Full opinion text
Opinion GEORGE, C. J. Article IV, section 12 of the California Constitution provides in part that “[t]he Legislature shall pass the budget bill by midnight on June 15 of each year,” but in recent years the timely adoption of the budget bill in California has proven to be the exception rather than the rule. This proceeding arises out of two taxpayer actions that were filed in the wake of budget impasses that occurred in 1997 and 1998. In the action filed in 1998, the trial court issued a preliminary injunction broadly barring the Controller from making payments from the state treasury in the absence of passage of the budget bill or an emergency appropriation—a preliminary injunction that largely would have shut down government operations in California, but for the Legislature’s prompt enactment of an emergency appropriation and the Court of Appeal’s subsequent order staying the effect of the preliminary injunction. In the Court of Appeal, the Controller contended that, contrary to the trial court’s ruling in the 1998 case, a variety of payments lawfully may be made from the treasury during a budget impasse. Although the ultimate passage of budget bills in 1997 and 1998 rendered the appeals in these cases moot, the Court of Appeal—concluding that the issues presented by this proceeding are important and likely to recur, but will regularly evade timely appellate review—retained the matter to consider this contention. After briefing and argument, the Court of Appeal, in a lengthy decision, ultimately concluded that the Controller may authorize the payment of state funds during a budget impasse in a variety of circumstances, including (1) when payment is authorized by a “continuing appropriation” enacted by the Legislature, (2) when payment is authorized by a self-executing provision of the California Constitution (for example, the payment of certain funds for public schools under article XVI, section 8.5 of the Constitution, and the payment of elected state officers’ salaries under article III, section 4 of the California Constitution), and (3) when payment is mandated by federal law (for example, the prompt payment of those wages mandated by the federal Fair Labor Standards Act, and the prompt payment of benefits mandated under federal food stamp, foster care and adoption, child support, and child welfare programs). (White v. Davis (2002) 108 Cal.App.4th 197 [133 Cal.Rptr.2d 691] (White v. Davis I); see fn. 14, post, p. 563.) The Court of Appeal reversed the trial court’s judgment granting a preliminary injunction insofar as the injunction applied to these categories of payments, but otherwise affirmed the order. The Controller and a number of state employee unions and associations that had intervened in the lower court actions (hereafter referred to as state employee interveners) filed petitions for review in this court, but the petitions challenged only two aspects of the Court of Appeal’s decision. First, both the Controller and the state employee interveners, contending that the Court of Appeal erred in affirming in any respect the trial court’s 1998 order granting the preliminary injunction, maintained that the trial court’s issuance of a preliminary injunction in this action constituted a clear abuse of discretion in light of (1) prior case law holding that the alleged harm to a taxpayer’s interest in the public treasury is insufficient to support the issuance of a preliminary injunction to bar the alleged improper expenditure of public funds, and (2) the circumstance that the harm posed by granting the broad preliminary injunctive relief sought by plaintiffs greatly outweighed the potential harm that would have resulted from denying such injunctive relief pending a full adjudication on the merits. Second, the state employee interveners challenged the Court of Appeal’s conclusions regarding the payment of state employee salaries during a budget impasse, contending that the Court of Appeal erred in determining that state law did not authorize the Controller to pay all state employees their full and regular salaries in the absence of a duly enacted budget bill, and erred additionally in concluding that the federal Fair Labor Standards Act required the Controller, during a budget impasse, to pay state employees covered by that law only at the minimum wage rate for hours worked during the impasse. We granted review to address only the two matters raised in the petitions for review: (1) the procedural question whether the trial court erred in granting a preliminary injunction in the underlying taxpayer action, and (2) the substantive question whether the Controller is authorized to pay state employees their full and regular salaries during a budget impasse. With regard to the first issue, we conclude that the trial court in the 1998 action abused its discretion in granting a preliminary injunction and that the Court of Appeal erred in affirming in any respect the order granting the preliminary injunction. With regard to the second issue, we conclude that the trial court erred in ruling that state employees who work during a budget impasse properly may be considered “volunteers” who obtain no right to the payment of salary or wages either under state or federal law, and also that the Court of Appeal erred insofar as that court concluded that state employees’ entitlement “to compensation for work performed during a budget impasse does not accrue until the enactment of a budget or other proper appropriation.” (White v. Davis I, supra, 108 Cal.App.4th 197, 226-227.) Instead, we conclude that under the applicable California statutes, state employees who work during a budget impasse obtain the right, protected by the contract clauses of the federal and state Constitutions, to the state’s ultimate payment of their full salary for work performed during the budget impasse; that is, when state employees work during a budget impasse, the state becomes contractually obligated ultimately to pay employees the full salary they have earned. At the same time, however, we conclude that the Court of Appeal was correct in determining that state employees do not have a contractual right actually to receive the payment of salary prior to the enactment of an applicable appropriation, and that the Controller is not authorized under state law to pay those salaries prior to such an appropriation. Thus, state law contractually guarantees that state employees ultimately will receive their full salary for work performed during a budget impasse, but state law does not authorize the Controller to disburse state funds to the employees until an applicable appropriation has been enacted. In addition, we conclude that, in light of the requirements of federal law, the Controller is required, notwithstanding a budget impasse and the limitations imposed by state law, to timely pay those state employees who are subject to the minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act— a category that includes many, but not all, state employees—the wages required by that act. I As noted, this case arises out of two separate taxpayer actions, the first filed in 1997 concerning the 1997-1998 budget impasse (hereafter, the 1997 action), and the second filed in 1998 related to the 1998-1999 budget impasse (hereafter the 1998 action). We briefly describe each of the actions. A On July 25,1997, Steven White filed the 1997 action against