State to Repay Funds Diverted Improperly to Balance Budget : Money

The state of California has agreed in Los Angeles Superior Court to settle a series of taxpayers’ lawsuits by repaying $119 million that was improperly diverted from special funds to help balance its annual budget.

Special funds are restricted for certain purposes. Revenue earned from business license fees, for example, can only be used to pay for business regulation costs. But from 1991 to 1994, the state diverted such funds to its general budget.

Under the settlement reached last week, the state agreed to repay the $119 million plus $42 million in interest over a five-year period, state officials said.

“Hopefully, the state Legislature will balance future budgets without attempting to harm the taxpayer,” said Los Angeles attorney Richard I. Fine, who represented the seven business owners and outdoor enthusiasts who challenged the state.

Named as plaintiffs are Stanley G. Auerbach and Norbert Bactowski of Malibu, Eloy Fierro of North Hollywood, Rochelle Abramovitz, Kurt Hathaway of Culver City and Michael Heinl and Michael Scott of Northern California.

State Finance Department spokesman H.D. Palmer said he was pleased with the settlement because it was less than half the amount originally sought. “We believe what was negotiated was indeed a great deal for the state,” Palmer said.