to the payment of their salaries in the event of a budget impasse.  
Government Code section 1231 provides in part: “No state officer or employee 
shall be deemed to have a break in service or to have terminated his or her 
employment, for any purpose, nor to have incurred any change in his or her salary 
or other conditions of employment, solely because of the failure to enact a budget 
act for a fiscal year prior to the beginning of that fiscal year.”  Government Code 
section 1231.1 provides: “Funds from each appropriation made in the budget act 
for any fiscal year may be expended to pay to officers and employees whatever 
salary that would have otherwise been received had the budget act been adopted 
on or prior to July 1, of that fiscal year.” 
The Court of Appeal then stated: “In interpreting these statutes, we seek a 
construction that is constitutionally sound.  [Citation.]  ‘Under our Constitution the 
creation of an enforceable contract with the state requires compliance with the 
constitutional debt limitation provisions of article XVI, section 1, or a valid 
appropriation in support of the contract under article XVI, section 7.  [Citations.]  
In this respect our law is consistent with federal law and the law of nearly every 
state in the Union.  [Citations.]  Persons who deal with the government are held to 
have notice of this limitation upon the authority to enter into contracts.  
[Citation.]’  [Citation.]”  (White v. Davis I, supra, 98 Cal.App.4th 969, 997.)   
The Court of Appeal observed that “[n]othing supports a determination that 
Government Code sections 1231 and 1231.1 establish an obligation to pay 
employee salaries in conformity with . . . the debt limitation provisions of 
California Constitution, article XVI, section 1.  [Citation.]  Nor do the parties 
dispute that the salaries at issue here are generally paid pursuant to an 
appropriation on the general treasury fund, rather than pursuant to a continuing 
 
22
appropriation or constitutional mandate.”  (White v. Davis I, supra, 98 Cal.App.4th 
969, 998.) 
The Court of Appeal concluded that “[u]nder these circumstances, 
Government Code sections 1231 and 1231.1 cannot establish an employment 
relationship that entitles state employees to their salaries during a budget impasse 
absent an appropriation, given the constitutional limitations that we have 
described.”  (White v. Davis I, supra, 98 Cal.App.4th 969, 998.)  Instead, the Court 
of Appeal held that “these statutes, if constitutionally sound, authorize a 
continuing employer-employee relationship during a budget impasse under which 
entitlement to compensation for work done during the budget impasse arises only 
upon the satisfaction of a condition precedent, namely, the enactment of a budget 
or other proper appropriation.”  (Ibid., italics in original.)   
The Court of Appeal continued:  “Although the employer-employee 
relationship at issue here is ultimately governed by statute, we discern no reason 
rooted in the state Constitution barring the Legislature from subjecting the 
entitlement to wages earned during a budget impasse to an analogue of a condition 
precedent.  Thus, the entitlement of state employees to compensation for work 
performed during a budget impasse does not accrue until the enactment of a 
budget or other proper appropriation.  Furthermore, given the friction of 
democratic politics — which Government Code sections 1231 and 1231.1 
impliedly recognize — state employees assume the risk that satisfaction of this 
condition may be delayed due to the Legislature’s inaction during a budget 
impasse.  [Citations.]”  (White v. Davis I, supra, 98 Cal.App.4th 969, 998.)   
In sum, with regard to the question of a continuing employment 
relationship, the Court of Appeal ultimately concluded that state employees who 
work during a budget impasse do have a continuing employment relationship with 
the state, but it is one under which an employee’s “entitlement to compensation for 
 
23
work done during the budget impasse arises only upon . . . the enactment of a 
budget or other proper appropriation.”  (White v. Davis I, supra, 98 Cal.App.4th 
969, 998.)   
(ii)  Scope of the FLSA 
The Court of Appeal then turned to the question whether the type of 
employment relationship that it just had described — that is, an employment 
relationship in which an employee’s entitlement to compensation for work done 
during a budget impasse is subject to a condition precedent — falls within the 
scope of the FLSA.  Although that court indicated it had found “little case 
authority addressing the extent to which the FLSA applies to employer-employee 
relationships subject to such a condition precedent” (White v. Davis I, supra, 98 
Cal.App.4th 969, 999), the court ultimately concluded that the type of continuing 
relationship that state employees have with the state during a budget impasse does 
fall within the protection of the FLSA during such an impasse.  (Ibid.)  Reiterating 
that the FLSA “requires wages to be paid in a timely fashion” (ibid.), the Court of 
Appeal thus concluded that “the FLSA requires the prompt payment of minimum 
wages and overtime compensation for work performed during a budget impasse, 
with due reference to the state employee’s established work period.”  (Ibid.) 
(iii)  Compensation Over and Above the FLSA Requirements 
The final issue that the Court of Appeal addressed regarding state employee 
salaries was the question whether state employees are entitled to receive 
compensation during a budget impasse, beyond that required under the FLSA, by 
virtue of the contract or due process clauses of the federal and state Constitutions. 
As the Court of Appeal recognized, both the state and federal Constitutions 
contain provisions prohibiting the state from passing any law “impairing the 
obligation of contracts.”  (U.S. Const., art. I, § 10; Cal. Const., art. I, § 9.)  
Although the federal contract clause has been interpreted to be “directed only 
 
24
against impairment by legislation and not by judgment of courts” (Tidal Oil Co. v. 
Flanagan (1924) 263 U.S. 444, 451), the Court of Appeal noted that the state 
contract clause has been construed also to apply to judicial action.  (Bradley v. 
Superior Court (1957) 48 Cal.2d 509, 519.)  Because the state employee 
intervenors in this case contended that a judicial order — the trial court’s 
preliminary injunction — constituted an impermissible impairment of contract in 
prohibiting the Controller from authorizing the full and regular payment of salaries 
to which the employees contended they were contractually entitled, the appellate 
court limited its consideration to the state contract clause. 
In addressing the employees’ contract clause claim, the Court of Appeal 
began by explaining that “[u]nder the state contract clause, ‘[n]either the court nor 
the Legislature may impair the obligation of a valid contract . . . .’  [Citation.]  
However, the contract clause does not protect contracts that are prohibited by law 
or against public policy.  [Citations.]”  (White v. Davis I, supra, 98 Cal.App.4th 
969, 1001, italics added by White v. Davis I.)   
The Court of Appeal then stated that “[g]enerally, ‘no contractual 
obligation may be enforced against a public agency unless it appears the agency 
was authorized by the Constitution or statute to incur the obligation; a contract 
entered into by a governmental entity without the requisite constitutional or 
statutory authority is void and unenforceable.’ ”  (White v. Davis I, supra, 98 
Cal.App.4th 969, 1001.)   
The Court of Appeal concluded:  “In our view, the state Constitution 
precludes the state from incurring an obligation to pay employee salaries during a 
budget impasse in the absence of a proper appropriation, and thus the failure to 
pay full salaries under such circumstances does not constitute an impairment of 
contract under the state contract clause.”  (White v. Davis I, supra, 98 Cal.App.4th 
969, 1001.)  The Court of Appeal reasoned that a contractual obligation to pay 
 
25
salaries in the absence of an appropriation “would directly undermine the 
appropriation requirement in article XVI, section 7 of the state Constitution.  As 
our Supreme Court explained in Humbert v. Dunn (1890) 84 Cal. 57, 59, this 
requirement, which is taken from the United States Constitution, ‘had its origin in 
Parliament in the seventeenth century, when the people of Great Britain, to 
provide against the abuse by the king and his officers of the discretionary money 
power with which they were vested, demanded that the public funds should not be 
drawn from the treasury except in accordance with express appropriations therefor 
made by Parliament [citation]; and the system worked so well in correcting the 
abuses complained of, our forefathers adopted it, and the restraint imposed by it 
has become a part of the fundamental law of nearly every state in the Union.’  In 
view of the fundamental nature of this requirement, we conclude that the state 
cannot undertake obligations protected by the contract clause that directly 
contravene it.  To hold otherwise would gut the requirement.”  (White v. Davis I, 
supra, 98 Cal.App.4th at p. 1002.)   
The Court of Appeal, in similarly denying the employees’ claim that the 
preliminary injunction violated the due process clause insofar as it denied them the 
payment of their full salaries during a budget impasse, reasoned that “[u]nder 
principles of contract interpretation, ‘ “ ‘all applicable laws in existence when an 
agreement is made, which laws the parties are presumed to know and to have in 
mind, necessarily enter into the contract and form a part of it . . . .’ ” ’ ”  “For this 
reason, state employees must be deemed to have notice of the limitation on the 
payment of their salaries during a budget impasse.”  (White v. Davis I, supra, 98 
Cal.App.4th 969, 1002.)   
(iv)  Conclusion on State Employee Salary Issue 
In view of the foregoing conclusions, the Court of Appeal ultimately held 
that “the preliminary injunction must be reversed to the extent that it denies state 
 
26
employees the compensation required under the FLSA during a budget impasse 
. . . .”  (White v. Davis I, supra, 98 Cal.App.4th 969, 1003.)   
(b)  Other Federal Law 
In addition to the FLSA, the Controller contended in the Court of Appeal 
that a number of other federal laws require the disbursement of public funds 
during a budget impasse.  The Controller asserted that such payments are required 
pursuant to the state’s participation in the federal (1) food stamp program 
(7 U.S.C. § 2011 et seq.), (2) foster care and adoption programs (42 U.S.C. 
§§ 670-679b), (3) child support programs (42 U.S.C. §§ 651-669b), and (4) child 
welfare services program (42 U.S.C. §§ 620-628). 
In analyzing this contention, the Court of Appeal stated that it found 
guidance in two federal decisions, Pratt v. Wilson (E.D.Cal. 1991) 770 F.Supp. 
539 and Dowling v. Davis (9th Cir. 1994) 19 F.3d 445.  In Pratt, the plaintiffs 
brought a federal action challenging the Controller’s cessation, during the 1990 
budget impasse, of payments that were partially funded under the former federal 
Aid to Families with Dependent Children (AFDC) program.  The court in Pratt 
held that under the supremacy clause the state was required to make AFDC 
payments during the budget impasse notwithstanding the appropriation 
requirements of the state Constitution, reasoning that once a state had elected to 
participate in the AFDC program it was required to comply with the governing 
federal statutes and regulations mandating timely payments. 
In Dowling v. Davis, supra, 19 F.3d 445, the plaintiffs brought a somewhat 
similar federal action challenging the Controller’s delay, also during the 1990 
budget impasse, of payments under the Medi-Cal program (Welf. & Inst. Code 
§ 14000 et seq.) (partially funded through the federal Medicaid law (42 U.S.C. 
§ 1236)) and under the In-Home Support Service program (Welf. & Inst. Code, 
§ 12300) (partially funded by a federal block grant).  In Dowling, unlike Pratt, the 
 
