The Legislature's lawyers believe Gov. Jerry Brown's plan to eliminate redevelopment agencies is unconstitutional because the state cannot reimburse itself with local property taxes.
In a recent memo to Republican Assemblywoman Diane Harkey, the Legislative Counsel Bureau questioned whether Brown could legally take $1.7 billion in redevelopment money to help balance the remaining $15.4 billion state deficit.
The opinion casts more doubt on a controversial aspect of Brown's budget that remains stalled in the Legislature. Under heavy lobbying from the cities and developers who use redevelopment, nearly all Republican lawmakers oppose Brown's plan.
The proposal calls for the elimination of redevelopment agencies, which use property tax revenues to finance projects in blighted areas. The Democratic governor wants to use that money instead for deficit reduction in the first year and greater payments to schools and local government services in later years.
Brown's plan calls for local governments to send $1.7 billion to the state in 2011-12 as reimbursement for trial court and health care services. The state is responsible for financing those activities, though they are delivered by local governments.
The Legislative Counsel's memo said the state cannot force local governments to send that money to the state.
The redevelopment bill does establish trust funds in each county that serve as a local collector of the redevelopment tax revenues before sending them to the state, but legislative lawyers said that mechanism is "not sufficient" to comply with the constitution.
Department of Finance spokesman H.D. Palmer disputed that interpretation, saying the counsel's office was "finding intent that cannot be found in the constitution."
"The administration's opinion remains unchanged," Palmer said. "We think this proposal is crafted in such a way we think it will withstand any legal challenge."
The opinion was made available Tuesday by the California League of Cities, which has vigorously opposed Brown's redevelopment plan.
The league's executive director, Chris McKenzie, said his group was pleased with the opinion and was anticipating another legal review on whether the governor's plan violates Proposition 22, a local government measure approved by voters in 2010.