Supreme Court: Arizona must make inflation adjustment to school funding

PHOENIX -- Reaffirming the right of voters to make their own laws, the Arizona Supreme Court on Thursday ruled state lawmakers acted illegally by refusing to adjust state aid to public schools for inflation.

The justices rejected arguments by attorneys for the state that lawmakers are free to ignore the provisions of a 2000 voter-approved measure mandating the annual increases. They said the Voter Protection Act, a constitutional provision prohibiting legislative tinkering with anything approved at the ballot, pretty much makes such adjustments off limits.

Thursday's decision most immediately ensures that schools will be in line for at least another $80 million this coming budget year, with increases every year forever unless and until voters decide otherwise.

Nothing in Thursday's ruling requires lawmakers to give schools now what they should have given them during the four years they did not fully fund the formula.

But attorney Tim Hogan, who represents schools that sued, said future state aid should be computed not from current funding but what it would have been had legislators complied with the law all along. That yet-to-be-fought battle could immediately add up to $250 million in aid to schools.

The implications of Thursday's ruling, however, are more far reaching.

The decision is a sound slap at lawmakers who contended they can ignore voter mandates. And the ruling broadly interpreting the scope of the Voter Protection Act will limit future efforts by lawmakers to balance the budget by short-changing programs voters have said they want funded.

At issue is a 2000 ballot measure which boosted the state's 5 percent sales tax by six-tenths of a cent through June 30, 2021. Approved on a margin of 53.5 percent to 46.5 percent, it also requires the Legislature to forever increase funding for schools by 2 percent or the change in the gross domestic price deflator, whichever is less.

Lawmakers did that until 2010, when, facing a budget deficit, they reinterpreted what the law requires. The result is that, since then, schools have lost anywhere from $189 million to $250 million, depending on whose figures are used.

School districts sued.

Legislators did add $82 million in inflation funding for the new fiscal year that began July 1 after the state Court of Appeals sided with challengers. But lawmakers took the case to the high court, arguing the mandate is legally unenforceable.

Assistant Attorney General Kathleen Sweeney said the 2000 measure sets the formula for increasing state aid and then tells the Legislature to find the money somewhere. She argued that infringes on the constitutional right of lawmakers to decide funding priorities.

But Justice John Pelander, writing for the unanimous court, said Sweeney has it backwards.

"Our state constitution, unlike the federal constitution, does not grant power, but instead limits the exercise and scope of legislative authority,' he wrote.

Pelander acknowledged that, generally speaking, one Legislature cannot bind future legislatures. That principle frees lawmakers next year to repeal what was adopted by lawmakers two years ago.

But he pointed out that lawmakers in 2000 chose not to enact the tax hike and inflation indexing measure themselves, punting instead and putting the question to voters.

"Having chosen to refer the measure to the people, who then passed it, the Legislature is subject to the restrictions of the Voter Protection Act which fundamentally altered the balance of power between the electorate and the Legislature,' Pelander wrote.

House Speaker Andy Tobin, R-Paulden, said the issue never should have wound up in court -- and the justices should have stayed out of the whole issue.

"The courts continue to venture into this policy land by pretending that they're really answering legal questions,' he said.

Tobin said that the justices should have recognized that it is the job of elected legislators to determine how to divide up the state's tax revenues. He said Thursday's ruling ties lawmakers' hands if they have to abide by years-old voter mandates.

But Andrew Morrill, president of the Arizona Education Association, said it's a problem of legislators' own making.

"If the state Legislature were even responsive to the will and priorities of Arizona voters time and time again, I don't think you'd see the (initiative) process, which is protected in the Constitution, used as often as it is,' he said.

Tobin said that's fine from an academic standpoint. But said the courts need to consider what happens the next time the state's revenues drop by nearly a third, which is what happened at the end of the last decade, and lawmakers find they don't have the money they need to fund every priority but are required by court rulings to fund anything approved by voters.

"What are they going to do: Come in and do the budget for you?' he asked, wondering out loud if the justices might force lawmakers to hike the state sales tax to raise revenues or, alternately, cut funding for the Department of Veterans Services.

Rep. John Kavanagh, R-Fountain Hills, who chairs the House Appropriations Committee, said Thursday's ruling makes it difficult for lawmakers to balance future budgets.

`When you have people appropriating large amounts of money based not upon a holistic view of government but on what they're hearing, often by well-financed political campaigns, it wrecks havoc on the budget,' he said.

But Tim Ogle, executive director of the Arizona School Boards Association, was not swayed.

"They have a responsibility to the citizens that elected them,' Ogle said, citizens who have a constitutional right to adopt their own laws. "So they'll just have to figure that part out.'

The court has not always sided with ballot proponents. Last year, without comment, the justices upheld a lower court ruling that lawmakers can sidestep a requirement in a 2004 ballot measure that the state must provide care for everyone below the federal poverty level.

But that conclusion was based on language in the initiative which said the coverage would be funded by a tobacco tax, the state's share of a nationwide settlement with tobacco companies, and other "available sources' of cash. And the courts said it is up to legislators to determine whether there are funds "available.'

The programs cut from the Arizona Health Care Cost Containment System are set to be restored in January as part of the state's decision to take advantage of -- and get funds through -- the federal Affordable Care Act. Under the plan pushed by Gov. Jan Brewer, those dollars will be coupled with what amounts to a tax on hospitals.

But that program itself could wind up before the Supreme Court, with foes of Medicaid expansion arguing that lawmakers illegally enacted a tax hike without the requisite two-thirds vote required by the Arizona Constitution. Attorneys for the governor contend the levy is not a tax and needed only a simple majority of both the House and Senate.

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