27
court held that the delay in payments did not violate federal law, concluding that 
“[d]elayed payment is an inherent feature of the Medicaid statutory and regulatory 
framework,” that the federal block grant supporting the In-Home Support Service 
program did not require timely payments, and that the state statute governing the 
In-Home Support Service program predicated the continuing existence of the 
program on an appropriation in the state budget act.  (19 F.3d at pp. 447-448.) 
The Court of Appeal held that “[i]n view of Pratt and Dowling, the key 
issue is whether the federal laws cited by the Controller require timely payments 
during a budget impasse.”  (White v. Davis I, supra, 98 Cal.App.4th 969, 1004.) 
The Court of Appeal then carefully reviewed the controlling statutory 
provisions and regulations governing each of the federal programs identified by 
the Controller to determine whether federal law mandates timely payment.  With 
regard to the food stamp program, the foster care and adoption programs, and the 
child support program, the Court of Appeal concluded that the relevant statutes 
and regulations require the prompt payment of benefits and prompt provision of 
services specified by those programs, and thus that the Controller properly may 
disburse funds during a budget impasse to comply with such federal mandates.  
(White v. Davis I, supra, 98 Cal.App.4th 969, 1104-1105.)  With regard to the 
child welfare services program, however, the Court of Appeal concluded that the 
applicable federal regulations mandated the timely disbursement only of those 
funds necessary to comply with certain notice and hearing requirements imposed 
by the federal regulations on the child welfare services program, and it held that 
only such funds may be properly disbursed by the Controller during a budget 
impasse.  (Id., at pp. 1005-1006.)   
4.  Adequacy of Injunction Bond 
After addressing the validity of the various grounds upon which the 
Controller maintained that payments properly could be made during a budget 
 
28
impasse, the Court of Appeal took note of the Controller’s and state employee 
intervenors’ additional contention that the trial court had failed to require plaintiffs 
to post an adequate injunction bond.  As noted above, in granting the preliminary 
injunction the trial court ordered plaintiffs to post a $100,000 bond.   
As the Court of Appeal recognized, Code of Civil Procedure section 529, 
subdivision (a), provides generally that “[o]n granting an injunction, the court or 
judge must require an undertaking on the part of the applicant to the effect that the 
applicant will pay to the party enjoined any damages, not exceeding an amount to 
be specified, the party may sustain by reason of the injunction, if the court finally 
determines that the applicant was not entitled to the injunction.”  As past cases 
have explained, “the trial court’s function is to estimate the harmful effect which 
the injunction is likely to have on the restrained party and to set the undertaking at 
that sum.”  (ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 14.) 
The Court of Appeal determined, however, that it was unnecessary for it to 
address the claimed inadequacy of the injunction bond in view of (1) its 
conclusion that the preliminary injunction must be set aside in part, and 
(2) plaintiffs’ representation that they were not seeking further relief from the trial 
court.  (White v. Davis I, supra, 98 Cal.App.4th 969, 1006-1007.)   
5.  Disposition by the Court of Appeal 
In its disposition, the Court of Appeal dismissed the appeal in the 1997 
action as moot.  With regard to the 1998 action, the court stated: “The preliminary 
injunction . . . is reversed to the extent that it bars the Controller from disbursing 
funds pursuant to (1) continuing appropriations, (2) article III, section 4, and 
article XVI, section 8.5 of the state Constitution, (3) the [f]ederal [Fair] Labor 
Standards Act (29 U.S.C. § 201 et seq.), and (4) the federal funding mandates that 
we have identified applicable to the food stamp program (7 U.S.C. § 2011 et 
seq.,), foster care and adoption programs (42 U.S.C. § 670 et seq.), child support 
 
29
program (42 U.S.C. §§ 651-669b), and child welfare services program (42 U.S.C. 
§§ 620-628).  The preliminary injunction is otherwise affirmed.  In view of 
[plaintiffs’] abandonment of further action in the trial court, we do not remand the 
matter for modification of the preliminary injunction. . . .”  (White v. Davis I, 
supra, 98 Cal.App.4th 969, 1007.)   
 
 
II 
As noted above, only the Controller and several state employee intervenors 
sought review from the Court of Appeal’s decision,8 and the petitions for review 
challenged only two aspects of that decision.  The Controller’s principal objection 
is to the Court of Appeal’s treatment of the preliminary injunction issue: the 
Controller maintains that under the general principles governing the issuance or 
denial of a preliminary injunction, the trial court in the 1998 case should not have 
granted a preliminary injunction in any respect, and that the Court of Appeal 
consequently erred in upholding the preliminary injunction in part.  The state 
employee intervenors principally challenge the Court of Appeal’s conclusions 
with regard to the payment of state employee salaries during a budget impasse, 
contending that the Court of Appeal should have held that the Controller is 
authorized to pay all state employees their full and regular salaries during a budget 
impasse.  No party has challenged any other aspect of the Court of Appeal’s 
decision and none of the numerous additional issues passed upon by the Court of 
Appeal has been briefed or argued in this court, and thus we have no occasion to 
                                             
 
8  
A petition for review was filed by the California State Employees 
Association (CSEA), and a separate petition for review jointly was filed by the 
California Correctional Peace Officers Association (CCPOA) and the California 
Correctional Union of Safety Employees (CAUSE). 
 
30
address any of those additional issues here.9  Moreover, as noted above, the Court 
of Appeal itself confined its discussion only to the particular provisions of law that 
were raised by the parties on appeal, and did not purport to determine whether any 
other provision of law may authorize or mandate the disbursement of funds during 
a budget impasse.10 
Accordingly, we shall address only the two general issues presented on 
review:  (1) Did the trial court err in granting a preliminary injunction in this 
case?, and (2) Is the Controller authorized to pay all state employees their full and 
regular salaries during a budget impasse?  We turn first to the preliminary 
injunction issue.11 
                                             
 
9  
As we explain more fully below, however, because the other issues 
discussed by the Court of Appeal are important in their own right, we shall order 
the Court of Appeal opinion in this matter to be published in the Official Reports.  
(See, post, p. 45, fn. 14.)   
10  
An amicus curiae brief has been filed in this court by the California 
Appellate Defense Counsel (CADC), asserting that under the supremacy clause of 
the federal Constitution (U.S. Const., art. VI, § 2) attorneys who are appointed to 
represent indigent defendants in criminal prosecutions are entitled to obtain 
payment for their services during a budget impasse because the state is obligated 
by the Sixth and Fourteenth Amendments of the federal Constitution to provide 
such representation.  Unlike the state employee intervenors, however, CADC did 
not seek to intervene in this proceeding in the trial court, and the contention raised 
in its brief was not addressed by either the trial court or the Court of Appeal.  
Under these circumstances, we conclude that it is not appropriate to address the 
issue in this proceeding, and we express no view on the merits of this assertion.   
 
For similar reasons, we do not address the claims raised in a separate 
amicus curiae brief challenging the validity of the state’s failure during a budget 
impasse to make payments to those persons or entities that furnish goods or 
services to or on behalf of the state. 
11  
Two requests for judicial notice have been filed in this case.  No objection 
to either request has been received.   
 
The Controller requests that we take judicial notice of (1) the date that the 
budget act for the 1998-1999 fiscal year (Stats. 1998, ch. 324) was enacted, (2) the 
(footnote continued on next page) 
 
31
 
 
III 
The Controller’s principal contention before this court is that the Court of 
Appeal erred in upholding the preliminary injunction in any respect.  The 
Controller argues that the trial court’s issuance of a preliminary injunction was 
contrary to well established principles governing the circumstances in which a trial 
court in a taxpayer action may enjoin a public official from expending funds prior 
to a full adjudication of the merits of the taxpayer’s claim.  As we explain, we 
agree that the trial court erred in granting the preliminary injunction.   
As its name suggests, a preliminary injunction is an order that is sought by 
a plaintiff prior to a full adjudication of the merits of its claim.  (See 6 Witkin, 
Cal. Procedure (4th ed. 1997) Provisional Remedies, § 287, p. 228.)  To obtain a 
preliminary injunction, a plaintiff ordinarily is required to present evidence of the 
irreparable injury or interim harm that it will suffer if an injunction is not issued 
                                                                                                                                                              
(footnote continued from previous page) 
effective dates of the emergency appropriation enacted after the issuance of the 
trial court’s preliminary injunction (Stats. 1998, ch. 213, § 1, enacting Sen. Bill 
No. 267 (1997-1998 Reg. Sess.)), and (3) the legislative history of Senate Bill No. 
267.  All of these items are proper subjects of judicial notice (Evid. Code, § 452, 
subd. (c) [official acts of the legislative branch of the State of California]), and 
accordingly the request to take judicial notice is granted. 
 
CAUSE and CCPOA, two of the state employee intervenors, request the 
court to take judicial notice of (1) the current salary ranges for certain state public 
safety employees as set forth in the salary schedule in the current agreement 
between CAUSE and the state, and (2) the current salary ranges for state 
correctional workers as set forth in the Department of Personnel Administration’s 
California Civil Service Pay Scales.  Although the relevance of this material is 
debatable, the material appears to be properly subject to judicial notice under 
Evidence Code section 452, subdivisions (c) (official acts of the executive branch 
of the State of California) and (h) (facts that are not reasonably subject to dispute 
and are capable of immediate and accurate determination by resort to sources of 
reasonably indisputable accuracy).  Accordingly, the request to take judicial notice 
of this material is granted.   
 
32
pending an adjudication of the merits.  (See City of Torrance v. Transitional 
Living Centers for Los Angeles, Inc. (1982) 30 Cal.3d 516, 526.)  
Past California decisions further establish that, as a general matter, the 
question whether a preliminary injunction should be granted involves two 
interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits, 
and (2) the relative balance of harms that is likely to result from the granting or 
denial of interim injunctive relief.  As explained in IT Corp. v. County of Imperial 
(1983) 35 Cal.3d 63, 69-70: “This court has traditionally held that trial courts 
should evaluate two interrelated factors when deciding whether or not to issue a 
preliminary injunction.  The first is the likelihood that the plaintiff will prevail on 
the merits at trial.  The second is the interim harm that the plaintiff is likely to 
sustain if the injunction were denied compared to the harm that the defendant is 
likely to suffer if the preliminary injunction were issued.”  As the court in IT Corp. 
further noted: “The ultimate goal of any test to be used in deciding whether a 
preliminary injunction should issue is to minimize the harm which an erroneous 
interim decision may cause.  [Citation.]” (Id. at p. 73, italics added.) 
A number of Court of Appeal decisions have addressed the proper 
application of these general principles relating to preliminary injunctions in the 
particular circumstance of a taxpayer action that is brought to enjoin the alleged 
improper expenditure of public funds.  In Cohen v. Board of Supervisors (1986) 
178 Cal.App.3d 447 (Cohen II), the Court of Appeal, in a decision on remand 
from this court (see Cohen v. Board of Supervisors (1985) 40 Cal.3d 277 
(Cohen I)), addressed the question whether the relative “balance of harms” in that 
case supported the trial court’s decision denying a preliminary injunction in a 
taxpayer action that challenged the validity of a recently enacted city ordinance 
imposing various regulations and restrictions on escort services within the city.  
The action challenged the ordinance on a variety of grounds, including a claim that 
 
33
it was facially unconstitutional under the First Amendment.  Noting that one of the 
plaintiffs in the case had brought suit solely as a resident taxpayer under section 
526a of the Code of Civil Procedure to enjoin the alleged illegal expenditure of 
public funds, the court in Cohen II observed that this plaintiff’s “interest appears 
to be limited to his taxpayer’s pocketbook, an interest which is sufficient to confer 
statutory standing to maintain this action and bring it to final judgment 
permanently enjoining unlawful expenditures (Blair v. Pitchess (1971) 5 Cal.3d 
258, 267-270), but which to our knowledge has never been held to satisfy the high 
degree of existing or threatened injury required for the prejudgment injunctive 
relief sought here.”  (178 Cal.App.3d at p. 454, italics added.)  The court in Cohen 
II went on to expressly reject the plaintiff taxpayer’s argument that its assertion 
that the ordinance was unconstitutional, and that the public funds that would be 
expended to enforce the ordinance would therefore be unlawfully incurred, was 
itself sufficient to demonstrate the type of irreparable injury that would justify 
granting a preliminary injunction.  (Id. at pp. 454-455.)  Accordingly, on this 
ground alone, the court in Cohen II affirmed the trial court’s order in that case 
denying the taxpayer’s request for a preliminary injunction. 
In Loder v. City of Glendale (1989) 216 Cal.App.3d 777(Loder I), the Court 
of Appeal considered the question of interim harm in reviewing the validity of a 
trial court order granting a preliminary injunction in a taxpayer action challenging 
the validity of a recently adopted city drug testing program as violative of federal 
and state constitutional restrictions on unreasonable searches and seizures.  
Following the reasoning of the decision in Cohen II, the Court of Appeal in 
Loder I held that the plaintiff’s “status as a taxpayer by itself was insufficient to 
entitle her to a preliminary injunction. . . . [W]hile plaintiff’s alleged status as a 
taxpayer affords her standing to maintain this action, her harm for preliminary 
injunction purposes is limited to defendants’ alleged improper use of tax funds.  
 