the Governor and numerous other state officials, a taxpayer action alleging the improper expenditure of public funds. On September 22, 1997, White filed a first amended complaint, alleging that the Legislature had failed to pass a budget for the 1997-1998 fiscal year by the constitutionally required date of June 15, 1997, and that from June 15 to August 18, 1997, when a budget finally was enacted, the Controller improperly had disbursed funds from the state treasury to welfare recipients, state employees, members of the Legislature, and other individuals without the enactment of an emergency appropriation bill. The complaint maintained that “[w]ithout any appropriations, the government of the State of California should have closed,” and sought declaratory and injunctive relief. Defendants filed a demurrer to the complaint, and on March 13, 1998, the trial court sustained the demurrer without leave to amend, concluding that the action was moot as to the 1997-1998 fiscal year because a budget for that year had been enacted, and that the action was premature as to the following fiscal year. White filed an appeal from the dismissal of the 1997 action. B On June 24, 1998, the Howard Jarvis Taxpayers Association and Steven White (hereafter plaintiffs) initiated the 1998 action, another taxpayer action seeking declaratory and injunctive relief against the Controller. The complaint stated that the Legislature had not passed a budget by June 15, 1998, and asserted that “[t]he Constitution of the State of California does not have any provision to allow the state government to function without a budget, absent emergency bills. Under the Constitution . . . , without an emergency bill, the state government must close.” The complaint further alleged that the Controller was likely to disburse funds despite this asserted constitutional restriction, and sought both interim and permanent injunctive relief. On July 9, 1998, the trial court issued a temporary restraining order barring the Controller from paying out funds absent the enactment of a budget or an emergency appropriation, unless payments were authorized by a continuing appropriation or federal law. Thereafter, the trial court granted intervener status to several state employee unions and associations as well as several individual state employees. On July 21, 1998, after conducting a hearing, the trial court granted a preliminary injunction barring the Controller from disbursing any funds in the absence of a budget, with the exception of (1) funds properly appropriated prior to July 1, 1998, for expenditure in the 1998-1999 fiscal year, (2) funds properly appropriated pursuant to emergency bills, and (3) payments of minimum wages and overtime compensation required under the federal Fair Labor Standards Act for work performed prior to July 21, 1998. In the course of its decision, the trial court determined that state employees who continued to work during the budget impasse after the entry of its order did so as “volunteers,” and prohibited the Controller from making any payments for such work. The trial court also found that continuing appropriations “have no constitutional basis and simply represent examples of expenditures from the state treasury that have no unique position over other required expenditures.” As part of its injunctive order, the trial court also ordered plaintiffs to post a $100,000 bond. The Controller and the state employee interveners immediately appealed from the order granting the preliminary injunction, and requested the Court of Appeal to stay the preliminary injunction by supersedeas. On July 22, 1998—the day after the trial court issued its preliminary injunction—the Legislature enacted an emergency appropriation to fund vital services and pay the salaries of state employees through August 5, 1998. On July 28, 1998, the Court of Appeal issued a writ of supersedeas staying the trial court’s preliminary injunction pending consideration of the appeal. That stay has remained in effect throughout the pendency of the appeal. The 1998-1999 budget bill ultimately was passed and signed into law on August 21, 1998. C The Court of Appeal consolidated the appeals from the 1997 and 1998 actions and decided the cases in a single opinion. (White v. Davis I, supra, 108 Cal.App.4th 197.) Because the budget bills for both the 1997-1998 and 1998-1999 fiscal years had been enacted prior to the resolution of the appeal, the Court of Appeal turned first to the issue of mootness, dismissing the appeal from the 1997 action as moot but retaining the appeal from the 1998 action for decision. The Court of Appeal explained that an appellate court has “ ‘discretion to decide otherwise moot cases presenting important issues that are capable of repetition yet tend to evade review’” (108 Cal.App.4th at p. 208, quoting Conservatorship of Wendland (2001) 26 Cal.4th 519, 524, fn. 1 [110 Cal.Rptr.2d 412, 28 P.3d 151]), and that the issues presented here “are of profound public significance and arise with some frequency, but escape review with the enactment of a budget.” (108 Cal.App.4th at p. 208.) In addressing the validity of the broad preliminary injunction issued by the trial court in the 1998 action, the Court of Appeal noted that the Controller contended in the trial court and on appeal that there are numerous circumstances under which payment of public funds is authorized even in the absence of the enactment of the annual budget act: (1) when payment is authorized by a “continuing appropriation” enacted by the Legislature, (2) when payment is authorized by a self-executing provision of the California Constitution, and (3) when payment is required by federal law. The Court of Appeal proceeded to address each of these categories, emphasizing that its decision was limited to the provisions of law discussed by the parties on appeal, and that its decision did not purport to determine “whether other provisions of law may authorize or mandate the disbursement of funds during a budget impasse.” (White v. Davis I, supra, 108 Cal.App.4th 197, 206, fir. 1.) Because the Court of Appeal’s discussion of the numerous issues before it reveals the complexity of the task of determining which payments of public funds lawfully may be made during a budget impasse, we believe it is useful to review at some length that court’s analysis and conclusions. 1. Continuing Appropriations The Court of Appeal initially scrutinized the category of “continuing appropriations.” In California Assn, for Safety Education v. Brown (1994) 30 Cal.App.4th 1264, 1282 [36 Cal.Rptr.2d 404], the court explained that “[a]n appropriation is a legislative act setting aside ‘a certain sum of money for a specified object in such manner that the executive officers are authorized to use that money and no more for such specified purpose.’ [Citation.] A continuous [or continuing] appropriation runs from year to year without the need for further authorization in the budget act. [Citations.]” (Fn. omitted, italics added.) Government Code section 16304 evidences the Legislature’s approval of such appropriations. As the Court of Appeal noted, the Controller’s brief cited a considerable number of statutes and voter-approved initiatives that establish continuing appropriations independent of the budget act, authorizing payments for items such as tax refunds, disability and retirement payments, and payments to bondholders. Plaintiffs did not claim in the trial court or in the Court of Appeal that any of the provisions cited by the Controller were not intended to create continuing appropriations, but rather argued that, as a general matter, continuing appropriations are not constitutionally permissible. The trial court agreed with plaintiffs, and its preliminary injunction barred the Controller from making payments during a budget impasse pursuant to any continuing appropriation. The Court of Appeal disagreed with the trial court on this fundamental issue, holding that legislative or voter-approved measures authorizing continuing appropriations independent of the budget act are constitutionally valid. In reaching this conclusion, the Court of Appeal began by observing that under the California Constitution “[gjenerally, the Legislature ‘may exercise any and all legislative powers which are not expressly or by necessary implication denied to it by the Constitution. ’ (Methodist Hosp. of Sacramento v. Saylor (1971) 5 Cal.3d 685, 691 [97 Cal.Rptr. 1, 488 P.2d 161].)” (White v. Davis I, supra, 108 Cal.App.4th 197, 212.) In Methodist Hosp. of Sacramento, our court explained this fundamental point at greater length: “Unlike the federal Constitution, which is a grant of power to Congress, the California Constitution is a limitation or restriction on the powers of the Legislature. [Citations.] Two important consequences flow from this fact. First, the entire law-making authority of the state, except the people’s right of initiative and referendum, is vested in the Legislature, and that body may exercise any and all legislative powers which are not expressly or by necessary implication denied to it by the Constitution. [Citations.] In other words, ‘we do not look to the Constitution to determine whether the legislature is authorized to do an act, but only to see if it is prohibited.’ [Citation.] []f] Secondly, all intendments favor the exercise of the Legislature’s plenary authority: ‘If there is any doubt as to the Legislature’s power to act in any given case, the doubt should be resolved in favor of the Legislature’s action. Such restrictions and limitations [imposed by the Constitution] are to be construed strictly, and are not to be extended to include matters not covered by the language used.’ [Citation.]” (Methodist Hosp. of Sacramento v. Saylor, supra, 5 Cal.3d at p. 691.) The Court of Appeal then turned to the terms of the two state constitutional provisions upon which plaintiffs relied. Article IV, section 12, subdivision (c) of the California Constitution provides in relevant part: “The Legislature shall pass the budget bill by midnight on June 15 of each year. Until the budget bill has been enacted, the Legislature shall not send to the Governor for consideration any bill appropriating funds for expenditure during the fiscal year for which the budget bill is to be enacted, except emergency bills recommended by the Governor or appropriations for the salaries and expenses of the Legislature.” Article XVI, section 7, provides: “Money may be drawn from the Treasury only through an appropriation made by law and upon a Controller’s duly drawn warrant.” The Court of Appeal observed that “nothing in . . . article IV, section 12, expressly bars continuing appropriations. On its face, section 12 prohibits the Legislature from sending specified appropriation bills to the Governor prior to the enactment of a budget, and it provides for exceptions to this prohibition; it does not otherwise limit the Legislature’s authority to enact appropriations.” (White v. Davis I, supra, 108 Cal.App.4th 197, 212.) Similarly, article XVI, section 7, simply provides that money may be drawn from the treasury “only through an appropriation made by law . . . .” (Italics added.) That provision does not limit the form in which an appropriation may be adopted. In addition to noting that the relevant constitutional provisions do not on their face preclude the Legislature from enacting continuing appropriations, the Court of Appeal further explained that the predecessor to current article IV, section 12—former article IV, section 34—had been interpreted by this court to permit the Legislature to enact continuing appropriations that are available for expenditure independent of the budget act (see, e.g., Gillum v. Johnson (1936) 7 Cal.2d 744, 758 [62 P.2d 1037, 108 A.L.R. 595]; Railroad Commission v. Riley (1923) 192 Cal. 54, 56-58 [218 P. 415]), that there was no indication that the drafters or the voters intended any change in meaning in this regard when article IV was substantially revised in 1966 and the current provisions of article IV, section 12, were adopted, and that subsequent Court of Appeal opinions have recognized the existence of continuing appropriations (see, e.g., California Assn, for Safety Education v. Brown, supra, 30 Cal.App.4th 1264, 1283). (White v. Davis I, supra, 108 Cal.App.4th 197, 212-216.) Accordingly, the Court of Appeal concluded that continuing appropriations are constitutionally permissible, and it set aside the preliminary injunction insofar as it rested on the trial court’s contrary determination. 2. Payments Authorized by the State Constitution The Court of Appeal next considered the Controller’s contentions that a number of provisions of the California Constitution authorize the payment of funds from the state treasury independent of the budget act. (a) Article III, Section 4 The Court of Appeal first addressed the Controller’s contention that the payment of salaries of elected state officers is authorized by article III, section 4, of the California Constitution without a specific budget act appropriation. That constitutional provision states in relevant part: “[Salaries of elected state officers may not be reduced during their term of office. Laws that set these salaries are appropriations.“ (Italics added.) The Controller maintained that because the salaries of state officers are set by statute, the Controller may authorize the payment of these salaries independent of a budget act or emergency appropriation. The Court of Appeal agreed with the Controller’s position, explaining that not only did the explicit constitutional language of article III, section 4, establish that the statutes setting those salaries themselves operate as appropriations for purposes of the Constitution, but that this conclusion found support in the decision of Brown v. Superior Court (1982) 33 Cal.3d 242 [188 Cal.Rptr. 425, 655 P.2d 1260], which states that “though a bill setting salaries of elected state officers is not an appropriation bill it nonetheless takes effect as an appropriation once it has been enacted.” (33 Cal.3d at pp. 249-250, fn. 6.) (b) Article XVI, Section 8 The Court of Appeal next addressed the Controller’s contention that article XVI, section 8 of the California Constitution—a provision establishing a minimum level of education funding enacted as part of the voter initiative popularly known as Proposition 98—authorizes the disbursement of funds independent of a budget act or emergency appropriation. On this point, the Court of Appeal rejected the Controller’s contention and agreed with the earlier decision of County of Sonoma v. Commission on State Mandates (2000) 84 Cal.App.4th 1264, 1290 [101 Cal.Rptr.2d 784], that “Proposition 98 does not appropriate funds. . . . The power to appropriate funds was left in the hands of the Legislature. Proposition 