In re Quantification Settlement Agreement Cases

A California appellate court reversed and remanded a lower court decision invalidating a settlement agreement between the state and three water and irrigation agencies concerning the intra-state right to water from the Colorado River. In addition to allocating water rights within the state, the settlement allocated responsibility for mitigating impacts from reduced water flows to the Salton Sea. As part of the settlement, the parties entered a "joint powers agreement" that provided that California would pay all of the mitigation costs beyond a particular amount for which the water and irrigation agencies were to be liable. The lower court ruled that this unconditional commitment of funds violated Article XVI, Section 7 of the California Constitution, which provides that money may be drawn from the Treasury only through an appropriation enacted by the legislature. But while the agreement does unconditionally obligate the state to pay the excess mitigation costs beyond those for which the agencies are responsible, nothing in the joint powers agreement gives those agencies the right to enforce that obligation by drawing money from the Treasury without an appropriation by the legislature. Accordingly, the joint powers agreement does not violate the appropriation requirement. Nor does the joint powers agreement violate the debt limitation in Section 1 of Article XVI of the California Constitution because the state's commitment to pay the excess mitigation costs is contingent on there being excess costs to pay, and a contingent obligation does not qualify as a "debt" or "liability" within the meaning of that constitutional provision.