34
This monetary harm is insufficient to justify the issuance of a preliminary 
injunction.”  (216 Cal.App.3d at pp. 784-785.)  On this basis, the court in Loder I  
reversed the trial court’s order granting a preliminary injunction, taking care at the 
same time to note that “[n]othing in this opinion is intended to reflect on, or 
express any opinion as to the validity of the City’s drug testing program or any 
part of it.”12 
In Leach v. City of San Marcos (1989) 213 Cal.App.3d 648 (Leach), the 
Court of Appeal reached the same conclusion as the courts in Cohen II and Loder I 
with regard to the general principle that a taxpayer’s claim of an illegal 
expenditure of public funds ordinarily is not sufficient in itself to warrant the 
issuance of a preliminary injunction.  In Leach, a taxpayer challenged the validity 
of a redevelopment plan adopted by the defendant city, and sought a preliminary 
injunction to prevent the city from taking any further action to implement the 
challenged plan.  Although the taxpayer presented evidence to support his claim 
that the redevelopment plan at issue might well not conform with the applicable 
Community Redevelopment Law, he presented no specific evidence indicating 
that an injunction was necessary to prevent irreparable harm pending a trial on the 
merits of the claim, and the trial court denied the preliminary injunction.  On 
appeal, the Court of Appeal affirmed the denial of a preliminary injunction, 
concluding that even though the taxpayer had demonstrated a likelihood of success 
on the merits, the trial court properly had denied a preliminary injunction on the 
ground that the taxpayer had failed to demonstrate sufficient interim harm.  The 
                                             
 
12 
After a trial on the merits, the trial court in the Loder case granted a 
permanent injunction enjoining the application of the Glendale drug testing 
program as applied to some employment positions, and on appeal of that judgment 
this court in Loder v. City of Glendale (1997) 14 Cal.4th 846 (Loder II) addressed 
the validity of the program.   
 
35
court in Leach stated that “even if the record here demonstrated the imminent 
expenditure of tax increment revenues, such an expenditure would not support a 
preliminary injunction in favor of a private citizen.”  (213 Cal.App.3d at p. 662.)  
After quoting at length the pertinent portions of Cohen II, the court in Leach 
observed that, “[c]ontrary to Leach’s argument, we find no meaningful distinction 
between his status as a taxpayer whose burden might be increased by the plan and 
the plaintiff in Cohen II whose tax dollars might have been unlawfully spent 
enforcing the escort ordinance.  While the redevelopment plan may eventually 
impose a larger burden on taxpayers outside the plan area than enforcement of an 
escort ordinance, Leach has not suggested how much of a burden he would suffer, 
and most importantly, how that burden would affect him.  Given these 
circumstances, his status as a taxpayer will not support a preliminary injunction.”  
(Id. at p. 663.)  Accordingly, the court affirmed the trial court order denying a 
preliminary injunction.   
In the present proceeding, plaintiffs brought their 1998 action solely in their 
capacity as taxpayers and relied upon their interest as taxpayers in claiming that 
they would be irreparably harmed by the alleged impropriety of the payments of 
public funds that the Controller proposed to authorize during the budget impasse.  
Plaintiffs suggested that such payments not only violated the state Constitution, 
but also eliminated significant public pressure that (in the absence of such 
payments) would be brought to bear upon the Legislature to comply with its 
constitutional obligation to timely enact a budget bill.  Under the Court of Appeal 
decisions discussed above, a taxpayer’s general interest in not having public funds 
spent unlawfully (including not having such funds spent in alleged contravention 
of fundamental constitutional restrictions), while sufficient to afford standing to 
bring a taxpayer’s action under Code of Civil Procedure section 526a and to obtain 
a permanent injunction after a full adjudication on the merits, ordinarily does not 
 
36
in itself constitute the type of irreparable harm that warrants the granting of 
preliminary injunctive relief.  Under these appellate decisions, the granting of a 
preliminary injunction in the present case arguably would be improper on this 
ground alone. 
In this case, however, we need not decide whether interim harm to a 
taxpayer’s interest is ever in itself sufficient to justify a preliminary injunction 
barring the expenditure of public funds during a budget impasse, because even if 
there may be some circumstances in which granting a preliminary injunction 
might be warranted in a taxpayer’s action (for example, if the Controller continues 
to approve expenditures that have been held unlawful by a controlling judicial 
precedent), in the case before us we believe it is clear that in light of both the 
relative balance of harms and the lack of clear authority supporting the merits of 
plaintiffs’ broad claim, the trial court abused its discretion in granting a 
preliminary injunction. 
In support of their claim of irreparable injury if a preliminary injunction 
were not issued, plaintiffs alleged that “[t]he failure to grant the injunction will 
allow the flagrant violation of the Constitution to continue as it has for the past 
dozen years causing extreme hardship and sometimes bankruptcy to the numerous 
small businesses and other suppliers of goods and services to the State who have 
not been paid due to the failure of the Legislature to timely pass and the Governor 
to timely approve a State Budget, while illegally paying themselves.  [¶]  The 
respect for the Constitution has and will be destroyed by this illegal activity.  If the 
Legislature and the Governor wish to continue their illegal activity, the correct 
method is to seek an Amendment to the Constitution to legalize such activity.”   
In advancing this claim of irreparable injury, however, plaintiffs failed to 
cite any authority to support the contention that a taxpayer’s interest in forestalling 
an alleged continuing violation of the state Constitution constitutes the type of 
 
37
irreparable injury that will support granting a preliminary injunction, and, as we 
have seen, the Court of Appeal decisions cited above have rejected just such a 
contention. 
Further, as part of their claim of irreparable harm, plaintiffs referred to the 
hardship sustained by small businesses and other suppliers of goods and services 
to the state that are not paid during a budget impasse.  Although plaintiffs did not 
expressly explain how the granting of a preliminary injunction prohibiting the 
Controller from making any payments to state employees or other persons would 
relieve the hardship suffered by such small businesses and other vendors during a 
budget impasse, plaintiffs’ contention apparently was based upon the strategic 
assumption that the trial court’s granting of a preliminary injunction prohibiting 
the Controller from making any payments during a budget impasse would place 
pressure on the Legislature to enact a budget bill promptly, and in that indirect 
manner might result in relieving the hardship suffered by small businesses or other 
vendors during the budget impasse.  Even if we assume that plaintiffs, in their 
capacity as taxpayers, have standing to rely upon the interim harm that would be 
sustained by such businesses or other vendors, the suggestion that a trial court may 
issue a preliminary injunction broadly prohibiting the Controller from authorizing 
the expenditure of public funds for the purpose of placing pressure on the 
Legislature to pass a budget in a timely fashion is problematical.  The relevant 
provision of the California Constitution that requires passage of the budget bill “by 
midnight on June 15” (Cal. Const., art. IV, § 12) does not purport to authorize a 
preliminary injunction against the Controller as a “sanction” or “lever” against the 
Legislature for failing to enact a budget on time, and thus any legal action seeking 
an injunction against the Controller’s expenditure of funds during a budget 
impasse necessarily must rest on the asserted illegality of a particular challenged 
expenditure or expenditures, rather than on the conduct of the Legislature.  Indeed, 
 
38
in light of the separation of powers doctrine (Cal. Const., art. III, § 3), courts must 
be especially sensitive about intruding upon the Legislature’s fundamental  and 
essentially political  legislative and budget powers, and must be vigilant not to 
depart from established principles governing preliminary injunctions simply in 
order to lend support to an effort to increase the leverage on the Legislature to pass 
a budget bill. 
Thus, the principal properly cognizable harm alleged by plaintiffs that 
would be prevented by the granting of a preliminary injunction would be the 
indirect fiscal harm they as taxpayers would suffer by the Controller’s payment of 
those public funds that the Controller concluded properly could be made during 
the budget impasse, but that plaintiffs contended were not properly authorized by 
the Constitution.   
In its opposition to the request for a preliminary injunction, the Controller 
cited and relied upon the numerous Court of Appeal opinions, described above, 
holding that a taxpayer’s claim that public funds may be improperly expended 
does not itself constitute sufficient harm to support the issuance of a preliminary 
injunction.  The Controller further pointed out that when the budget act for the 
then-current fiscal year was enacted, that act, like prior budget acts, would be 
retroactive to the beginning of the fiscal year (Gov. Code, §§ 1231.1, 1231.2),13 
                                             
 
13  
As noted above, Government Code section 1231.1 provides:  “Funds from 
each appropriation made in the budget act for any fiscal year may be expended to 
pay officers and employees whatever salary that would have otherwise been 
received had the budget act been adopted on or prior to July 1, of that fiscal year.” 
 
Government Code section 1231.2 provides:  “Funds from each 
appropriation made in the budget act for any fiscal year may be expended to pay 
any obligation incurred between the commencement of that fiscal year and the 
effective date of the budget act for that fiscal year, which would otherwise have 
been authorized by the budget act of that year had that act been adopted, on or 
(footnote continued on next page) 
 
39
and thus even if the trial court were to assume, as plaintiffs contended, that some 
or all of the expenditures that the Controller proposed to authorize during the 
budget impasse could not lawfully be paid at that time, the asserted loss to the 
treasury in any event would be temporary, because the subsequently enacted 
budget act ultimately would provide the necessary appropriation for such 
expenditures.  The Controller argued that under these circumstances plaintiffs 
certainly had not demonstrated the type of irreparable harm that would support a 
preliminary injunction. 
Moreover, in contrast to the lack of irreparable harm that assertedly would 
result from the denial of a preliminary injunction, the opposition papers filed by 
both the Controller and the state employee intervenors strongly emphasized the 
serious and widespread hardship that would be imposed by the granting of the 
preliminary injunction sought by plaintiffs.  As our summary of the Court of 
Appeal’s decision in this case makes clear, the public funds at issue in this case 
affected the availability of the essential necessities of life for tens of thousands of 
Californians.  The opposition papers pointed out that granting the broad 
preliminary injunction sought by plaintiffs — precluding the Controller from 
making any payments authorized by continuing appropriations or from paying any 
wages to state employees for work done after the preliminary injunction was 
granted or making other payments required by federal law — would deprive 
current state employees, persons receiving state pensions or disability benefits, 
persons receiving food stamps, persons caring for adopted children with special 
needs, and thousands of others, of funds necessary to feed, house, and clothe 
                                                                                                                                                              
(footnote continued from previous page) 
prior to July 1 of that year, subject to the same limitations, conditions, and 
requirements.” 
 
