Governor Taps Punitive Damage Awards For Budget Shortfall

As part of his revised budget package presented to the Legislature, Governor Schwarzenegger recently proposed to increase state revenues by changing existing law to require that 75 percent of future punitive damage awards be paid to the State. Eight other states already have such "split-award" statutes. The Governor projects that this proposal would generate $450 million for California.

The Governor unveiled his proposal in the "May Revision" to his January budget proposal, and explained, "Since the award of compensatory damages compensates the complaining party for their loss or injury, the award of punitive damages … should more appropriately be awarded to the state where it can be used for public good purposes that are consistent with the nature of the award."