SMUD's Illegal Affirmative Action Program

And in another case . . .

Nick, writing for the majority, found that SMUD's affirmative action program giving preferences to minority contractors violates the California constitution--under Proposition 109. SMUD is now, as seen in this Sacramento Bee article, using our money (the ratepayers') to appeal to the Supreme Court.

In case the link is no longer available, here is the text of the Bee article:

SMUD forges ahead in minority-bid appeal
By Carrie Peyton Dahlberg -- Bee Staff WriterPublished 2:15 am PDT Thursday, October 21, 2004In a move that could clarify California's ban on government affirmative-action programs, Sacramento's electric utility will ask the state Supreme Court to save a minority contracting program.
Sacramento Municipal Utility District directors voted 6-1 Tuesday to ask the state's highest court to overturn an appellate court ruling that ordered SMUD to end special breaks for some minority contractors.
At stake is a longtime SMUD practice of studying its own contracting procedures, pinpointing areas where minority-and women-owned firms are underrepresented, and then providing a financial edge in those areas.
Contractors in categories judged to be affected by past discrimination have their bids ranked as if they were 5 percent lower than the actual bid amount.
SMUD has argued that its program falls under a key exemption to Proposition 209, a 1996 voter initiative that outlawed most government preferences for minorities.
The initiative carved out an exception for programs required to maintain eligibility for federal funding. That exemption applies, SMUD contends, because its own past discrimination was well documented, and so it was federally required to correct it.
Both a Sacramento Superior Court judge and the state's 3rd Appellate District disagreed, although the three-judge appellate panel rejected SMUD's arguments on a 2-1 vote.
If the Supreme Court agrees to hear SMUD's appeal, "it could have a wide impact," said Brian Landsberg, a professor specializing in constitutional law at the University of the Pacific McGeorge School of Law in Sacramento.
"A statewide ruling would be of great significance," he said Wednesday.
Of the many challenges Proposition 209 has faced, the federal exemption had "the most potential to gut the purpose of 209 if it was interpreted broadly," attorney Sharon Browne said after last month's appellate ruling.
Browne represents the Pacific Legal Foundation, which sued SMUD over its contracting practices in 2000 on behalf of a Loomis contractor. The foundation will oppose SMUD's petition for a high court hearing, she said, arguing that the appellate court reached "a straightforward, well-reasoned decision" that left no issues to be resolved.
"SMUD has been told 'no' twice - what part of 'no' do they not understand?" Browne asked Wednesday.
"This is going to impact the ratepayers because they're the ones paying for the litigation."
SMUD has spent about $380,000 so far defending its program; going on to the state Supreme Court will add $35,000 to $75,000 to that, said SMUD general counsel Arlen Orchard.
The cost issue weighed heavily on SMUD directors when they debated an appeal in a special closed session, board President Peter Keat said.
Ultimately, he said, the appeal will demonstrate "our commitment to diversity" and to show that "being fair and just is how we go about our business."
The issue, Keat said, is "not just about SMUD. ... We represent not just our own ability to use these tools to address past discrimination and injustice, but other people's ability to do that as well."
SMUD uses the incentives as a way of "assuring diversity and fairness," and the program deserves to be defended, Director Genevieve Shiroma said.
Howard Posner, the lone director who voted against the appeal, has repeatedly tried to persuade fellow board members to abandon the program, arguing that it violated the law.
"I don't think we're going to prevail," he said. "I couldn't justify spending ratepayers' funds in what appears to me to be a losing battle."
Even some directors who ultimately supported the appeal said their decision was a tough one.
Director Larry Carr said he didn't believe the benefit of the program would be worth the cost of more litigation. But when it became clear a majority of four directors supported the appeal, Carr said, he decided to back it and tried to persuade other directors the board's vote should be unanimous.
That would send a message, he said, "that everyone on the board is solidly committed to being inclusive in our contracting."
Director Bill Slaton said he, too, struggled but concluded, "It's important to speak with one voice on this issue."
The high court has about two months to decide whether to hear SMUD's appeal, and if it does, the decision would probably come within a year.