The administration amended a court filing Tuesday night to drop its complaint that special master Matthew Lopes might be increasing the mental health requirements for the state to keep revenue flowing to his law firm.
A judge previously gave the administration five days to withdraw what he called an unsubstantiated "smear" or face the possibility of sanctions.
The administration backed away from the claim but expanded its objections that the special master is costing California too much money.
The filing was part of the state's effort to end court oversight of inmate medical and mental health care and persuade judges to drop a requirement that the state reduce its prison population by about 10,000 inmates this year to improve conditions.
"The state does not allege that the special master is unethical, nor does it impugn his character. But it is indisputable that in a time of extreme fiscal hardship, the state is paying large sums to the special master and his staff," state officials said in the court filing.
Special masters and their experts in the mental health lawsuit have been paid more than $48 million since a court-appointed monitor was established 17 years ago.
In the five years since he took over as special master, Lopes and his court-appointed experts have collected about half that money. His Rhode Island law firm has five lawyers assigned to monitor California's mental health treatment, each of whom bills the state an average of at least $30,000 every month, the state said.
Lopes has said he cannot comment because the case is ongoing.
Michael Bien, the lead attorney representing the welfare of mentally ill inmates, said Wednesday that state officials "don't like the message, so they attack the messenger. And they attack in a way that is unethical and inappropriate."
Despite the administration's arguments, Bien said California still fails to provide proper care to inmates.
Rosen Bien Galvan and Grunfeld of San Francisco is the lead law firm in the mental health lawsuit on behalf of inmates. Attorneys led by Bien's firm in the case have been paid $19 million by the state since 1997, according to figures compiled by The Associated Press.
Brown, a Democrat, has repeatedly criticized what he calls "the prison lobby" as he urges federal judges to end the oversight.
All told, taxpayers have spent $182 million during the past 15 years for court-appointed authorities including the special master, and for inmates' attorneys who filed a dozen lawsuits over the treatment of state prisoners, parolees and incarcerated juveniles.
The total exceeds $200 million when state legal costs are added.
Meanwhile, California has doubled its spending on inmates' medical, dental and mental health care from $1.1 billion in fiscal year 2003-04 to $2.3 billion last year.
The state is disputing Lopes' report last month that the state still provides substandard care.
Inmates are dying by suicide at the rate of one every 11 days; inmates can wait weeks before they receive mental health treatment; and the state still has too few mental health staff and beds despite years of costly efforts, Lopes wrote.
U.S. District Court Judge Lawrence Karlton of Sacramento has scheduled a March 27 hearing on whether conditions have improved and the court should end its oversight.