County Counsel Anita Grant said the complaint against Chiang was filed on Friday afternoon in Sacramento County Superior Court.
Sacramento County and San Diego are leading the suit, according to a report from the California State Association of Counties (CSAC). Lake is among more than two dozen counties which either have joined the lawsuit or are expected to do so.
Grant said the suit argues that Chiang doesn't have the statutory or constitutional authority to withhold payments to counties for certain services and programs in light of the state's current budget situation.
“This is not an attack on the controller,” said in a statement issued by CSAC Friday. “But none of our counties are in a position to serve as the ATM for the state. If Wall Street won't make loans to the state, why would California counties?”
CSAC said the withholdings impact benefits programs such as mental health, adoption and foster care assistance, alcohol and drug programs.
Money also is being withheld from CalWorks, a program which provides families with temporary financial assistance and employment services. CSAC noted that CalWorks saw a 22-percent increase in applications between September 2007 and September 2008.
“I share the frustration of county supervisors throughout the state,” Chiang said in a statement his office released Friday. “I, too, am angry that we have been put in the situation of having to delay payments that go to critical services for our most vulnerable residents.”
Chiang said he's been warning Gov. Arnold Schwarzenegger and the state Legislature for months that without a solid budget in place a cash crisis early this year was likely to occur.
That crisis arrived, Chiang said, and without enough money to make it through February, he said he was forced to delay payments that do not have first call to funding as specified in the state constitution, federal or case law.
The counties initiating the lawsuit said the state was essentially passing the state's cash crisis onto counties.
Chiang began withholding the payments for 30 days beginning on Feb. 1, saying the state's lack of a budget deal and cash shortfalls left him with the inability to pay the state's bills.
The lawsuit seeks the release of the $270 million due to California's counties this month. CSAC said that figure includes an $89 million payment to counties that was due to be made on Friday.
Specific amounts for the withholdings weren't available on Friday from the county administration.
County Chief Administrative Officer Kelly Cox said he's sure the county has enough cash on hand to get through the month without the money, adding that the state often is one or two months late with some of the payments for mental health programs.
“Hopefully by the time the next payments are due the state budget will be settled and the money will be flowing as normal,” he said.
Still to be submitted in the case are the points and authorities – which Grant said explains the suit's legal position through case law – and the joinders to the suit from Lake and rest of the counties adding their names to the suit.
A budget deal is believed to be imminent in Sacramento, with a vote set for Saturday. “If a budget should pass that's going to moot these efforts,” Grant said.
Chiang said Friday that, as soon as the state's coffers are refiled, his office will begin working around the clock to make sure the withheld funds are quickly sent out to counties.
The budget document the Legislature currently is trying to settle doesn't contain a plan to defer seven months of payments to counties, a proposal that had Cox and many other officials around the state worried about keeping their counties solvent.
“As long as they drop that ridiculous idea, I think we should be able to handle everything else,” he said.
E-mail Elizabeth Larson at
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