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CAVE CREEK UNIFIED SCHOOL DISTRICT v. DUCEY

January 15, 2013

CAVE CREEK UNIFIED SCHOOL DISTRICT; CASA GRANDE ELEMENTARY SCHOOL DISTRICT; CRANE ELEMENTARY SCHOOL DISTRICT; PALOMINAS ELEMENTARY SCHOOL DISTRICT; YUMA UNION HIGH SCHOOL DISTRICT; ARIZONA EDUCATION ASSOCIATION; ARIZONA SCHOOL BOARDS ASSOCIATION; SCOTT HOLCOMB; FRANK HUNTER; AND NANCY PUTNAM, PLAINTIFFS/APPELLANTS,
v.
DOUG DUCEY, IN HIS CAPACITY AS STATE TREASURER; AND STATE OF ARIZONA, DEFENDANTS/APPELLEES.



The opinion of the court was delivered by: Brown, Judge.

OPINION

¶ 1 In this opinion, we address whether a statute approved by Arizona's voters in 2000, as part of Proposition 301, creates a binding obligation on the legislature to implement specific inflation adjustments to the annual budget for K-12 schools. See Arizona Revised Statutes ("A.R.S.") section 15-901.01 (2012) (stating that "the legislature shall increase the base level or other components of the revenue control limit"). For reasons explained below, we hold that § 15-901.01 requires the legislature to provide for annual inflationary increases in each component of the revenue control limit, including the base level. We also conclude that to the extent the legislature may view § 15-901.01 as permitting fewer increases, such an interpretation would violate the Voter Protection Act ("VPA") of the Arizona Constitution, which generally prohibits the legislature from changing voter-approved measures. Ariz. Const. art. 4, pt. 1, § 1(6)(B).

BACKGROUND

¶ 2 In June 2000, the legislature convened in a special session and adopted Senate Bill 1007 ("S.B. 1007"), which (1) proposed a .6% sales tax hike to provide additional funding for public educational institutions and (2) imposed financial and academic accountability requirements on K-12 schools. See generally S.B. 1007, 2000 Ariz. Sess. Laws, ch. 1 (5th Spec. Sess.). The legislature determined that certain portions of S.B. 1007, including the inflation adjustment provision at issue here, would become effective only if approved by the voters:

If approved by the qualified electors voting at a statewide general election, for fiscal years 2001-2002 through 2005-2006, the legislature shall increase the base level or other components of the revenue control limit by two percent. For fiscal year 2006-2007 and each fiscal year thereafter, the legislature shall increase the base level or other components of the revenue control limit by a minimum growth rate of either two percent or the change in the GDP price deflator, ... whichever is less, except that the base level shall never be reduced below the base level established for fiscal year 2001-2002.[*fn1]

A.R.S. § 15-901.01 (emphasis added). Thus, S.B. 1007 directed the secretary of state to submit § 15-901.01 to the voters, along with several other statutory amendments. S.B. 1007 at § 64. The bill stated as follows: "[t]he secretary of state shall place on the ballot of the 2000 state general election the issue of ... [i]nflation adjustments in the state aid to education base level and other components of the revenue control limit pursuant to 15-901.01, ... as added by this act." Id. (emphasis added).

¶ 3 The measure was then placed on the ballot as Proposition 301. Ariz. Sec'y of State, Ballot Propositions and Judicial Performance Review for the 2000 General Election, Proposition 301 (Sept. 2000) ("Proposition 301 Publicity Pamphlet").[*fn2] The full text of the proposed statutory amendments was included in the Proposition 301 Publicity Pamphlet, together with analysis by the Legislative Council and arguments for and against the measure. Id. As relevant to the inflation adjustment, the Legislative Council analysis stated: "If Proposition 301 passes, state general fund expenditures would be an additional $94.5 million in 2002, increasing annually thereafter. These additional expenditures would not be paid for from the increase in the sales tax." Id. at 172. The analysis explained further that the measure to be voted on would provide for "[a]utomatic inflation adjustments in the state aid to education base level or other components of a school district's revenue control limit." Id.

¶ 4 The voters approved Proposition 301 and in each subsequent budget year the legislature made inflation adjustments to both the base level and the transportation support level (the only "other component" existing at the time). The legislature's budget for fiscal year 2010-2011 ("H.B. 2008") adopted in March 2010, however, included an inflation adjustment only for the transportation support level.[*fn3] Ariz. State Senate, Fact Sheet for H.B. 2008/S.B. 1008, provision 1 (7th Spec. Sess. 2010).