98 merely provides formulas for determining the minimum to be appropriated every budget year. The state’s obligation is to ensure specific amounts of moneys are applied by the state for education.” Accordingly, the Court of Appeal concluded that the provisions of article XVI, section 8 “do not constitute a self-executing authorization to disburse funds.” (White v. Davis I, supra, 108 Cal.App.4th 197, 221.) (c) Article XVI, Section 8.5 The Court of Appeal next addressed the Controller’s argument that article XVI, section 8.5, of the California Constitution—an additional educational funding provision, also adopted as part of Proposition 98—authorizes the disbursement of funds independent of a budget act or emergency appropriation. After analyzing the somewhat complex features of this provision, the Court of Appeal ultimately agreed with the Controller that article XVI, section 8.5 provides an independent basis for the disbursement of funds. As the Court of Appeal explained, article XVI, section 8.5 operates in conjunction with another provision of the California Constitution, article XIII B, which generally limits governmental spending. “As it was originally enacted, article XIIIB required that all governmental entities return revenues in excess of their appropriation limits to the taxpayers through tax rate or fee schedule revisions. In Proposition 98, . . . article XIII B was amended to provide that half of state excess revenues would be transferred to the state school fund for the support of school districts and community college districts.” (Hayes v. Commission on State Mandates (1992) 11 Cal.App.4th 1564, 1580, fn. 7 [15 Cal.Rptr.2d 547].) Along with the amendment of California Constitution, article XIII B in Proposition 98, the voters adopted article XVI, section 8.5. Article XVI, section 8.5, subdivision (a) provides that in addition to the education funding required under article XVI, section 8, “the Controller shall during each fiscal year transfer and allocate all revenues available [under the relevant provisions] of article XIII B to that portion of the State School Fund restricted for elementary and high school purposes, and to that portion of the State School Fund restricted for community college purposes, respectively, in proportion to the enrollment in school districts and community college districts respectively.” Article XVI, section 8.5, subdivision (c), in turn, provides that “[f]rom any funds transferred to the State School Fund pursuant to subdivision (a), the Controller shall each year allocate to each school district and community college district an equal amount per enrollment in school districts from the amount in that portion of the State School Fund restricted for elementary and high school purposes and an equal amount per enrollment in community college districts from that portion of the State School Fund restricted for community college purposes.” Finally, article XVI, section 8.5, subdivision (d) provides that “[a]ll revenues allocated pursuant to subdivision (a) shall be expended solely for the purposes of instructional improvement and accountability as required by law.” In analyzing whether the provisions of article XVI, section 8.5 authorize the disbursement of funds without the need for a legislative appropriation, the Court of Appeal noted that in California Teachers Assn. v. Hayes (1992) 5 Cal.App.4th 1513 [7 Cal.Rptr.2d 699], the appellate court, in discussing this constitutional provision, declared: “The measure is self-executing; it requires no legislative action. . . . [f] . . . Section 8.5 does not extend the Legislature’s spending power to excess revenues; rather it imposes a self-executing, ministerial duty upon the Controller to transfer such excess revenues to a restricted portion of the school fund and thence to allocate such revenues to school districts and community college districts on a per-enrollment basis. Section 8.5 specifically restricts,,the purposes for which those funds may be expended.” (5 Cal.App.4th at p. 1530.) The Court of Appeal below agreed with California Teachers Assn.’s description of the effect of this provision, and held that “[a]s such, article XVI, section 8.5, bears the earmarks of a continuing appropriation entrenched by the voters in the state Constitution. We therefore conclude that this provision contains a self-executing authorization to disburse funds.” (White v. Davis I, supra, 108 Cal.App.4th 197, 223.) 3. Payments Pursuant to Federal Law After addressing the Controller’s contentions regarding the permissibility of authorizing payments from the treasury absent a budget bill or emergency appropriation, pursuant to continuing appropriations and various provisions of the California Constitution, the Court of Appeal turned to the third general category asserted by the Controller as providing a basis for the payment of state funds during a budget impasse—payments that are required to comply with federal law. In analyzing this claim, the Court of Appeal recognized at the outset that in light of the supremacy clause of the federal Constitution (U.S. Const., art. VI, cl. 2 [“laws of the United States . . . shall be the supreme law of the land; and the judges of every state shall be bound thereby, any thing in the Constitution or laws of any state to the contrary notwithstanding”]), the requirements of federal law necessarily prevail over any restrictions that state law may place on the disbursement of state funds. (See, e.g., McCulloch v. Maryland (1819) 17 U.S. (4 Wheat.) 316, 427 [4 L.Ed. 579, 606-607]; Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 516 [112 S.Ct. 2608, 2617, 120 L.Ed.2d 407] [“state law that conflicts with federal law is ‘without effect’ ”].) Thus, the Court of Appeal concluded that when federal law places an obligation upon the state promptly to make payments of public funds, the Controller is authorized to make such payments independent of the enactment of a budget bill or emergency appropriation. The Court of Appeal held that the pertinent question in each instance is whether the applicable federal law in fact requires the state to make the payment or payments during the time period in question. The Court of Appeal then discussed a number of federal statutes asserted by the Controller to require the disbursement of public funds notwithstanding a budget impasse. (a) Fair Labor Standards Act The Court of Appeal first addressed the question whether the Controller is required under the Fair Labor Standards Act (29 U.S.C. § 201 et seq.) (FLSA) to disburse funds to pay the salaries of state employees during a budget impasse. The trial court had concluded that the state was required by the FLSA to pay the wages required by that act only for work performed prior to the date of the trial court’s preliminary injunction—determining that state employees would be “volunteers” not entitled to compensation with regard to work performed after the trial court issued its injunction. The Court of Appeal rejected this conclusion, determining that the state is obligated to pay in a timely fashion the wages required by the FLSA for all work performed during a budget impasse. That court also concluded, however, that, contrary to the arguments set forth by the state employee interveners, state employees “do not have an entitlement to their full salaries (over and above the compensation required under the FLSA) pursuant to the contract clauses of the United States and California Constitutions.” (White v. Davis I, supra, 108 Cal.App.4th 197, 223-224.) Because the question of the payment of state employee salaries during a budget impasse is one of the issues upon which review was sought and granted, we describe in detail the Court of Appeal’s resolution of the salary issue. The Court of Appeal began its analysis by explaining that the FLSA— which by its terms applies to public employers, including a state (29 U.S.C. § 203(d), (e)(2)(C))—requires an employer to pay minimum wages (29 U.S.C. § 206(a)) and overtime compensation (29 U.S.C. § 207(a)(1)) to those employees to whom those provisions apply, and provides for the recovery of unpaid minimum wages, unpaid overtime compensation, and liquidated damages. (29 U.S.C. § 216(b).) The Court of Appeal also noted that the federal courts have held that, as a general matter, “ ‘the FLSA is violated unless the minimum wage is paid on the employee’s regular payday . . . .’ (Biggs v. Wilson (9th Cir. 1993) 1 F.3d 1537, 1541 [cert. den. (1994) 510 U.S. 1081 [114 S.Ct. 902, 127 L.Ed.2d 94]].)” (White v. Davis I, supra, 108 Cal.App.4th 197, 224, italics added.) Although nothing in the FLSA specifically addresses a state’s obligation to pay wages required under the act during a budget impasse, the Court of Appeal explained that in Biggs v. Wilson, supra, 1 F.3d 1537, the Ninth Circuit Court of Appeals squarely held that California had violated the FLSA in July 1990 by failing to pay the wages owed to public transportation employees under the FLSA during a budget impasse. In this proceeding, no one has questioned the validity of the interpretation or application of the FLSA set forth in Biggs—namely that under the FLSA, the state is required to pay the wages owed under that act on the employees’ regular payday, notwithstanding the existence of a budget impasse. The Court of Appeal noted that although the trial court in this case had acknowledged the Biggs decision, the trial court had concluded that under that decision the Controller was authorized to pay the minimum wages and overtime compensation required under the FLSA only for work performed prior to the date of the preliminary injunction, because state employees who continued to work after that date were “volunteers” not entitled to compensation under the FLSA. The Court of Appeal reasoned that the trial court apparently had concluded “that a budget impasse nullifies the relationship between the state and its employees, and that employees who continued to work despite notification of this nullification fall outside the protection of the FLSA.” (White v. Davis I, supra, 108 Cal.App.4th 197, 224.) The Court of Appeal treated the trial court’s ruling as raising three issues: “(1) whether there is a continuing employment relationship between the state and its employees during a budget impasse; (2) whether this relationship, if it exists, falls within the scope of the FLSA; and (3) whether state employees are entitled to payment of their salaries during a budget impasse absent an appropriation, over and above the compensation requirements found in the FLSA.” (Ibid) The appellate court proceeded to address each of those issues. (i) Continuing Employment Relationship In discussing this issue, the Court of Appeal first recognized that although “‘[p]ublic employment, by and large, is not held by contract, but by statute, . . .’” “public employment [nonetheless] may give rise to obligations regarding compensation treated as contractual under the contract clauses of the federal and state Constitutions.” (White v. Davis I, supra, 108 Cal.App.4th 197, 224-225, citation omitted.) The Court of Appeal noted that the Legislature had enacted two statutes— Government Code sections 1231 and 1231.1—relating to the status of public employees and to the payment of their salaries in the event of a budget impasse. Government Code section 1231 provides in part: “No state officer or employee shall be deemed to have a break in service or to have terminated his or her employment, for any purpose, nor to have incurred any change in his or her . . . salary or other conditions of employment, solely because of the failure to enact a budget act for a fiscal year prior to the beginning of that fiscal year.” Government Code section 1231.1 provides: “Funds from each appropriation made in the budget act for any fiscal year may be expended to pay to officers and employees whatever salary that would have otherwise been received had the budget act been adopted on or prior to July 1, of that fiscal year.” The Court of Appeal then stated: “In interpreting these statutes, we seek a construction that is constitutionally sound. [Citation.] ‘Under our Constitution the creation of an enforceable contract with the state requires compliance with the constitutional debt limitation provisions of article XVI, section 1, or a valid appropriation in support of the contract under article XVI, section 7. [Citations.] In this respect our law is consistent with federal law and the law of nearly every state in the Union. [Citations.] Persons who deal with the government are held to have notice of this limitation upon the authority to enter into contracts. [Citation.]’ [Citation.]” (White v. Davis I, supra, 108 Cal.App.4th 197, 225.) The Court of Appeal observed that “nothing supports a determination that Government Code sections 1231 and 1231.1 establish an obligation to pay employee salaries in conformity with . . . the debt limitation provisions of California Constitution, article XVI, section 1. [Citation.] Nor do the parties dispute that the salaries at issue here are generally paid pursuant to an appropriation on the general treasury fund, rather than pursuant to a continuing appropriation or constitutional mandate.” (White v. Davis I, supra, 108 Cal.App.4th 197, 226.) The Court of Appeal concluded that “[u]nder these circumstances, Government Code sections 1231 and 1231.1 cannot establish an employment relationship that entitles state employees to their salaries during a budget impasse absent an appropriation, given the constitutional limitations that we have described.” (White v. Davis I, supra, 108 Cal.App.4th 197, 226.) Instead, the Court of Appeal held that “these statutes, if constitutionally sound, authorize a continuing employer-employee relationship during a budget impasse under which entitlement to compensation for work done during the budget impasse arises only upon the satisfaction of a condition precedent, namely, the enactment of a budget or other proper appropriation.” {Ibid., italics in original.) The Court of Appeal continued: “Although the employer-employee relationship at issue here is ultimately governed by statute, we discern no reason rooted in the state Constitution barring the Legislature from subjecting the entitlement to wages earned during a budget impasse to an analogue of a condition precedent. Thus, the entitlement of state employees to compensation for work performed during a budget impasse does not accrue until the enactment of a budget or other proper appropriation. Furthermore, given the friction of democratic politics—which Government Code sections 1231 and 1231.1 impliedly recognize—state employees assume the risk that satisfaction of this condition may be delayed due to the Legislature’s inaction during a budget impasse. [Citations.]” (White v. Davis I, supra, 108 