Arizona Supreme Court Holds That Legislature’s Budget Measure Violated Voter Protection Act By Repealing or Amending Voter-Approved Statute Requiring Certain Increases to School Funding.

This case involves the interplay of two state constitutional provisions.  Article 4, Part 1, Section 1(1) of the Arizona Constitution reserves for the people the “power to propose laws and amendments to the constitution and to enact or reject such laws and amendments at the polls, independently of the legislature.”  The people exercise this power through the initiative and referendum process.  Under the Voter Protection Act (“VPA”), the legislature may not repeal a voter-approved law and may only amend the law if it “furthers the purposes” of the law and receives a three-fourths super-majority vote in the legislature.  Ariz. Const. art. 4, pt. 1, § 1(6), (14).

Public schools receive funding based on a statutory formula which includes calculation of a “revenue control limit.”  The “revenue control limit” consists of the “base level” support for each school and the “transportation support level.” 

In 2000, voters approved Proposition 301.  Among other things, Prop 301 required the legislature to make annual inflation adjustments to “increase the base level or other components of the revenue control limit” by certain amounts.  Until 2010, the legislature made annual adjustments for inflation to the base level and the transportation level. In the 2010-11 budget (HB 2008), the legislature only adjusted the transportation level.  In budgets for 2011-12 and 2012-13, the legislature also did not include base level adjustments. 

Various school districts and others sued, contending that HB2008 unconstitutionally amended or repealed Prop 301 (codified as A.R.S. § 15-901.01) in violation of the VPA.  The trial court disagreed and dismissed the complaint.  The court of appeals reversed, holding that § 15-901.01 requires “annual inflationary increases” and that the law was subject to the VPA, meaning that the legislature was bound unless the voters amended or repealed § 15-901.01.  The Supreme Court granted the State’s petition for review because the case raised issues of statewide importance.

The Supreme Court first held that Prop 301/§ 15-901.01 was constitutional.  The State argued that “only a constitutional provision can limit the legislature’s plenary authority” and the constitution did not authorize the electorate to restrict the legislature’s discretion.  Because Prop 301 merely created a statutory provision, the State reasoned, the legislature’s discretion was left intact. 

The Court rejected the State’s argument for several reasons.  First, the Court noted that the “legislature and the electorate” share in the lawmaking power for Arizona.  The legislature does not need specific constitutional authority to act; the constitution identifies what is prohibited, not what is allowed.  The same is true of the people’s law-making power.  Thus, because the Arizona Constitution does not prohibit the voters from enacting Prop 301, they are free to enact it.  Second, the fact that Prop 301 involved a statutory limitation rather than a constitutional amendment did not matter.  The VPA prohibits the legislature from repealing or amending a “referendum measure” approved by a majority of votes; the VPA applies regardless of whether the referendum measure creates a statute or constitutional amendment.

Next, the Supreme Court considered whether HB2008 “impermissibly repeals, amends, or supersedes” § 15-901.01 in violation of the VPA.  A.R.S. §15-901.01 requires the legislature to “increase the base level . . . of the revenue control limit” annually for inflation.  HB2008 deviated from the “funding mandate” in A.R.S. § 15-901.01 by increasing only the transportation level and not the base level.  Although the VPA does not define “repeal,” “amend,” or “supersede,” and HB2008 did not expressly state how it affected § 15-901.01, the Court held that HB2008 implicitly repealed or amended § 15-901.01 because the two provisions could not “be harmonized.”  The Court thus held that HB2008 violated the VPA.

Justice Pelander authored the unanimous opinion.