SAN FRANCISCO - A federal appeals court yesterday delayed California's Oct. 7 gubernatorial recall election because of "obsolete" voting equipment.
Proponents of the recall said they are prepared to go to the U.S. Supreme Court if necessary in order to hold the election on Oct. 7. Most observers believe the recall will likely now occur in March, during the presidential primary election.
More than 130 candidates want to take Democratic Gov. Gray Davis' office.
The Ninth U.S. Circuit Court of Appeals agreed with four plaintiffs, including the National Association for the Advancement of Colored People and the Southern Christian Leadership Conference, and issued a preliminary injunction in a 66-page ruling against California Secretary of State Kevin Shelley.
"The choice between holding a hurried, constitutionally infirm election and one held a short time later that assures voters that the 'rudimentary requirements of equal treatment and fundamental fairness are satisfied' is clear," said the three-member panel.
The panel wrote that public interest weighs heavily in favor of postponing the election for "a few months" when the punch-card system can be replaced with more modern voting equipment. The justices said the delay would demonstrate "our national commitment to democracy" to other nations.
The court allowed a seven-day stay for parties to appeal the ruling to either the full Ninth Circuit Court or the Supreme Court.
The ruling also delays voting on two referendums set to be on the ballot. Proposition 53 asks voters to set aside up to 3% of California's general fund to pay for infrastructure and transportation improvements with cash instead of bond financing. Proposition 54 would restrict the collection of racial information by the state.
Sherry Jeffe, a senior political scholar at the University of Southern California School of Policy, Planning and Development, predicted that the special election recalling Davis will go all the way to the Supreme Court. Until then there is no assurance when the election might be held, she said.
"Democrats and Gray Davis have always wanted this election in March 2004 since day one," Jeffe said. "What it will do is only add to voter frustration, voter confusion, and voter doubt, which could help the governor, because when in doubt, California voters tend to vote no."
More than 1 million voters signed petitions to put the recall measure on the ballot. Earlier this month Davis appointed Leon Panetta to advise state leaders on addressing California's structural budget reform effort.
Others in the thick of the issue said they still plan for the Oct. 7 election.
"Anything that leads to greater enfranchisement in California is something we support," said Peter Ragone, spokesman for Californians Against the Costly Recall, in a press statement following the ruling. "We will continue to campaign for the Oct. 7 election until the issue is resolved in the courts."
Actor Arnold Schwarzenegger said he would continue his campaign and urged Shelley to appeal.
"Historically, the courts have upheld the rights of voters, and I expect that the court will do so again in this case," said the leading Republican candidate in a press statement. "I will continue to vigorously campaign for governor. The people have spoken, and their word should -- and will -- prevail."
Dave Hitchcock, a director at Standard & Poor's, said it is unlikely the delay would affect the state's BBB rating because it would take a cash crisis to lower the state's rating further. Standard & Poor's dropped the state's rating in July.
Still, the political uncertainty can cause uncertainty in the state's credit, he said.
"If the new governor was in place, he would not have much time to make much budget decisions by the May revise. It would give a very short window for any new governor to propose revisions in a budget that the current governor may have earlier proposed in January," Hitchcock said.
Moody's Investors Service assigns California general obligation bonds an A3 rating.
Moody's analysts did not believe that a delayed recall election would have any near-term credit impact on California, according to Ray Murphy, a Moody's vice president.
"The decision to delay the recall election does not necessarily affect our opinion one way or the other," Murphy said.
Fitch Ratings assigns the state's GOs an A rating with a negative outlook.
The state is expected to sell an estimated $2.3 billion of enhanced tobacco bonds on Sept. 23.
John Hallacy, a managing director of municipal research for Merrill Lynch & Co., said he thinks momentum in favor of the recall is beginning to fade and that this news will not affect the tobacco deal.
"It could cause some additional disclosure and that could add to the time frame, but I don't think so," Hallacy said.
Steve Galiani, California portfolio manager for Wells Capital Market, said some would view this as raising uncertainty in the market, while others would not see an impact on the state's debt.
"However, how the bonds trade will be affected more by the nature of the state's finances going forward and by the news that comes out regarding the budget," Galiani said. "These will be the prime determination of how bonds trade. These are the more important facts."