40
themselves and their families for the duration of the budget impasse.  The 
Controller also noted that granting a preliminary injunction would prevent the 
state from making payments to bondholders — thereby exposing the state to 
potentially costly litigation and damage claims — and would deny local 
governmental entities access to the funds such entities had invested in the Local 
Agency Investment Fund, a special fund in the state treasury that was created for 
the purpose of providing a safe and reliable investment option to local 
governments.  (See Gov. Code, § 164294.1.)  Finally, the Controller observed that 
if the injunction were to result in the scenario that plaintiffs asserted was 
required — the closure of state government — the injunction would have a “dire 
effect on numerous important state services involving safety, health and education, 
and thus could dramatically impact the public at large.” 
In granting a preliminary injunction, the trial court did not provide any  
indication that it had considered or weighed the hardship that would be imposed 
by granting such an injunction against the hardship that would result from denying 
an injunction.  Instead, the order granting the preliminary injunction rested simply 
on the trial court’s agreement with the merits of plaintiffs’ constitutional claim.  
The order stated that, in the court’s view, article IV, section 12, subdivision (c) of 
the California Constitution prohibits the Controller from authorizing any payments 
prior to the enactment of a budget bill (other than pursuant to the exceptions 
embodied in article IV, section 12).  The order further concluded that “so-called 
‘continuing appropriations’ have no constitutional base” and expressed the view 
that the holding in Biggs v. Wilson, supra, 1 F.3d 1537, requiring the state to pay 
the wages required by the FLSA during a budget impasse, did not apply to the 
present situation, because “if the state employees choose to continue to work with 
knowledge of no authority to appropriate money to pay them, there can be no 
violation of the FLSA.  The employees would simply be volunteers.”   
 
41
In granting a preliminary injunction without considering the relative harms 
that would be imposed by denying or granting a preliminary injunction, the trial 
court erred.  As discussed above, the controlling authorities make it clear that in 
evaluating a request for a preliminary injunction a court must consider two 
factors — both the likelihood of success on the merits, and the relative harms that 
would flow from denying or granting a preliminary injunction. 
Although the Controller and state employee intervenors argued in the Court 
of Appeal that the preliminary injunction should be set aside in its entirety because 
of the trial court’s failure to consider the balance of hardships, and because the 
hardship resulting from granting a preliminary injunction dramatically outweighed 
any hardship that the plaintiff-taxpayers would incur if a preliminary injunction 
were denied, the Court of Appeal declined to set aside the preliminary injunction 
in its entirety and held instead that the injunction granted in this case properly 
could be upheld in part even if the balance of harms did not favor plaintiffs  
based upon “ ‘a sufficiently strong showing of likelihood of success on the 
merits . . . .’ (Common Cause v. Board of Supervisors (1989) 49 Cal.3d [432,] 
447.)”  (White v. Davis I, supra, 98 Cal.App.4th 969, 1002-1003.)   
We agree with the Controller that the decision in Common Cause v. Board 
of Supervisors, supra, 49 Cal.3d 432, provides no basis for upholding the 
preliminary injunction issued by the trial court in the present case.  The relevant 
passage in Common Cause upon which the Court of Appeal relied reads in full: 
“The likelihood of success on the merits and the balance-of-harms analysis are 
ordinarily ‘interrelated’ factors in the decision whether to issue a preliminary 
injunction.  [Citations.]  The presence or absence of each factor is usually a matter 
of degree, and if the party seeking the injunction can make a sufficiently strong 
showing of likelihood of success on the merits, the trial court has discretion to 
 
42
issue an injunction notwithstanding that party’s inability to show that the balance 
of harms tips in his favor.”  (49 Cal.3d at pp. 446-447.) 
As the Controller observes, although this passage indicates that in some 
instances a trial court may grant a preliminary injunction upon a sufficiently strong 
showing of likelihood of success even when the party seeking the injunction 
cannot show that the balance of harms “tips” in its favor (Common Cause, supra, 
49 Cal.3d at p. 477), the decision in Common Cause did not suggest that when a 
party makes a sufficient showing of likely success on the merits a trial court need 
not consider the relative balance of hardships at all, or that when the balance of 
hardships dramatically favors the denial of a preliminary injunction a trial court 
nonetheless may grant a preliminary injunction on the basis of the likelihood-of-
success factor alone.  As noted, a principal objective of a preliminary injunction 
“is to minimize the harm which an erroneous interim decision may cause” (IT 
Corp. v. County of Imperial, supra, 35 Cal.3d 63, 73, italics added), and thus a 
court faced with the question whether to grant a preliminary injunction cannot 
ignore the possibility that its initial assessment of the merits, prior to a full 
adjudication, may turn out to be in error.  
In this case, the balance of harms dramatically favored denial of the 
preliminary injunction.  The principal legitimate interest of plaintiffs that allegedly 
would be harmed by denying a preliminary injunction was their general interest as 
taxpayers in not having public funds disbursed unlawfully, an interest that the 
appellate court decisions discussed above found insufficient in itself to warrant the 
granting of a preliminary injunction.  On the other hand, granting the preliminary 
injunction would cause great immediate harm to the many persons who would be 
deprived of vital funds, frequently necessary to obtain the necessities of life, and 
would threaten the continued delivery of a wide range of essential public services.   
 
43
Furthermore, even if the relative hardships posed by granting or denying a 
preliminary injunction were more evenly balanced, the trial court’s preliminary 
injunction in this case could not be upheld on the theory that plaintiffs had made a 
sufficiently strong showing of likelihood of success on the merits.  As noted 
above, in the trial court plaintiffs advanced the very broad position that, under the 
California Constitution, if the Legislature fails to pass a budget bill on time, “state 
government must shut down” in the absence of an emergency appropriation.  
Plaintiffs, however, failed to cite any case authority to support their reading of the 
state Constitution, and, as the Court of Appeal’s opinion in this case demonstrates, 
such a reading of the relevant constitutional provisions is untenable and contrary 
to established precedent.  Under California law, the Controller and other public 
officials in the executive branch have been given the initial and primary 
responsibility for ascertaining the payments that lawfully may be made from the 
treasury during a budget impasse.  These officials, of course, have the obligation 
to follow the law and must comply with controlling judicial decisions that have 
determined whether a particular category of payments properly may be made 
during a budget impasse.  As explained by the Court of Appeal’s decision, 
however, there are numerous grounds on which the Controller properly may 
authorize the payment of funds from the treasury even when a budget bill has not 
yet been enacted, and the question whether a particular payment or category of 
payments validly may be made often involves complex legal issues.  Plaintiffs’ 
broad legal argument that the Constitution bars virtually all such payments clearly 
was not so unquestionably meritorious as to obviate any need to consider the 
balance of relative harms.  Accordingly, the trial court’s action in granting a 
preliminary injunction cannot be defended on the ground that plaintiffs had made a 
sufficiently strong showing of their likelihood of success on the merits. 
 
44
In sum, we conclude that the trial court abused its discretion in issuing a 
preliminary injunction in the 1998 action, and that the judgment of the Court of 
Appeal must be reversed insofar as it affirms in any respect the granting of a 
preliminary injunction. 
 
IV 
As discussed, the complaint filed by plaintiffs advanced the very broad 
position that, in the absence of enactment of a budget bill or an emergency 
appropriation, “the state government must close.”  The complaint did not 
challenge on a point-by-point basis the validity of specific categories or types of 
payments authorized by the Controller during a budget impasse.  In responding to 
plaintiffs’ request for a preliminary injunction, the Controller cited a number of 
categories of payments that assertedly could be made during a budget impasse, in 
support of the Controller’s position that a preliminary injunction should not be 
granted.  In granting the preliminary injunction, the trial court largely rejected the 
claim that payments during a budget impasse could be authorized on the various 
grounds relied upon by the Controller. 
On appeal, the Court of Appeal, after finding that the question of what 
payments the Controller is authorized to make during a budget impasse constitutes 
an issue of great importance but one that often will evade timely appellate review, 
undertook to address the merits of the Controller’s claims that payment of public 
funds during a budget impasse properly may be made when payment is authorized 
by (1) a continuing appropriation, (2) a self-executing state constitutional mandate, 
or (3) a federal mandate, and, within these categories, by particular constitutional 
or statutory provisions. 
Although the petitions for review filed in this court contended that the trial 
court erred in granting a preliminary injunction in any respect and maintained that 
the injunction should be set aside in its entirety, the petitions did not question the 
 
45
Court of Appeal’s decision to address the substantive merits of the issue whether 
disbursement of public funds may be authorized during a budget impasse on the 
various grounds advanced by the Controller.  Instead, the petitions for review 
challenged the Court of Appeal’s conclusion with respect to one of the categories 
of payments  the payment of salaries for state employees during a budget 
impasse. 
In light of our conclusion in part III of this opinion that the preliminary 
injunction that was issued in this case must be set aside in its entirety because the 
trial court failed to apply the applicable standards properly in granting the 
injunction, it would be possible to dispose of this matter on that ground alone 
without reaching the merits of the substantive payment-of-salary issue raised by 
the petitions.  As the Court of Appeal recognized, however, the question of what 
payments the Controller is authorized to make during a budget impasse is the type 
of issue that arises frequently but often may evade timely appellate review.  Under 
the circumstances, we conclude it is appropriate to address the state employee 
salary issue that has been briefed in this court, in order to provide guidance to the 
Controller and other public officials in the event of a future budget impasse.  
Because the salary issue is the only substantive matter upon which review was 
sought and granted, we confine our substantive discussion to that category of 
payments.14 
                                             
 
14  
Under the current California Rules of Court, a Court of Appeal opinion that 
is superseded by a grant of review ordinarily is not published in the Official 
Reports, but this court has authority after granting review, or after decision, to 
order the opinion of the Court of Appeal published in whole or in part.  (Cal. Rules 
of Court, rule 976(d).)  In Agricultural Labor Relations Bd. v. Tex-Cal Land 
Management, Inc. (1987) 43 Cal.3d 696, 709, footnote 12, we explained that the 
efficient use of this court’s review jurisdiction — in which we may grant or limit 
review to only some of the issues addressed in the Court of Appeal decision — 
(footnote continued on next page) 
 
46
The state employee intervenors maintain that all state employees are 
entitled to timely payment, on their regular payday, of their full and regular 
salaries for work performed during a budget impasse, notwithstanding the absence 
of a duly enacted budget bill.  They assert that payment of full state employee 
salaries during a budget impasse is required under both state and federal law.  We 
begin with a discussion of California law. 
 
