In his ruling, Chaffee cited a 1992 federal court decision that voided a California ban on intra-candidate transfers. Such bans are an unconstitutional infringement on free speech, the court said, because they restrict a candidate's ability to spend campaign money.

"I think I'm bound to follow the [federal court] opinion," Chaffee said after an hourlong hearing.

Correa hailed the ruling and criticized Franklin for filing the lawsuit after the offices of state Atty. Gen. Bill Lockyer and Orange County Dist. Atty. Tony Rackauckas, using the same legal logic as Chaffee, declined to enforce the county transfer ban.

The ban was part of a political reform package approved by county voters in 1992, fine-tuning the county's 1978 political reform laws known as TIN CUP, for the campaign slogan "Time Is Now, Clean Up Politics."

"All of the case law said we were correct, and they still sued," said Correa, whose attorney, Karen Getman, is past chairwoman of the state's Fair Political Practices Commission. "This was a desperate act by a desperate candidate to use the court system to affect the race."

The ruling has broad implications for other local races in Orange County. With the advent of state term limits, county seats have become much more attractive for lawmakers who must leave Sacramento. The redrawing of district lines has also made legislative seats less competitive, meaning few incumbents face significant challenges and have been able to amass sizable surpluses in their state accounts.

Though Correa was the first to transfer a chunk of state-raised funds to a local race, other members of the Legislature are eyeing local contests for 2006. They include Assemblyman Tom Harman (R-Huntington Beach) and Assemblywoman Pat Bates (R-Laguna Niguel), who are considering running for supervisorial seats, and Assemblyman Todd Spitzer (R-Orange), touted as a future candidate for district attorney.

The ability to flood a local race with state money "makes me sick," snapped longtime government watchdog Shirley Grindle, author of the county's campaign reform law. She said local candidates wouldn't have the same ability to jump-start their county races, which carry contribution limits of $1,400 each.

Franklin didn't attend the hearing. His attorney, Kimon Manolius, said they'd confer about what to do next. They have 30 days to appeal the decision and a second ruling that allows Correa to ask the court to order Franklin to pay his legal fees.

Reached by phone later, Franklin said he may appeal. "It's certainly disappointing, but it doesn't change any of the reasons why I felt it was wrong for someone to come in and try to buy a seat on the Board of Supervisors," he said. "The race will still be decided in March."

In court papers, Franklin contended that Orange County's law, which prohibited transfers from any other federal, state or local account, was approved by voters to limit the influence of outside money in elections.

Correa said he made the transfer after receiving a written opinion from the district attorney's office concurring with the earlier attorney general's opinion that upheld the legality of intra-candidate transfers.

To make sure his transfers didn't violate the county's then-$1,000 contribution limit â€" which was raised in recent months to $1,400 â€" he accounted for 340 transfers of $1,000 each from a host of donors to his state campaigns, including state and federal political action committees.

Franklin's attorney called that detailed accounting "a nice disguise" because the money was transferred in a lump sum. "It's just a fiction to get the money into the account," Manolius said.

The ruling also aids Garden Grove Mayor Bruce Broadwater, who transferred about $35,000 to a supervisorial account from his city campaign. Franklin, Correa and Broadwater have declared candidacies to replace 1st District Supervisor Chuck Smith, who is termed out this year.