Anger simmered last week in local governments across California following a judge’s ruling forcing the locals to turn over some $2.05 billion in redevelopment funds to the state.

The redevelopment agency in Placentia in Orange County voted to withhold the money from the strapped state. In a number of communities, including Sonoma, Richmond, Fortuna, Ridgecrest, Pittsburg and San Diego, officials were publicly expressing anger at the decision. Some were considering withholding the money.

“We have 350 members and they’re all making a decision,” said John Shirey, executive director of the California Redevelopment Association. “We recommended that theymake the payments today. We have no legal reason that they shouldn’t make those payments. So we are doing the right thing, which is abiding by the law, which is something I do not feel the state of California is doing on this issue.”

“This $2 billion is gigantic,” he added. “And we have agencies who have to meet their obligations and they just can’t do it.”

The first week of May, Sacramento Superior Court Judge Lloyd Connelly, in a legal victory for the Schwarzenegger administration, ruled that the locals were required to turn over $1.7 billion in redevelopment funds for the current fiscal year, plus another $350 million in funds for the new fiscal year beginning July 1. The shift is intended to help the state meet its obligation to education funding.

Connelly’s ruling followed a year of litigation that was prompted by the Schwarzenegger administration’s decision to tap the redevelopment money. Shirey’s group, citing constitutional provisions and a 1952 voter-approved law, said redevelopment funding must be used to further redevelopment purposes, including meeting the debts and obligations of the redevelopment agencies.

Connelly, a former Assemblyman a Sacramento City Council member, disagreed. He ruled in favor of the Schwarzenegger administration, which is faced with a $20 billion state byudget deficit,. Connelly said the Legislature had the authority to determine whether the funding was being used to further a redevelopment purpose.

The redevelopment agencies, contending that the money was needed to jump-start local economies, asked for an appellate court to order a stay in the case until the issues were argued on appeal, but the court declined. A appeal is expected to be filed with the 3rd District Court of Appeal within days.

The League of California Cities said the court’s action allows a state raid on local funds.

“Today, politicians are raiding redevelopment funds to offset what the state owes schools without actually benefiting the schools. Tomorrow, if this court decision is upheld, they will steal local funds to finance virtually any program so they don’t have to honestly balance the state budget. The possibilities are virtually endless,” said Chris McKenzie, the League’s executive director.

The fight over the local money couldn’t at a more difficult time for the state or local governments.

With double-digit unemployment, lower-than-expected revenues from income tax collections and a $20 billion budget deficit, the Schwarzenegger administration is poised to present its revised version of the 2010-11 budget on Friday. Local governments, battered by the recession and layoffs, are scrambling for funds.

“It’s incredibly narrow-minded of Sacramento to reach into the pockets of local redevelopment agencies, one of the state’s strongest job-creating engines, at a time when job creation and economic development are desperately needed,” said Fortuna City Manager Duane Rigge.

The redevelopment agencies are backing a ballot initiative that would maintain the use of redevelopment funds for redevelopment purposes. The proponents recently submitted 1.1 million signatures on petitions to the secretary of state. If the measure qualifies, it would appear on the November ballot.