LOS ANGELES — An Orange County Superior Court judge Wednesday ruled against the California county in its lawsuit against the state Department of Finance over more than $73 million in disputed property taxes.
Judge Robert Moss ordered Orange County Auditor Controller Jan Grimes to reverse the allocation of property taxes and send them to the state.
County supervisors avoided layoffs stemming from budget cuts in early 2012 with its decision to not forward the property taxes to the state.
County leaders made the decision with former Auditor-Controller David Sundstrom after the state took funds the county had been receiving to repay bonds issued following the county's 1995 bankruptcy. Shortly after the decision was made, Sundstrom left to take a similar position in affluent Sonoma County in Northern California.
The state took the funds to solve its own budget crisis in legislation passed during the 2011 session.
County officials argue that state legislators had erred in how they allocated property taxes back to the county and should allow the county to keep a greater share.
Attorneys for the state argued that Orange County was trying to achieve in court what it could not achieve in the state Legislature.
The dispute arose after Gov. Jerry Brown in 2011 made a decision to take back a chunk of vehicle license fees collected by the county.
When the county financed its bankruptcy in 1995, state officials allowed the county to send a portion of their vehicle license fees directly to bond holders. But in 2007, when the county refinanced its debt, the legislative authorization for the special license fees was not included.
In 2011, Brown's budget staff discovered the omission and took back the money.
Assemblyman Jose Solorio, an Orange County Republican, sponsored last-minute legislation to restore funding to the county, but it failed to make it through both chambers of the state legislature.
After the failure of Solorio's bill, county leaders, with the help of several law firms, persuaded Sundstrom to ignore Sacramento's budget allocations on property taxes.
On Jan. 31, Sundstrom allocated the $73 million to the county instead of local schools. The idea was that the state would have to provide the lost funding to the schools through a state law that requires schools statewide to receive an equal amount of funding.
The schools impacted were also a party in the lawsuit.