League ofArizonaCities and Towns v. Martin (2/3/2009)

February 4, 2009

Arizona Supreme Court Holds That a Statutory Measure Requiring Incorporated Cities and Town to Deposit Money into the State General Fund Is Not an Appropriation That May Be Included in the General Appropriations Bill.

The general appropriations bill for the 2008-2009 fiscal year included a provision that required incorporated cities and towns to pay approximately $18 million dollars into the state general fund before the end of the fiscal year.  The League of Arizona Cities and Towns, on behalf of its members, raised with the Governor its concern that the provision violates Arizona Constitution Article 4, Part 2, Section 20, which limits what may be included in the general appropriations bill.  Discussions with the Governor did not resolve the issue, and the League brought a special action in the Arizona Supreme Court.  The Court accepted jurisdiction and granted relief, agreeing with the League that the provision is unconstitutional.

The Court held that the provision did not meet the definition of an “appropriation” for purposes of Article 4, Part 2, Section 20, which requires (1) a “certain sum”; (2) a “specified object”; and (3) the “authority to spend.”  The Court pointed to Rios v. Symington, 172 Ariz. 3, 833 P.2d 20 (1992), in which it concluded that a transfer from a special fund into the state general fund, which has the effect of reducing a prior appropriation for the special fund, is also an appropriation.  In this case, although the provision met the “certain sum” requirement, the legislature did not identify any prior appropriation set aside for cities and towns that would be reduced by the challenged provision. 

Before addressing the merits of the League’s challenge, the Court treated at some length the Governor’s argument that the Court should decline jurisdiction based on the equitable doctrine of laches.  It rejected her claim that a delay in filing an action could deprive the Court of jurisdiction but conceded that an unreasonable and prejudicial delay might factor into the Court’s decision whether to take the case. 

The Court concluded that any delay in filing this suit was neither unreasonable nor prejudicial.  The four-month delay was not unreasonable because, the Court said, seven months remained in the fiscal year when the League filed suit, and five months remained as of the date of its opinion.  The Court also disagreed with the Governor’s claim that the four-month delay caused prejudice by imposing a burden on the state budget process.  The approximately $18 million to be paid into the state general fund represented only a small fraction of the state deficit, reportedly $1.6 billion as of the date of the Court’s opinion.  In addition, an alternative remedy is available to make up the shortfall caused by the Court’s rejection of the provision:  the legislature may reduce or eliminate as-yet-undistributed payments due to cities and towns under the Urban Revenue Sharing Fund, A.R.S. § 43-206.    

Vice Chief Justice Berch authored the opinion for a unanimous Court.

Justice Bales wrote a concurring opinion, in which Justice Hurwitz joined, explaining that the challenge by the cities and towns was not barred by laches because the legislature has sufficient time left in the fiscal year to adjust the budget in response to the Court’s opinion without affecting other recipients of appropriations.  Although a four-month filing delay might otherwise be unreasonable in the context of state budget measures, this case presents unique circumstances that allow the legislature to reach the same result while avoiding the constitutional pitfall identified by the League.  Adhering to the Arizona Constitution’s prohibition against including provisions other than “appropriations” in the general appropriations bill, although the same end can be achieved through separate measures, “not only honors the language of Article 4, Part 2, Section 20 of the constitution, but also promotes accountability and transparency in the state’s budgeting process.”