A.  California Law 
1.  State Constitutional Impairment-of-Contract Clause 
The California State Employees Association (CSEA) argues that under the 
provision of the California Constitution barring the impairment of contracts (Cal. 
Const., art. I, § 9), the state is constitutionally required during a budget impasse to 
pay state employees, on their regular payday, their regular and full salaries for 
work performed during that period.  CSEA relies upon a line of California 
                                                                                                                                                              
(footnote continued from previous page) 
“suggests that . . . significant Court of Appeal opinions should be available as 
citable precedent with respect to issues not reached by us on subsequent review.”  
In Tex-Cal, upon finding that the Court of Appeal opinion in that case was 
“worthy of publication in that regard” (ibid.), we ordered the Court of Appeal 
opinion to be published in the Official Reports, but at the same time expressly 
cautioned that “our order of publication does not necessarily imply agreement with 
the Court of Appeal’s analysis on issues not addressed in our opinion.”  (Ibid.)   
 
In this case, as in Tex-Cal, we find that the issues that were decided by the 
Court of Appeal but upon which review was not sought are significant issues, and 
that the discussion of those issues in the Court of Appeal’s opinion is worthy of 
publication. Accordingly, in order to preserve that court’s analysis of those issues 
as citable Court of Appeal precedent, we shall order the Court of Appeal opinion 
to be published in the Official Reports.  As we have explained above, however, 
because these additional issues have not been briefed or argued in this court, we 
express no opinion on the merits of those issues, and we emphasize that the Court 
of Appeal opinion shall constitute citable authority not of this court but of the 
Court of Appeal.   
 
47
decisions holding that, in California, public employment gives rise to certain 
obligations, protected by the contract clause of the Constitution, including “the 
right to the payment of salary which has been earned.”  (Kern v. City of Long 
Beach (1947) 29 Cal.2d 848, 853; see also Olson v. Cory (1980) 27 Cal.3d 532, 
538.)  CSEA argues that the Controller is authorized to pay a state employee’s 
salary on his or her regular payday even in the absence of a duly enacted and 
available appropriation, because the failure to pay an employee’s salary at such 
time would amount to an unconstitutional impairment of contract.  
As CSEA acknowledges, it is well established that the terms and conditions 
of public employment, unlike those of private employment, generally are 
established by statute or other comparable enactment (e.g., charter provision or 
ordinance) rather than by contract.  (See, e.g., Boren v. State Personnel Board 
(1951) 37 Cal.2d 634, 641.)  Nonetheless, a long line of California cases 
establishes that with regard to at least certain terms or conditions of employment 
that are created by statute, an employee who performs services while such a 
statutory provision is in effect obtains a right, protected by the contract clause, to 
require the public employer to comply with the prescribed condition.    
Kern v. City of Long Beach, supra, 29 Cal.2d 848, is perhaps the seminal 
decision in this line of authority.  In Kern, at the time the plaintiff firefighter had 
begun his employment with the defendant city, the city charter provided that after 
20 years of service a firefighter would be entitled to receive a retirement pension 
equal to 50 percent of his or her annual salary.  A month before the plaintiff in 
Kern completed the required 20 years of service, the city revised the charter and 
purported to eliminate all pension benefits as to all persons not then eligible for 
retirement.  In Kern, the plaintiff challenged the validity of the city’s action, and 
this court concluded that the city “by completely repealing all pension provisions, 
has attempted to impair its contractual obligations.  This it may not 
 
48
constitutionally do, and therefor the repeal is ineffective as to petitioner.”  
(29 Cal.2d at p. 856.)  In the course of reaching this determination, the court in 
Kern explained that its conclusion was “not in conflict with language appearing in 
some cases to the general effect that public employment is not held by contract.  
[Citations.]  These cases involve the right to remain in an office or employment, or 
to the continuation of civil service status.  Although there may be no right to 
tenure, public employment gives rise to certain obligations which are protected by 
the contract clause of the Constitution, including the right to the payment of salary 
which has been earned.  Since a pension right is ‘an integral portion of 
contemplated compensation’ [citation], it cannot be destroyed, once it has vested, 
without impairing a contractual obligation.”  (Id. at p. 853.) 
In Olson v. Cory, supra, 27 Cal.3d 532, another case invalidating an 
attempt retroactively to reduce vested pension rights, the court similarly stated:  
“We recognize the often quoted language that public employment is not held by 
contract and therefore is not protected by the contract clause.  [Citations.]  Those 
and other cases involve purported rights to remain in office or to continued public 
employment.  On the other hand, we deal here with the right to compensation by 
persons serving their terms of public office to which they have undisputed rights.  
‘[P]ublic employment gives rise to certain obligations which are protected by the 
contract clause of the Constitution. . . .’  [Citations.]  Promised compensation is 
one such protected right. [Citation.]  Once vested, the right to compensation 
cannot be eliminated without constitutionally impairing the contract obligation.”  
(27 Cal.3d at pp. 537-538, italics added.) 
Other cases have recognized that the state may violate the impairment-of- 
contracts clause not only by directly reducing the pension benefits an employee is 
entitled to receive, but also by failing to fulfill its obligation — created by 
statute — to make continuing contributions to its employees’ retirement fund so as 
 
49
to preserve the actuarial soundness of the fund.  (See, e.g., California Teachers 
Assn. v. Cory (1984) 155 Cal.App.3d 494; Valdes v. Cory (1983) 139 Cal.App.3d 
773.)  
As CSEA maintains, these past California cases clearly establish that 
although the conditions of public employment generally are established by statute 
rather than by the terms of an ordinary contract, once a public employee has 
accepted employment and performed work for a public employer, the employee 
obtains certain rights arising from the legislative provisions that establish the 
terms of the employment relationship  rights that are protected by the contract 
clause of the state Constitution from elimination or repudiation by the state.  As 
noted, a number of cases have stated broadly that among the rights protected by 
the contract clause is “the right to the payment of salary which has been earned.” 
(E.g., Kern v. City of Long Beach, supra, 29 Cal.2d 848, 853.)  None of the cases 
upon which CSEA relies, however, specifically address the question whether the 
rights obtained by a public employee under state law include the right to receive 
payment of earned salary in the absence of an available appropriation.  To answer 
that question we must examine the applicable California constitutional provisions 
and statutes to determine which rights such provisions purport to provide. 
A number of constitutional and statutory provisions relate to the question 
whether a state employee who works during a budget impasse obtains a right, 
protected by the contract clause, to receive payment for such work prior to the 
enactment of an available appropriation.  We note that unlike past cases that have 
generally involved impairment-of-contract challenges to new or revised legislative 
provisions that purport to alter the compensation or other conditions of 
employment set forth in earlier legislative measures after an employee already has 
performed services, in this case there has been no recent change in the relevant 
constitutional or statutory provisions. 
 
50
To begin with, as noted above, article XVI, section 7 of the California 
Constitution provides that “[m]oney may be drawn from the Treasury only 
through an appropriation made by law and upon a Controller’s duly drawn 
warrant.”  As the Court of Appeal observed, this constitutional requirement ― 
which has counterparts in the United States Constitution (U.S. Const., art. II, § 9, 
cl. 7) and in most state constitutions ― “had its origin in Parliament in the 
seventeenth century, when the people of Great Britain, to provide against abuse by 
the king and his officers of the discretionary money power with which they were 
vested, demanded that public funds should not be drawn from the treasury except 
in accordance with express appropriations therefor made by Parliament [citation]; 
and the system worked so well in correcting the abuses complained of, our 
forefathers adopted it, and the restraint imposed by it has become a part of the 
fundamental law of nearly every state in the Union.”  (Humbert v. Dunn, supra, 84 
Cal. 57, 59.) 
Consistent with the directive of article XVI, section 7 of the California 
Constitution, Government Code section 12440 provides:  “The Controller shall 
draw warrants on the Treasurer for the payment of money directed by law to be 
paid out of the State Treasury; but a warrant shall not be drawn unless authorized 
by law, and unless, except for refunds authorized by Section 13144, unexhausted 
specific appropriations provided by law are available to meet it.” 
With regard to the payment of state employee salaries, Government Code 
section 9610, enacted in 1943, provides: “The fixing or authorizing the fixing of 
the salary of a State officer or employee is not intended to and does not constitute 
an appropriation of money for the payment of the salary.  The salary should be 
paid only in the event that moneys are made available by another provision of 
law.”  (Italics added; cf. Cal. Const., art. III, § 4 [dealing with elected state 
officers].)  This statute sets forth the basic understanding that statutes or other 
 
51
measures that set salaries for state employees are not themselves appropriations 
for such salaries, and further makes clear that the payment of a salary to a state 
employee depends upon the availability of an appropriation to pay the salary. 
The foregoing provisions do not specify that an appropriation for state 
employee salaries can be made only in the budget act, and in some instances state 
employee salaries currently are paid from continuing appropriations,15 but 
appropriations for most state employee salaries traditionally have been adopted as 
part of the annual budget act.  In any event, the constitutional and statutory 
provisions set forth above clearly require that some applicable appropriation be 
available before a state employee’s salary actually may be paid from public funds. 
In addition to the provisions just discussed, Government Code sections 
1231 and 1231.1 address the effect of a budget impasse upon the employment 
relationship between the state and its employees and the payment of salary for 
work performed during a budget impasse.  As previously noted, section 1231, 
enacted in 1969, provides:  “No state officer or employee shall be deemed to have 
a break in service or to have terminated his or her employment for any purpose, 
nor to have incurred any change in his or her authority, status, or jurisdiction or in 
his or her salary or other conditions of employment, solely because of the failure 
to enact a budget act for a fiscal year prior to the beginning of that fiscal year.  [¶]  
A person entering state service on or after the beginning of a fiscal year and before 
                                             
 
15  
As CSEA points out, under current law the salaries of some state employee 
are payable from a continuing appropriation.  (See, e.g., Ins. Code, § 11770 et seq. 
[“The assets of the [State Compensation Insurance Fund] shall be applicable . . . to 
the payment of the salaries and other expenses charged against it . . . .”]; see also 
Board of Osteopathic Examiners of California v. Riley (1923) 192 Cal. 158 
[ordering Controller to pay salaries of members of the Board of Osteopathic 
Examiners pursuant to a continuing appropriation from a special fund into which 
fees paid by osteopaths were deposited].)   
 
