The state Supreme Court on Thursday upheld Gov. Jerry Brown’s plan to dissolve redevelopment agencies, but struck down a compromise law that would have allowed the agencies to survive if they made payments to the state.

In his 2011 budget, Brown proposed eliminating redevelopment agencies and redirecting their tax dollars to school districts and local governments, thereby freeing up nearly $2 billion dollars to shore up the state’s general fund. The Legislature passed Brown’s proposal, but added a measure allowing redevelopment agencies to continue if they paid substantial fees to the state.

The California Redevelopment Association filed suit, claiming the laws violated state Proposition 22, which forbids the state from taking local tax dollars without a vote of the people. Redevelopment officials also argued that eliminating redevelopment agencies would mean the loss of thousands of construction jobs and stall efforts to revitalize hundreds of communities.

In the wake of Thursday’s Supreme Court ruling, redevelopment officials said they would re-open talks with legislative leaders next month to come up with a solution that would allow the agencies to continue operating.

“Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement,” said Julio Fuentes, president of the Community Redevelopment Association.

In a statement issued Thursday afternoon, Los Angeles Mayor Antonio Villaraigosa said he intends to work with state and local leaders to craft alternative legislation to revitalize local communities.