Copyright© 2005 by School Services of California, Inc.

                                      Volume 18                   For Publication Date: December 2, 2005             No. 24

By the Way . . .

Sacramento Superior Court Judge Rules Against Utilization of Obligation Bonds to Pay for Pensions. On Thursday, November 17, 2005, a Sacramento Superior Court judge ruled against allowing the state to utilize an obligation bond to pay for state employee pensions. As part of the 2005-06 State Budget approved earlier this year, the Administration and lawmakers agreed to use bond funds to backfill the more than $500 million needed to pay for state pensions. However, Judge Raymond Cadei ruled that such an action was unconstitutional, since voter approval is required for state bonds in excess of $300,000.  

A similar attempt by Governor Davis to use bonds to make pensions whole was also rejected by the courts.  

The Administration plans on appealing this ruling. However, this ruling may ultimately place additional cost pressure on the state if it elects to pay for pensions from the state's General Fund.