52
the effective date of the budget act for that fiscal year and who otherwise is a state 
officer or employee, shall be deemed a state officer or employee from the time he 
or she entered state service, notwithstanding the failure to enact a budget act for 
that fiscal year.”  And section 1231.1, which derives from a provision first enacted 
as an urgency measure in 1976, provides:  “Funds from each appropriation made 
in the budget act for any fiscal year may be expended to pay to officers and 
employees whatever salary that would have otherwise been received had the 
budget act been adopted on or prior to July 1, of that fiscal year.” 
By its terms, Government Code section 1231 establishes that the 
employment relationship between the state and state employees is not dependent 
upon the passage of the annual budget bill and continues to exist during a budget 
impasse, and further provides that the conditions of employment — including an 
employee’s salary — remain in effect during the budget impasse.  Contrary to the 
contention of the state employee intervenors, however, section 1231 does not 
indicate a legislative intent to authorize the actual payment of salary to employees 
prior to the passage of a budget act that includes a requisite appropriation of funds 
for such salaries.  Particularly when read in conjunction with Government Code 
sections 9610 and 1231.1, we believe that section 1231 reasonably must be 
interpreted to recognize that under state law the actual payment of a state 
employee’s salary is dependent upon the availability of a duly enacted 
appropriation.  Indeed, it is because of that limitation that section 1231.1 
establishes that once a budget ultimately is enacted, appropriations included in that 
budget are available to pay for work performed during the budget impasse.  If 
section 1231 afforded employees the right actually to receive their full pay during 
a budget impasse, there would have been no reason to provide in section 1231.1 
that funds from appropriations in the budget act “may be expended to pay to . . . 
employees whatever salary that would have otherwise been received had the 
 
53
budget act been adopted on or prior to July 1, of that fiscal year.”  (Italics 
added.)16   
Accordingly, we conclude that in light of article XVI, section 7, of the 
California Constitution, and Government Code sections 12440, 9610, 1231, and 
1231.1, the employment rights of state employees reasonably must be viewed as 
                                             
 
16  
Although the state employee intervenors contend that one of the 
“conditions of employment” protected by Government Code section 1231 during a 
budget impasse is a public employee’s right to the timely payment of salary, they 
have not cited any statute or other authority that specifically creates such a right.  
Labor Code section 204, which imposes an obligation of timely payment of wages 
upon employers in California generally, is not applicable to the payment of wages 
of employees who are directly employed by the state.  (Lab. Code, § 220.)  In any 
event, assuming that state employees generally enjoy a right, protected by the 
contract clause, to the timely payment of earned salary when appropriated funds 
are available to pay such salary, the state employee intervenors have not 
persuasively demonstrated how such a general right to the timely payment of 
salary properly can apply during the period of a budget impasse, in light of the 
constitutional and statutory provisions we have discussed above. 
 
For similar reasons, we find inapposite the numerous out-of-state cases that 
have considered the validity of a variety of “pay lag” and mandatory furlough 
measures.  (See, e.g., University of Hawaii Professional Assembly v. Cayetano 
(9th Cir. 1999) 183 F.3d 1096; Mass. Community College Council v. Com. (Mass. 
1995) 649 N.E.2d 708.).  In general, these cases hold that a variety of state statutes 
that postponed the payment of employee salaries for one or more pay periods or 
that imposed mandatory furloughs without pay in order to save the state money 
during a budget crisis were invalid under the impairment-of-contract clause.  None 
of the cases, however, involved the question whether public employees have a 
right, protected by the contract clause, to obtain timely payment of salary in the 
absence of an available appropriation.  Indeed, in Mass. Community College 
Council, supra, 649 N.E.2d 708, the court specifically noted that “[t]here is no 
suggestion that the Legislature had not appropriated funds to pay the 
compensation called for under the collective bargaining agreements.  Indeed, the 
furlough program was designed to generate revenue surpluses that would be 
available at the end of the fiscal year to help balance the budget.” (649 N.E.2d at 
pp. 711-712.)  Accordingly, we do not find these decisions on point.   
 
54
including a condition that the actual payment of an employee’s salary is dependent 
upon the existence of an available appropriation. 
In arguing against this conclusion, CSEA points to a footnote in this court’s 
decision in Jarvis v. Cory (1980) 28 Cal.3d 563, 574, footnote 6, which it claims 
supports its contention that state employees are entitled to receive payment of their 
salaries during a budget impasse.  In our view, however, the footnote in Jarvis v. 
Cory upon which CSEA relies actually confirms the common understanding that 
state employees whose salaries are paid from appropriations in the annual budget 
act do not have a right, under state law, to receive immediate payment of their 
salary prior to the enactment of a budget. 
In Jarvis v. Cory, supra, 28 Cal.3d 563, this court rejected a claim that a 
legislative enactment that authorized a lump-sum payment to state employees at 
the end of a fiscal year constituted a payment of “extra compensation” and as such 
was prohibited by article IV, section 17 of the California Constitution.  In the 
course of upholding the validity of the legislation, the decision in Jarvis v. Cory 
included a footnote — footnote 6 — that reads in full: “Although no appropriation 
for payment of salaries existed from July 1 to July 6, when the budget bill was 
finally passed, state employees faithfully attended work as usual during that period 
and were ultimately compensated as if their salaries had been established from the 
beginning of the fiscal year.  This procedure has practically become an annual 
event, and illustrates not only that state employees have often worked without 
guarantee of salary yet ultimately received compensation, but also that in 
interpreting article IV, section 17 [the state constitutional provision barring ‘extra 
compensation . . . after service has been rendered ’], a sensible recognition of the 
imperfect and cumbersome machinery of state government has long been the 
prevailing practice.  Strict interpretation would impose needless constraints on the 
ability of the state to function, and we find unacceptable the proposition that the 
 
55
Constitution was intended to annually bring state government to a grinding halt.”  
(28 Cal.3d at p. 574, fn. 6.) 
Footnote 6 in Jarvis v. Cory, supra, 28 Cal.3d 563, 574, clearly reflects the 
court’s view that the “extra compensation” clause of the California Constitution 
should not be interpreted “to annually bring state government to a grinding halt” 
by barring the Legislature from authorizing the payment of past-accrued state 
employee salaries from appropriations that are included in a budget bill enacted 
after the work in question has been performed.  In our view, however, there is 
nothing in this footnote to suggest that the court in Jarvis v. Cory anticipated that 
state employees would receive payment of their salaries prior to enactment of the 
budget bill.  On the contrary, because the footnote refers to state employees who 
“have often worked without guaranty of salary” and observes that such employees 
“were ultimately compensated as if their salaries had been established from the 
beginning of the fiscal year” (28 Cal.3d at p. 574, fn. 6, italics added), we believe 
this footnote reasonably must be understood simply to confirm the common 
understanding that, as a matter of state law, the Controller may pay the salaries of 
state employees only after an applicable appropriation has been enacted.  Other 
cases reflect the same understanding.  (See, e.g., California State Employees’ 
Assn. v. Flournoy (1993) 32 Cal.App.3d 219, 231 [“[I]t is clear that [the practice 
of the Board of Regents] with regard to personnel salary increases has been to 
apply for, and obtain, a legislative appropriation with which to pay the salary 
increases”]; Theroux v. State of California (1984) 152 Cal.App.3d 1, 9 [“[The 
State and the Controller] have argued that the funds remaining from the initial 
appropriation are inadequate to pay appropriate salary adjustments to all entitled 
employees once the restrictions are removed [as required by the Theroux 
decision].  However, should that prove so, we must ‘presume the Legislature will 
 
56
give meaning to our ruling and “that the proper steps will be taken to appropriate 
the amount required” to pay such [adjustments].’ ”]) 
Although we thus conclude that state employees have no right under the 
contract clause to the immediate payment of salary in the absence of a duly 
enacted appropriation for payment of such salaries, it should be emphasized that 
this conclusion does not mean that state employees who work during a budget 
impasse do so as “volunteers,” not entitled to compensation, as suggested by the 
trial court.  Government Code section 1231 expressly provides for the continuation 
of the employment relationship between the state and its employees during a 
budget impasse, without any change “in salary or other conditions of 
employment.”  In light of this provision, and the holdings in past cases that a 
public employee’s “right to the payment of salary earned” is “protected by the 
contract clause of the Constitution” (Kern v. City of Long Beach, supra, 29 Cal.2d 
848, 853), we conclude that employees who work during a budget impasse obtain 
a right, protected by the contract clause, to the ultimate payment of salary that has 
been earned.  As indicated by the above quoted passage in Jarvis v. Cory, supra, 
28 Cal.3d 562, 547, footnote 6, in the past the Legislature always has paid 
employees for work performed during such a period, and Government Code 
section 1231.1 now makes it clear that when a budget ultimately is enacted with 
appropriations for salaries, these appropriations are available for payment of work 
performed during the budget impasse.17 
                                             
 
17  
We have no occasion in this case to consider what remedy or remedies state 
employees may have in the unlikely event that the state fails to pay employees 
fully for work performed during a budget impasse, or whether any remedy would 
include compensation for any loss sustained as a result of a delay in payment.  As 
explained above, however, we conclude that employees who work during a budget 
impasse obtain the right, protected by the contract clause, to the ultimate payment 
of their earned salary, and nothing in the Court of Appeal’s opinion should be read 
(footnote continued on next page) 
 
57
Nonetheless, because the California Constitution and the applicable statutes 
establish that the Controller is not authorized actually to pay salaries to state 
employees in the absence of a duly enacted appropriation, that condition or 
qualification on the right to compensation necessarily comprises one term or 
condition of employment that is an integral part of a state worker’s employment 
rights that are protected by the constitutional contract clause.  Accordingly, we 
conclude that, contrary to the contention of CSEA, the state constitutional contract 
provision does not afford state employees the right to obtain the actual payment of 
salary from the treasury prior to the enactment of an applicable appropriation.18 
2.  Dills Act 
CSEA argues alternatively that if, under state law, an appropriation is 
necessary for the payment of state employee salaries, as we have determined 
above, we should conclude that whenever the Legislature has approved a state 
employee memorandum of understanding pursuant to the provisions of the Dills 
Act (Gov. Code, § 3512 et seq., formerly known as the State Employer-Employee 
Relations Act), such approval in itself properly must be viewed as, in effect, a 
“continuing appropriation” of the funds necessary to meet the salary obligations 
set forth in the memorandum of understanding, and thus that the payment of 
                                                                                                                                                              
(footnote continued from previous page) 
to suggest that these employees properly may be found to have “assumed the risk” 
that they never will be paid for such work.  
18 
Because we conclude that state employees do not have a contractual right to 
receive payment of their salaries prior to the enactment of an applicable 
appropriation, we have no occasion to determine whether  in the event these 
employees possessed such a contractual right  the Controller would have the 
authority to pay their salaries in the absence of an appropriation.  (Cf. Tevis v. City 
& County of San Francisco (1954) 43 Cal.2d 190, 200; Theroux v. State of 
California, supra, 152 Cal.App.3d 1, 7-9.) 
 
58
salaries of employees covered by such a memorandum of understanding may be 
made in the absence of a budget act appropriation.  As we shall explain, in our 
view the provisions of the Dills Act fail to support CSEA’s argument. 
As the Court of Appeal explained in Department of Personnel 
Administration v. Superior Court  (1992) 5 Cal.App.4th 155, 180-181: 
“ ‘Although the [Dills Act] affords state employees significant new rights, the 
Legislature at the same time placed definite limits on the scope of representation 
and retained substantial control over state employee compensation and many other 
terms and conditions of state employment. . . .  The act . . . provides that as to 
matters within the scope of representation, a memorandum of understanding 
requiring the expenditure of funds does not become effective unless it is approved 
by the Legislature in the annual Budget Act (§ 3517.6); under this provision, 
virtually all salary agreements are subject to prior legislative approval.’ ”  
(Original italics and fn. omitted, new italics added.)19   
Although Government Code section 3517.6 specifically provides that any 
provision of a memorandum of understanding that requires the expenditure of 
funds — as obviously does a provision embodying a salary agreement  “shall 
                                             
 
19  
Government Code section 3517.6 states in relevant part:  “If any provision 
of the memorandum of understanding requires the expenditure of funds, those 
provisions of the memorandum of understanding shall not become effective unless 
approved by the Legislature in the annual Budget Act.  If any provision of the 
memorandum of understanding requires legislative action to permit its 
implementation by amendment of any section not cited above [i.e., specified 
statutory provisions that may be superseded by a conflicting provision of a 
memorandum of understanding], those provisions of the memorandum of 
understanding shall not become effective unless approved by the Legislature.” 
 