Cal.App.4th 197, 226-227.) In sum, with regard to the question of a continuing employment relationship, the Court of Appeal ultimately concluded that state employees who work during a budget impasse do have a continuing employment relationship with the state, but it is one under which an employee’s “entitlement to compensation for work done during the budget impasse arises only upon ... the enactment of a budget or other proper appropriation.” (White v. Davis I, supra, 108 Cal.App.4th 197, 226.) (ii) Scope of the FLSA The Court of Appeal then turned to the question whether the type of employment relationship that it just had described—that is, an employment relationship in which an employee’s entitlement to compensation for work done during a budget impasse is subject to a condition precedent—falls within the scope of the FLSA. Although that court indicated it had found “little case authority addressing the extent to which the FLSA applies to employer-employee relationships subject to such a condition precedent” (White v. Davis I, supra, 108 Cal.App.4th 197, 227), the court ultimately concluded that the type of continuing relationship that state employees have with the state during a budget impasse does fall within the protection of the FLSA during such an impasse. (Ibid.) Reiterating that the FLSA “requires wages to be paid in a timely fashion” (ibid.), the Court of Appeal thus concluded that “the FLSA requires the prompt payment of minimum wages and overtime compensation for work performed during a budget impasse, with due reference to the state employee’s established work period.” (Id. at p. 228.) (iii) Compensation over and Above the FLSA Requirements The final issue that the Court of Appeal addressed regarding state employee salaries was the question whether state employees are entitled to receive compensation during a budget impasse, beyond that required under the FLSA, by virtue of the contract or due process clauses of the federal and state Constitutions. As the Court of Appeal recognized, both the state and federal Constitutions contain provisions prohibiting the state from passing any law “impairing the obligation of contracts.” (U.S. Const., art. I, § 10; Cal. Const., art. I, § 9.) Although the federal contract clause has been interpreted to be “directed only against impairment by legislation and not by judgment of courts” (Tidal Oil Co. v. Flanagan (1924) 263 U.S. 444, 451 [44 S.Ct. 197, 199, 68 L.Ed. 382]), the Court of Appeal noted that the state contract clause has been construed also to apply to judicial action. (Bradley v. Superior Court (1957) 48 Cal.2d 509, 519 [310 P.2d 634].) Because the state employee interveners in this case contended that a judicial order—the trial court’s preliminary injunction—constituted an impermissible impairment of contract in prohibiting the Controller from authorizing the full and regular payment of salaries to which the employees contended they were contractually entitled, the appellate court limited its consideration to the state contract clause. In addressing the employees’ contract clause claim, the Court of Appeal began by explaining that “[u]nder the state contract clause, ‘[n]either the court nor the Legislature may impair the obligation of a valid contract ....’’ [Citation.] However, the contract clause does not protect contracts that are prohibited by law or against public policy. [Citations.]” (White v. Davis I, supra, 108 Cal.App.4th 197, 229, italics added by White v. Davis I.) The Court of Appeal then stated that “[generally, ‘no contractual obligation may be enforced against a public agency unless it appears the agency was authorized by the Constitution or statute to incur the obligation; a contract entered into by a governmental entity without the requisite constitutional or statutory authority is void and unenforceable.’ ” (White v. Davis I, supra, 108 Cal.App.4th 197, 229.) The Court of Appeal concluded: “In our view, the state Constitution precludes the state from incurring an obligation to pay employee salaries during a budget impasse in the absence of a proper appropriation, and thus the failure to pay full salaries under such circumstances does not constitute an impairment of contract under the state contract clause.” (White v. Davis I, supra, 108 Cal.App.4th 197, 229.) The Court of Appeal reasoned that a contractual obligation to pay salaries in the absence of an appropriation “would directly undermine the appropriation requirement in article XVI, section 7 of the state Constitution. As our Supreme Court explained in Humbert v. Dunn (1890) 84 Cal. 57, 59 [24 P. Ill], this requirement, which is taken from the United States Constitution, ‘had its origin in Parliament in the seventeenth century, when the people of Great Britain, to provide against the abuse by the king and his officers of the discretionary money power with which they were vested, demanded that the public funds should not be drawn from the treasury except in accordance with express appropriations therefor made by Parliament [citation]; and the system worked so well in correcting the abuses complained of, our forefathers adopted it, and the restraint imposed by it has become a part of the fundamental law of nearly every state in the Union.’ In view of the fundamental nature of this requirement, we conclude that the state cannot undertake obligations protected by the contract clause that directly contravene it. To hold otherwise would gut the requirement.” (White v. Davis I, supra, 108 Cal.App.4th at pp. 197, 230.) The Court of Appeal, in similarly denying the employees’ claim that the preliminary injunction violated the due process clause insofar as it denied them the payment of their full salaries during a budget impasse, reasoned that “[u]nder principles of contract interpretation, ‘ “ ‘all applicable laws in existence when an agreement is made, which laws the parties are presumed to know and to have in mind, necessarily enter into the contract and form a part of it . . . ” “For this reason, state employees must be deemed to have notice of the limitation on the payment of their salaries during a budget impasse.” {White v. Davis I, supra, 108 Cal.App.4th 197, 230-231.) (iv) Conclusion on State Employee Salary Issue In view of the foregoing conclusions, the Court of Appeal ultimately held that “the preliminary injunction must be reversed to the extent that it denies state employees the compensation required under the FLSA during a budget impasse . . . (White v. Davis I, supra, 108 Cal.App.4th 197, 231.) (b) Other Federal Law In addition to the FLSA, the Controller contended in the Court of Appeal that a number of other federal laws require the disbursement of public fhnds during a budget impasse. The Controller asserted that such payments are required pursuant to the state’s participation in the federal (1) food stamp program (7 U.S.C. § 2011 et seq.), (2) foster care and adoption programs (42 U.S.C. §§ 670-679b), (3) child support programs (42 U.S.C. §§ 651-669b), and (4) child welfare services program (42 U.S.C. §§ 620-628). In analyzing this contention, the Court of Appeal stated that it found guidance in two federal decisions, Pratt v. Wilson (E.D.Cal. 1991) 770 F.Supp. 539 and Dowling v. Davis (9th Cir. 1994) 19 F.3d 445. In Pratt, the plaintiffs brought a federal action challenging the Controller’s cessation, during the 1990 budget impasse, of payments that were partially