¶ 5 In October 2010, several school districts and three individuals ("Appellants") filed a complaint in the superior court naming the State Treasurer and State of Arizona as defendants ("the State"). Seeking a declaratory judgment, Appellants alleged that § 15-901.01, as a referendum protected under the VPA, requires the legislature to increase both the base level and the "other components" of the revenue control limit annually for inflation. Appellants further alleged that the legislature violated the VPA because its failure to adjust the base level amounted to an effective amendment of the statute and because it redirected funds allocated for the specific purpose of making the inflation adjustments.[*fn4]

¶ 6 The State moved to dismiss the complaint for lack of standing and failure to state a claim. In doing so, the State conceded the inflation adjustment included in § 15-901.01 "applies to the base level and other components of the revenue control limit." The State also conceded the statute was a referendum protected by the VPA, but maintained that H.B. 2008 did not violate the VPA because it did not expressly repeal or amend § 15-901.01 or divert funds allocated for any specific purpose. Pursuant to A.R.S. § 12-1841 (2012), the Speaker of the House of Representatives and the Senate President ("the Legislators") filed memoranda in support of the State's motion to dismiss, but did not seek to intervene. Consistent with their arguments on appeal, they asserted that § 15-901.01 is not protected by the VPA because it was not a referendum. The Legislators also asserted the use of the word "or" in § 15-901.01 gives the legislature a choice to adjust either the base level, the "other components" of the revenue control limit, or all of the components. They argued further that looking to legislative history would be unnecessary and inappropriate.

¶ 7 Following oral argument, the superior court granted the State's motion, finding that Appellants had standing but did not meet the "legal prerequisites for recovery." The court explained that although the voters' intention was to have an annual appropriation of funds made to protect schools from the effects of inflation, § 15-901.01 is not self-executing. Noting that the statute is "precatory, not mandatory," the court concluded that "the voters cannot require the legislature to enact a law that provides for that appropriation." The court entered judgment in favor of the State and this appeal followed.

DISCUSSION

¶ 8 Appellants challenge the superior court's dismissal of their complaint, asserting that (1) Proposition 301, through § 15-901.01, "directed, in mandatory language, that specific appropriation of funds be made each year;" (2) § 15-901.01 requires inflation adjustments to all components of the revenue control limit; and (3) the legislature's failure to adhere to that requirement, by adopting H.B. 2008, violates the VPA.[*fn5] Because these issues involve pure questions of law involving statutory and constitutional provisions, our review is de novo. Prince v. City of Apache Junction, 185 Ariz. 43, 45, 912 P.2d 47, 49 (App.1996).

¶ 9 Adopted in 1998, the VPA arose out of concerns "the legislature was abusing its power to amend and repeal voter-endorsed measures." Ariz. Early Childhood Dev. & Health Bd. v. Brewer, 221 Ariz. 467, 469, ¶ 7, 212 P.3d 805, 807 (2009) (citation omitted). The VPA therefore prohibits the legislature from repealing initiatives or referenda passed by a majority of the voters voting on the measure. Ariz. Const. art. 4, pt. 1, §§ 1(6)(B)-(D), (14). As a further limitation, the VPA prevents the legislature from amending voter-approved measures "unless the amending legislation furthers the purposes of such measure and at least three-fourths of the members of each house of the legislature ... vote to amend such measure." Id. at (6)(C). Thus, the principal purpose of the VPA is to preclude the legislature from overriding the intent of the people. See Ariz. Early Childhood Dev., 221 Ariz. at 469, ¶ 7, 212 P.3d at 807 (citing Ariz. Sec'y of State 1998 Publicity Pamphlet at 47-48 (Arguments for Proposition 105)). With the adoption of the VPA, voter-approved measures are now superior to enactments of the legislature in that they cannot be repealed by legislative act, and they cannot be easily amended. See Ariz. Const. art. 4, pt. 1, §§ 1(6)(B)-(C).

ΒΆ 10 As a threshold issue, the Legislators argue that Proposition 301 was not a referendum and thus not subject to the VPA because S.B. 1007 directed the legislature to submit "issues" rather than specific statutory language and was not initiated by the legislature as a concurrent resolution. Through the Arizona Constitution, ...


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