Government Code section 3517.7 provides in relevant part:  “If the 
Legislature does not approve or fully fund any provision of the memorandum of 
understanding which requires the expenditure of funds, either party may reopen 
negotiations on all or part of the memorandum of understanding.” 
 
59
not become effective unless approved by the Legislature in the annual Budget Act” 
(italics added), CSEA argues that it would undermine the effectiveness of a multi-
year memorandum of understanding if the Legislature, after initially approving 
such a memorandum, retained the right during the period covered by the 
memorandum to refuse to appropriate in a subsequent annual budget the funds 
required by the agreement.  We have no occasion in this case to determine what 
remedy, if any — other than the reopening of negotiations prescribed by section 
3517.7 (see fn. 19, ante) — state employees or their representatives may have if 
the Legislature effectively repudiates one or more provisions of a multi-year 
memorandum of understanding by declining to appropriate the necessary funds to 
meet its obligations under the memorandum of understanding.  In light of the 
explicit language of section 3517.6 (“unless approved by the Legislature in the 
annual Budget Act” (italics added)), however, we cannot agree that the 
Legislature’s initial approval of the memorandum of understanding in a non-
budget act, or its appropriation of funds in one or more (but not all) of the annual 
budgets of a multi-year contract, properly can be viewed as a continuing 
appropriation, authorizing the Controller to pay salaries set forth in the 
memorandum of understanding in a new fiscal year without enactment of an 
applicable appropriation in that year’s budget act.20 
                                             
 
20  
The case of Association of Surrogates v. State (N.Y. 1991) 577 N.E.2d 10, 
upon which CSEA relies, does not support a contrary conclusion.  In Association 
of Surrogates, the New York Court of Appeals held that under the applicable New 
York statute, the legislature’s ratification of a three-year public employee 
collective bargaining agreement constituted “approval” of the entire three-year 
obligation expressed in the contract and precluded the Legislature from thereafter 
altering the provisions of the agreement by unilaterally instituting a “pay lag” 
under which, in one of the years covered by the agreement, employees were to be 
paid for only 50 rather than 52 weeks of work, with the withheld amounts to be 
repaid to the employees upon the termination of their employment, at the 
(footnote continued on next page) 
 
60
3.  Equity and Policy Reasons 
Finally, CSEA argues that state employees, like all other employees, should 
be able to work secure in the knowledge that they will timely receive their full 
salaries, and that, as a matter of equity and sound public policy, “[s]tate employees 
who report to work during a budget impasse and continue to faithfully serve the 
people of the State of California deserve nothing less.”  We could not agree more 
with this proposition.   The California Constitution contemplates that the 
Legislature will pass a budget in time to provide timely payment of all of the 
state’s regular obligations, and public employees certainly are treated inequitably 
when, through no fault of their own, they are deprived of the prompt payment of 
their salaries.  Furthermore, we also agree with CSEA that, as a matter of policy, 
this situation is almost certainly detrimental to the state as an employer because, 
“if state employees must confront financial uncertainty each summer as to whether 
they will receive their full and regular salaries, they [may well] look elsewhere for 
employment.”  But these points, however well founded, simply highlight the 
crucial importance of timely enactment of a budget bill or some other legislative 
                                                                                                                                                              
(footnote continued from previous page) 
employees’ then-current rate of salary.  (577 N.E.2d at pp. 12-16.)  Although the 
court in Association of Surrogates concluded that the newly-adopted pay lag 
mechanism was invalid, the court did not suggest that the legislature’s approval of 
the multi-year agreement authorized the actual payment of funds from the treasury 
without an applicable annual appropriation.  On the contrary, the court in that case 
expressly stated that “[a]s with any other expenditure of funds by the State, money 
for public employees’ salaries must be appropriated by the Legislature each year” 
(id. at p. 12, italics added), and further noted that “[p]laintiffs do not dispute the 
necessity for a legislative appropriation before State funds may be paid as salary to 
public employees.”  (Ibid.)  Thus, the court in Association of Surrogates did not 
hold that the legislature’s approval of a multi-year agreement properly could be 
viewed as constituting a continuing appropriation, obviating the need for an annual 
appropriation. 
 
61
measure appropriating funds for the payment of state employee salaries.  Our 
agreement with these sentiments affords us no authority to disregard well-
established principles of state law that authorize the payment of state employee 
salaries only when there is an applicable and available appropriation. 
 
B. Federal Law 
1.  Federal Contract Clause and Due Process Clause  
As explained above, we have concluded that state employees have no 
contract right, under California law, to the immediate payment of salary during a 
budget impasse, because one of the conditions that is part of their employment 
contract is that the Controller is authorized to pay their salary only if there is a 
duly enacted appropriation from which such payment may be made.  For this 
reason, the federal constitutional contract clause does not provide any support for 
the employees’ claim, and similarly there is no violation of the federal due process 
clause, because the state has not deprived the employees of a right they otherwise 
possess. 
2.  Fair Labor Standards Act (FLSA) 
The Court of Appeal held that under the federal supremacy clause, 
California nevertheless is required to comply with the FLSA, which requires 
timely payment of those wages required by the federal act, that is payment of such 
wages on the regular payday of those workers to whom the minimum wage and 
overtime compensation provisions of the FLSA apply.  In a brief in this court, the 
Controller takes the position that the Court of Appeal’s opinion did not purport to 
determine the amount of wages the FLSA requires an employer to pay on the 
regular payday — that is, whether the FLSA requires payment of the employee’s 
full regular wages, or payment only of wages computed at the minimum wage 
rate — and the Controller suggests that this court need not resolve that issue 
either.  The state employee intervenors, however, read the Court of Appeal’s 
 
62
opinion as holding that the FLSA requires only the prompt payment of minimum 
wages and overtime compensation.  Although the opinion is somewhat ambiguous 
on this point,21 we believe in any event that it is appropriate to clarify our 
understanding of what the FLSA requires with regard to the amount of salary 
payments that must be made during a budget impasse, so as not to leave the 
Controller without guidance on this issue. 
We begin with the governing language of the FLSA.  The basic minimum 
wage provision of the act provides in relevant part:  “(a) Every employer shall pay 
to each of his employees who in any workweek is . . . employed in an enterprise 
engaged in commerce . . . , wages at the following rates:  (1) . . . not less than [the 
current designated minimum wage].”  (29 U.S.C. § 206.)  The relevant overtime 
compensation provision of the FLSA provides in relevant part:  “(a)(1) Except as 
otherwise provided in this section, no employer shall employ any of his employees 
. . . for a workweek longer than forty hours unless such employee receives 
compensation for his employment in excess of the hours above specified at a rate 
not less than one and one-half times the regular rate at which he is employed.”  
(29 U.S.C. § 207.)  These minimum wage and overtime compensation provisions 
                                             
 
21  
On the one hand, the Court of Appeal states in a footnote:  “We do not 
resolve the extent to which the FLSA applies to the different categories and 
classes of state employees, or the extent to which the compensation required under 
the FLSA may fall short of any state employee’s full salary.  These questions have 
not been presented to us, and we do not address them.”  (White v. Davis I, supra, 
98 Cal.App.4th 969, 995, fn. 9.)  On the other hand, in another footnote the Court 
of Appeal states: “Citing Donovan v. Crisostomo (9th Cir. 1982) 689 F.2d 869, 
876, the state employee intervenors argue under the FLSA, employees who work 
overtime must receive the requisite overtime wages plus their full straight time 
pay.  However, they do not cite any authority that the FLSA requires the full 
payment of straight time wages in all circumstances, and we are unaware of any 
such authority.”  (White v. Davis I, supra, 98 Cal.App.4th at p. 1000, fn. 12.) 
 
63
of the FLSA apply to most, although by no means all, state employees; thus, for 
example, those employees “employed in a bona fide executive, administrative, or 
professional capacity” generally are “exempt” from ― that is, they do not enjoy 
the benefit of ― these provisions of the FLSA.  (29 U.S.C. § 213(a)(1).)22  
Employees to whom the minimum wage and overtime compensation provisions of 
the FLSA apply are generally referred to as “nonexempt employees,” and 
employees to whom those provisions do not apply are referred to as “exempt 
employees.”   
Although the United States Supreme Court has not yet directly addressed 
the issue whether the FLSA requires prompt payment of a nonexempt employee’s 
wages or overtime compensation, the lower federal courts consistently have 
interpreted the act to require the prompt payment of minimum and overtime 
wages.  (See, e.g., Biggs v. Wilson, supra, 1 F.3d 1537; Olson v. Superior Pontiac-
GMC, Inc. (11th Cir. 1985) 765 F.2d 1570, 1579, as mod., 776 F.2d 265, 267; 
United States v. Klinghoffer Bros. Realty Corp. (2d Cir. 1961) 285 F.2d 487, 491; 
see also Brooklyn Sav. Bank v. O’Neil (1945) 324 U.S. 697, 707 & fn. 20, 709.) 
In Biggs v. Wilson, supra, 1 F.3d 1537, the Ninth Circuit addressed the 
question whether a state’s failure to pay its employees on their regular payday 
during a budget impasse violates the FLSA.  In Biggs, California highway 
maintenance workers were not paid any wages on their regular payday (July 16, 
1990) because of a budget impasse and did not receive wages for that pay period 
                                             
 
22 
No issue has been raised in this case  in either the trial court or on 
appeal  regarding which particular state employees (or state employee positions) 
are subject to the minimum wage and overtime compensation provisions of the 
FLSA and which employees are exempt from such provisions, and thus we have 
no occasion to address that issue here.  
 
