US - A Sacramento court judge has struck down more than half a billion dollars in pension obligation bonds included by California lawmakers in the 2005 state budget intended to help cover the state's contribution to the public employee pension system.
The judge invalidated the US$550m in POBs, ruling the government’s borrowing scheme violated the state constitution.
The Pacific Legal Foundation (PLF) and the Fullerton Association of Concerned Taxpayers (FACT) filed a legal challenge after the lawmakers included the bonds in the state budget.
When the bond plan was first unveiled last year, it was for nearly $1bn, however after the legal challenge was filed, the state reduced the proposed bond amount to $550m.
The POBs were intended to help cover the state’s pension contribution, but the PLF claimed the loan violated the California Constitution, which forbids state borrowing in excess of $300,000 without a vote of the people.
Sacramento County Superior Court judge Raymond Cadei upheld the prosecution case.
Harold Johnson, PLF attorney, described the decision as a victory for all Californians against spendthrift practices in the state legislature: Today’s court ruling should make it clear to lawmakers that they cannot run California on credit cards.
Thomas Babcock, FACT president, said the case highlighted the spiralling cost of pensions in the state, in which the public employee retirement system payments ballooned from $160m five years ago to $2.6bn this year.
California lawmakers can no longer get away with borrowing billions on the backs of our children because they lack the fiscal discipline to live within their means, he said.
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