funded under the former federal Aid to Families with Dependent Children (AFDC) program. The court in Pratt held that under the supremacy clause the state was required to make AFDC payments during the budget impasse notwithstanding the appropriation requirements of the state Constitution, reasoning that once a state had elected to participate in the AFDC program it was required to comply with the governing federal statutes and regulations mandating timely payments. In Dowling v. Davis, supra, 19 F.3d 445, the plaintiffs brought a somewhat similar federal action challenging the Controller’s delay, also during the 1990 budget impasse, of payments under the Medi-Cal program (Welf. & Inst. Code § 14000 et seq.) (partially funded through the federal Medicaid law (42 U.S.C. § .1396)) and under the In-Home Support Service program (Welf. & Inst. Code, § 12300) (partially funded by a federal block grant). In Dowling, unlike Pratt, the court held that the delay in payments did not violate federal law, concluding that “[d]elayed payment is an inherent feature of the Medicaid statutory and regulatory framework,” that the federal block grant supporting the In-Home Support Service program did not require timely payments, and that the state statute governing the In-Home Support Service program predicated the continuing existence of the program on an appropriation in the state budget act. (19 F.3d at pp. 447-448.) The Court of Appeal held that “[i]n view of Pratt and Dowling, the key issue is whether the federal laws cited by the Controller require timely payments during a budget impasse.” (White v. Davis I, supra, 108 Cal.App.4th 197, 232.) The Court of Appeal then carefully reviewed the controlling statutory provisions and regulations governing each of the federal programs identified by the Controller to determine whether federal law mandates timely payment. With regard to the food stamp program, the foster care and adoption programs, and the child support program, the Court of Appeal concluded that the relevant statutes and regulations require the prompt payment of benefits and prompt provision of services specified by those programs, and thus that the Controller properly may disburse funds during a budget impasse to comply with such federal mandates. (White v. Davis I, supra, 108 Cal.App.4th 197, 233.) With regard to the child welfare services program, however, the Court of Appeal concluded that the applicable federal regulations mandated the timely disbursement only of those funds necessary to comply with certain notice and hearing requirements imposed by the federal regulations on the child welfare services program, and it held that only such funds may be properly disbursed by the Controller during a budget impasse. (Id., at pp. 1005-1006.) 4. Adequacy of Injunction Bond After addressing the validity of the various grounds upon which the Controller maintained that payments properly could be made during a budget impasse, the Court of Appeal took note of the Controller’s and state employee interveners’ additional contention that the trial court had failed to require plaintiffs to post an adequate injunction bond. As noted above, in granting the preliminary injunction the trial court ordered plaintiffs to post a $100,000 bond. As the Court of Appeal recognized, Code of Civil Procedure section 529, subdivision (a), provides generally that “[o]n granting an injunction, the court or judge must require an undertaking on the part of the applicant to the effect that the applicant will pay to the party enjoined any damages, not exceeding an amount to be specified, the party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled to the injunction.” As past cases have explained, “the trial court’s function is to estimate the harmful effect which the injunction is likely to have on the restrained party and to set the undertaking at that sum.” (ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 14 [286 Cal.Rptr. 518].) The Court of Appeal determined, however, that it was unnecessary for it to address the claimed inadequacy of the injunction bond in view of (1) its conclusion that the preliminary injunction must be set aside in part, and (2) plaintiffs’ representation that they were not seeking further relief from the trial court. (White v. Davis I, supra, 108 Cal.App.4th 197, 235.) 5. Disposition by the Court of Appeal In its disposition, the. Court of Appeal dismissed the appeal in the 1997 action as moot. With regard to the 1998 action, the court stated: “The preliminary injunction ... is reversed to the extent that it bars the Controller from disbursing funds pursuant to (1) continuing appropriations, (2) article III, section 4, and article XVI, section 8.5 of the state Constitution, (3) the [f]ederal [Fair] Labor Standards Act (29 U.S.C. § 201 et seq.), and (4) the federal funding mandates that we have identified applicable to the food stamp program (7 U.S.C. § 2011 et seq.), foster care and adoption programs (42 U.S.C. § 670 et seq.), child support program (42 U.S.C. §§ 651-669b), and Child Welfare Services program (42 U.S.C. §§ 620-628). The preliminary injunction is otherwise affirmed. In view of [plaintiffs’] abandonment of further action in the trial court, we do not remand the matter for modification of the preliminary injunction. . . .” (White v. Davis I, supra, 108 Cal.App.4th 197, 235.) II As noted above, only the Controller and several state employee interveners sought review from the Court of Appeal’s decision, and the petitions for review challenged only two aspects of that decision. The Controller’s principal objection is to the Court of Appeal’s treatment of the preliminary injunction issue: the Controller maintains that under the general principles governing the issuance or denial of a preliminary injunction, the trial court in the 1998 case should not have granted a preliminary injunction in any respect, and that the Court of Appeal consequently erred in upholding the preliminary injunction in part. The state employee interveners principally challenge the Court of Appeal’s conclusions with regard to the payment of state employee salaries during a budget impasse, contending that the Court of Appeal should have held that the Controller is authorized to pay all state employees their full and regular salaries during a budget impasse. No party has challenged any other aspect of the Court of Appeal’s decision and none of the numerous additional issues passed upon by the Court of Appeal has been briefed or argued in this court, and thus we have no occasion to address any of those additional issues here. Moreover, as noted above, the Court of Appeal itself confined its discussion only to the particular provisions of law that were raised by the parties on appeal, and did not purport to determine whether any other provision of law may authorize or mandate the disbursement of funds during a budget impasse. Accordingly, we shall address only the two general issues presented on review: (1) Did the trial court err in granting a preliminary injunction in this case?, and (2) Is the Controller authorized to pay all state employees their full and regular salaries during a budget impasse? We turn first to the preliminary injunction issue. Ill The Controller’s principal contention before this court is that the Court of Appeal erred in upholding the preliminary injunction in any respect. The Controller argues that the trial court’s