64
until July 30-31, when the state budget finally was enacted and signed into law.  
Thereafter, the workers brought suit against the state under the FLSA, and the 
Ninth Circuit held that the state’s failure to pay the employees on their regular 
payday violated the FLSA, concluding that the existence of a state constitutional 
provision prohibiting the payment of funds in the absence of an available 
appropriation did not excuse the state’s obligation to comply with the 
requirements imposed by federal law.  (1 F.3d at pp. 1543-1544.) 
There is some ambiguity in the language of the opinion in Biggs as to 
whether that decision purported to hold that the FLSA requires the prompt 
payment of an employee’s regular salary or only the prompt payment of wages 
based on the minimum wage.  Some language in the opinion, at least at first blush, 
appears to support the position that the FLSA requires the prompt payment of an 
employee’s regular salary.  Thus, for example, the trial court order that was 
affirmed in Biggs states in part that “ ‘[i]t is therefore declared that defendant’s 
failure to issue plaintiffs’ paycheck when due violates the Fair Labor Standards 
Act.’ ”  (Biggs v. Wilson, supra, 1 F.3d at p. 1538, fn. 2.)  Further, at the 
conclusion of the opinion in Biggs, the court of appeals stated:  “We therefore hold 
that state officials’ failure to issue the class’s paychecks promptly when due 
violates the FLSA.  Paychecks are due on payday.  After that, the minimum wage 
is ‘unpaid.’ ”  (1 F.3d at p. 1544.) 
When the opinion in Biggs v. Wilson, supra, 1 F.3d 1537, is read as a 
whole, however, it is clear that the opinion properly must be understood as holding 
that an employer complies with the FLSA so long as it pays those employees who 
are subject to the FLSA at the minimum wage rate on payday, and not that the 
FLSA requires an employer to pay employees their regular wage on payday.  The 
basic reasoning of the Biggs decision is that the minimum wage required by the 
FLSA must be paid promptly, not that the FLSA requires the payment of an 
 
65
employee’s salary above the minimum wage.  In describing the provisions of the 
FLSA, the court’s opinion in Biggs states: “The FLSA provides for the recovery of 
unpaid minimum wages, unpaid overtime compensation, and liquidated 
damages. . . .  These provisions necessarily assume that wages are due at some 
point, and thereafter become unpaid.”  (1 F.3d at p. 1539.)  Nothing in the FLSA 
provides for the recovery of unpaid regular wages above the minimum wage.  
Furthermore, after explaining why it believed the language of the statute itself was 
inconsistent with the state’s contention that the statute contained no prompt 
payment requirement, the opinion in Biggs states:  “Holding that the FLSA is 
violated unless the minimum wage is paid on the employee’s regular payday also 
comports with such case law as there is.”  (Id. at p. 1541, italics added.)  Finally, 
in rejecting the argument that the existence of a budget impasse should relieve the 
state of its obligation under the FLSA, Biggs states: “The FLSA does not require 
California to pass a budget on time; it only requires California to do what all 
employers must do — pay its employees the minimum wage on payday.”  (1 F.3d 
at p. 1543, italics added.) 
Accordingly, we conclude that, under Biggs, the state is required to comply 
with the FLSA during a budget impasse, but that the state satisfies the 
requirements of the FLSA by paying nonexempt state employees (who do not 
work overtime) at the minimum wage rate for the straight-time hours (that is, 
nonovertime hours) worked by those employees during the pay period.  For 
nonexempt employees who do not work overtime, the FLSA does not require the 
prompt payment of full salary. 
By contrast, under the applicable federal regulation (29 C.F.R. § 778.315 
(2002)), whenever a nonexempt employee works overtime, the FLSA requires the 
employer to pay the employee his or her full regular salary for the employee’s 
straight time as well as at least one and one-half times the employee’s regular 
 
66
salary for overtime hours worked.  (See Fidelity Federal Sav. & Loan Assn. v. 
de la Cuesta (1982) 458 U.S. 141, 153 [“Federal regulations have no less pre-
emptive effect than federal statutes.”].)  The applicable regulation states in this 
regard:  “Overtime compensation, at a rate not less than one and one-half times the 
regular rate of pay must be paid for each hour worked in the workweek in excess 
of the applicable maximum hours standard.  This extra compensation for the 
excess hours of overtime work under the Act cannot be said to have been paid to 
an employee unless all straight time compensation due him for the nonovertime 
hours under his contract (express or implied) or under any applicable statute has 
been paid.”  (29 C.F.R. § 778.315 (2002), italics added.)  In Donovan v. 
Crisostomo, supra, 689 F.2d 869, 876, the court explained the rationale underlying 
this regulation, noting that without such a limitation “[a]n employer could 
effectively eliminate the premium paid for overtime by [reducing an employee’s] 
straight time wages in an amount equal to or greater than the overtime premium.” 
In sum, in order to comply with the FLSA, the state, during a budget 
impasse, must timely pay nonexempt employees who do not work overtime at 
least at the minimum wage rate for all straight hours worked by the employee, and 
must timely pay nonexempt employees who work overtime their full salary for all 
straight time worked plus one and one-half times their regular rate of pay for 
overtime. 
In a declaration accompanying the opposition to the request for a 
preliminary injunction filed in the trial court, the Controller maintained that it was 
not feasible to determine and adjust all of the payments to state employees “to 
only pay the federally required minimum wage instead of the wages to which each 
employee is entitled prior to [the applicable] payroll deadlines.”  The Controller 
asserted it was thus necessary to pay all state employees covered by the FLSA 
their full regular wages in order to assure compliance with the requirements of that 
 
67
act.  The trial court never addressed this claim, and the Court of Appeal took note 
of the question but declined to address it for the first time on appeal.  (White v. 
Davis I, supra, 98 Cal.App.4th 969, 1003, fn. 13.)   
In a supplemental brief filed in this court, the Controller has reiterated the 
claim that it is infeasible or impossible for the state to timely pay only the 
minimum compensation required by the FLSA, emphasizing the state’s current use 
of a “negative payroll” system and the difficulty of “segregating those employees 
who worked overtime from those who did not work overtime” and the further 
difficulty of “determining whether an employee worked a full 40 hours each week 
or may have worked less due to being on unpaid leave or being ill,” and of making 
such determinations quickly enough to comply with the timely payment 
requirements of the FLSA.  On the record before us we have no means of 
evaluating or resolving the Controller’s factual claim of impossibility, but even if 
it is administratively infeasible, given the state’s current payroll system, for the 
state, prior to preparing an individual employee’s paycheck, to determine with 
certainty whether a particular nonexempt employee will or will not work overtime 
during a given pay period or to determine the exact number of straight-time hours 
the employee will work, we are somewhat skeptical of the contention that the state 
would be found to have violated the FLSA if, during a budget impasse, the state 
(1) pays full regular wages and overtime compensation to those nonexempt 
employees who it reasonably anticipates will work overtime during a given pay 
period, (2) pays minimum wage rate for all straight-time hours an employee is 
scheduled to work during the pay period to those nonexempt employees who it 
reasonably anticipates will not work overtime during a given pay period, and (3) in 
the following pay period, pays employees all additional sums that are due under 
the FLSA for the prior pay period based on information that the state obtains 
through reporting forms that it collects on or immediately following the preceding 
 
68
payday.  (Cf. Walling v. Harnischfeger Corporation (1945) 325 U.S. 427, 432-433 
[“Section 7(a) [the overtime provision of the FLSA] does not require the 
impossible.  If the correct overtime compensation cannot be determined until some 
time after the regular pay period the employer is not thereby excused from making 
the proper computation and payment.  Section 7(a) requires only that the 
employees receive a 50% premium as soon as convenient and practicable under 
the circumstances.”  (Italics added.)]; see also 29 C.F.R. § 778.106 (2002) [“When 
the correct amount of overtime compensation cannot be determined until some 
time after the regular pay period . . . the requirements of the Act will be satisfied if 
the employer pays the excess overtime compensation as soon after the regular pay 
period as is practicable.  Payment may not be delayed for a period longer than is 
reasonably necessary for the employer to compute and arrange for payment of the 
amount due and in no event may payment be delayed beyond the next payday after 
such computation may be made.”].) 
In any event, as already noted, the Controller’s claim of infeasibility was 
not fully litigated below, and thus we do not believe it would be appropriate to 
attempt to definitively resolve the claim at this juncture.  It is sufficient at this 
point to make clear that, by virtue of the supremacy of federal law, the state is 
obligated to comply with the minimum requirements of the FLSA during a budget 
impasse, notwithstanding the lack of an available appropriation.   
V 
For the reasons set forth in part III, ante, we conclude that the Court of 
Appeal erred in upholding in part the preliminary injunction granted by the trial 
court.  The judgment of the Court of Appeal is reversed insofar as it upheld in part 
the preliminary injunction, and the matter is remanded to the Court of Appeal with 
directions to set aside the preliminary injunction in its entirety.  Further, as 
explained above (see fn. 14, ante, p. 45), without ruling on the additional issues 
 
69
resolved by the Court of Appeal that we have not addressed in our present opinion, 
we order that the Court of Appeal’s opinion be published in the Official Reports.  
(Cal. Rules of Court, rule 976(d).) 
 
 
 
 
 
 
GEORGE, C.J. 
WE CONCUR: 
 
KENNARD, J. 
BAXTER, J. 
WERDEGAR, J. 
CHIN, J. 
BROWN, J. 
MORENO, J. 
 
 
 
 
See last page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion White v. Davis 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 98 Cal.App.4th 969 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S108099 
Date Filed: May 1, 2003 
 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: Robert H. O’Brien and Emilie H. Elias 
 
__________________________________________________________________________________ 
 
Attorneys for Appellant: 
 
Law Offices of Richard I. Fine & Associates, Richard I. Fine, Jeremy W. Faith, Genalin Sulat, Carmela 
Tan, Cheri M. Vu; Jonathan M. Coupal and Trevor A. Grimm for Plaintiff and Appellant and for Plaintiffs 
and Respondents. 
 
Daniel E. Lungren and Bill Lockyer, Attorneys General, Manuel M. Medeiros, State Solicitor General, 
Linda A. Cabatic and Andrea Lynn Hoch, Assistant Attorneys General, Louis R. Mauro, Acting Assistant 
Attorney General, Paul H. Dobson, Keith Yamanaka and Jennifer K. Rockwell, Deputy Attorneys General, 
for Defendant and Appellant and for Defendants and Respondents Gray Davis et al. 
 
__________________________________________________________________________________ 
 
Attorneys for Respondent: 
 
Bion M. Gregory, Richard Thomson; Eisen & Johnston Law Corporation and Marian M. Johnston for 
Defendants and Respondents Bill Lockyer, Cruz M. Bustamante, Rob Hurtt and Curt Pringle. 
 
Gary P. Reynolds, Anne M. Giese, Daniel S. Connolly and Michael D. Hersh for Interveners and 
Appellants Gary Gavinski and California State Employees Association, Local 1000, SEIU, AFL-CIO, 
CLC. 
 
Dennis F. Moss for Interveners and Appellants Professional Engineers in California Government and 
California Association of Professional Scientists. 
 
Benjamin C. Sybesma, Christine Albertine and Joel H. Levinson for Intervener and Appellant California 
Correctional Peace Officers’ Association. 
 
Carroll, Burdick & McDonough, Ronald Yank, Gary M. Messing, Laurie J. Hepler and Cathleen A. 
Williams for Intervener and Appellant California Union of Safety Employees. 
 
 
 
71
 
 
 
 
Page 2 - counsel continued - S108099 
 
 
Attorneys for Respondent: 
 
Lynn S. Carman; Steinberg & Steinberg, Lawrence William Steinberg and Anita Steinberg for Interveners 
and Appellants Jerome Feitelberg and Alameda Drug Company, Inc. 
 
David P. Lampkin, R. Clayton Seaman, Jr., Jeralyn Keller and Jonathan P. 
Milberg for California Appellate Defense Counsel as Amici Curiae. 
 
Lynn S. Carman for Frederick S. Mayer as Amicus Curiae. 
 
 
 
 
 
 
72
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Richard I. Fine 
Law Offices of Richard I. Fine & Associates 
468 North Cambden Drive, Suite 200 
Beverly Hills, CA  90210 
(310) 277-5833 
 
Jennifer K. Rockwell 
Deputy Attorney General 
1300 I Street 
Sacramento, CA  94244-2550 
(916) 445-6998 
 
Anne M. Giese 
California State Employees Association 
1108 “O” Street, Suite 327 
Sacramento, CA  95814 
(916) 326-4208 
 
Gary M. Messing 
Carroll, Burdick & McDonough 
2100 21st Street 
Sacramento, CA  95818-1708 
(916) 456-2100