issuance of a preliminary injunction was contrary to well-established principles governing the circumstances in which a trial court in a taxpayer action may enjoin a public official from expending funds prior to a full adjudication of the merits of the taxpayer’s claim. As we explain, we agree that the trial court erred in granting the preliminary injunction. As its name suggests, a preliminary injunction is an order that is sought by a plaintiff prior to a full adjudication of the merits of its claim. (See 6 Witkin, Cal. Procedure (4th ed. 1997) Provisional Remedies, § 287, p. 228.) To obtain a preliminary injunction, a plaintiff ordinarily is required to present evidence of the irreparable injury or interim harm that it will suffer if an injunction is not issued pending an adjudication of the merits. (See City of Torrance v. Transitional Living Centers for Los Angeles, Inc. (1982) 30 Cal.3d 516, 526 [179 Cal.Rptr. 907, 638 P.2d 1304].) Past California decisions further establish that, as a general matter, the question whether a preliminary injunction should be granted involves two interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief. As explained in IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70 [196 Cal.Rptr. 715, 672 P.2d 121]: “This court has traditionally held that trial courts should evaluate two interrelated factors when deciding whether or not to issue a preliminary injunction. The first is the likelihood that the plaintiff will prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued.” As the court in IT Corp. further noted: “The ultimate goal of any test to be used in deciding whether a preliminary injunction should issue is to minimize the harm which an erroneous interim decision may cause. [Citation.]” (Id. at p. 73, italics added.) A number of Court of Appeal decisions have addressed the proper application of these general principles relating to preliminary injunctions in the particular circumstance of a taxpayer action that is brought to enjoin the alleged improper expenditure of public funds. In Cohen v. Board of Supervisors (1986) 178 Cal.App.3d 447 [225 Cal.Rptr. 114] (Cohen II), the Court of Appeal, in a decision on remand from this court (see Cohen v. Board of Supervisors (1985) 40 Cal.3d 277 [219 Cal.Rptr. 467, 707 P.2d 840]) addressed the question whether the relative “balance of harms” in that case supported the trial court’s decision denying a preliminary injunction in a taxpayer action that challenged the validity of a recently enacted city ordinance imposing various regulations and restrictions on escort services within the city. The action challenged the ordinance on a variety of grounds, including a claim that it was facially unconstitutional under the First Amendment. Noting that one of the plaintiffs in the case had brought suit solely as a resident taxpayer under section 526a of the Code of Civil Procedure to enjoin the alleged illegal expenditure of public funds, the court in Cohen II observed that this plaintiffs “interest appears to be limited to his taxpayer’s pocketbook, an interest which is sufficient to confer statutory standing to maintain this action and bring it to final judgment permanently enjoining unlawful expenditures (Blair v. Pitchess (1971) 5 Cal.3d 258, 267-270 [96 Cal.Rptr. 42, 486 P.2d 1242, 45 A.L.R.3d 1206]), but which to our knowledge has never been held to substitute for the high degree of existing or threatened injury required for the prejudgment injunctive relief sought here.” (178 Cal.App.3d at p. 454, italics added.) The court in Cohen II went on to expressly reject the plaintiff taxpayer’s argument that its assertion that the ordinance was unconstitutional, and that the public funds that would be expended to enforce the ordinance would therefore be unlawfully incurred, was itself sufficient to demonstrate the type of irreparable injury that would justify granting a preliminary injunction. (Id. at pp. 454-455.) Accordingly, on this ground alone, the court in Cohen II affirmed the trial court’s order in that case denying the taxpayer’s request for a preliminary injunction. In Loder v. City of Glendale (1989) 216 Cal.App.3d 111 [265 Cal.Rptr. 66] (Loder I), the Court of Appeal considered the question of interim harm in reviewing the validity of a trial court order granting a preliminary injunction in a taxpayer action challenging the validity of a recently adopted city drug testing program as violative of federal and state constitutional restrictions on unreasonable searches and seizures. Following the reasoning of the decision in Cohen II, the Court of Appeal in Loder I held that the plaintiffs “status as a taxpayer by itself is insufficient to entitle her to a preliminary injunction. ... [t] ... [1] [W]hile plaintiffs alleged status as a taxpayer affords her standing to maintain this action, her harm for preliminary injunction purposes is limited to defendants’ alleged improper use of tax funds. This monetary harm is insufficient to justify the issuance of a preliminary injunction.” (216 Cal.App.3d at pp. 784-785.) On this basis, the court in Loder I reversed the trial court’s order granting a preliminary injunction, taking care at the same time to note that “[njothing in this opinion is intended to reflect on, or express any opinion as to the validity of the City’s drug testing program or any part of it.” (Id. at p. 786.) In Leach v. City of San Marcos (1989) 213 Cal.App.3d 648 [261 Cal.Rptr. 805] (Leach), the Court of Appeal reached the same conclusion as the courts in Cohen II and Loder I with regard to the general principle that a taxpayer’s claim of an illegal expenditure of public funds ordinarily is not sufficient in itself to warrant the issuance of a preliminary injunction. In Leach, a taxpayer challenged the validity of a redevelopment plan adopted by the defendant city, and sought a preliminary injunction to prevent the city from taking any further action to implement the challenged plan. Although the taxpayer presented evidence to support his claim that the redevelopment plan at issue might well not conform with the applicable Community Redevelopment Law, he presented no specific evidence indicating that an injunction was necessary to prevent irreparable harm pending a trial on the merits of the claim, and the trial court denied the preliminary injunction. On appeal, the Court of Appeal affirmed the denial of a preliminary injunction, concluding that even though the taxpayer had demonstrated a likelihood of success on the merits, the trial court properly had denied a preliminary injunction on the ground that the taxpayer had failed to demonstrate sufficient interim harm. The court in Leach stated that “even if the record here demonstrated the imminent expenditure of tax increment revenues, such an expenditure would not support a preliminary injunction in favor of a private citizen.” (213 Cal.App.3d at p. 662.) After quoting at length the pertinent portions of Cohen II, the court in Leach observed that, “[cjontrary to Leach’s argument, we find no meaningful distinction between his status as a taxpayer whose burden might be increased by the plan and the plaintiff in Cohen //whose tax dollars might have been unlawfully spent enforcing the escort ordinance. While the redevelopment plan may eventually impose a larger burden on taxpayers outside the plan area than enforcement of an escort ordinance, Leach has not suggested how