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Arpaio v. Maricopa County Board of Supervisors - 8/19/2010

Arizona Court of Appeals Division One Holds That Legislature Has Power To Authorize the Transfer of Monies From Statutorily Created Funds Into the State’s General Fund Without Expressly Amending the Statutes Which Created the Funds. In Addition, the Notice-of-Claim Statute, A.R.S. § 12-821.01, Applied When the Sheriff’s Remedies Would Seek the Return of Money from the State, Even Though The Complaint Did Not Request Damages.

The legislature passed House Bill 2275 (the “Bill”) in June 2008.  Among other things, the Bill directed each county to transfer a sum of money to the Arizona Health Care Cost Containment System Aministration.  After the bill was passed and signed, Senate Bill 1004 amended the bill and directed the transferred monies to be sent to the State’s general fund.  In implementing these bills, the Maricopa County Board of Supervisors (the “Board” or “County”) designated monies from twenty-six special revenue funds for transfer.  The Maricopa County Sheriff challenged the planned transfer of monies from six of the special revenue funds.  The Sheriff alleged those special revenue funds had been created by statute for the use and administration of the Sheriff and other county departments.  After the trial court granted summary judgment in favor of the County and the State, the County transferred the disputed monies to the State’s general fund.

The Sheriff appealed, arguing that the Bill was unconstitutional and that the trial court erred when it concluded that the Bill implicitly amended the statutes which created the special revenue funds at issue.  In response, the County argued that the Sheriff’s challenge was moot because the money was transferred already and thus any declaratory relief for the Sheriff would not have practical effect.  Additionally, following oral argument, the Court directed the parties to file briefs regarding whether the case was moot for the additional reason that the Sheriff failed to follow the “notice of claim” procedures found in A.R.S. § 12-821.01.

The Court of Appeals affirmed in a unanimous opinion.  At the outset, the Court held that A.R.S. § 12-821.01’s notice-of-claim requirements were applicable and thus the Sheriff’s appeal was moot.  Section 12-821.01 requires any claimant seeking to recover money damages from the State to follow a strict set of pre-suit procedures.  Although the Sheriff only sought declaratory and injunctive relief – which are in general not subject to notice-of-claim requirements – the Court reasoned that the Sheriff would have to follow Section 12-821.01 to the extent he sought any return or “replenishment” of the transferred monies.  After concluding that the Sheriff’s arguments on appeal were moot, however, the Court decided to address the merits because “the substantive issues could affect similar future legislative acts.”

On the merits, the Court held that the Board had authority to transfer the monies to the State.  First, the Court explained that the special revenue funds were “public funds,” not funds held in trust by the County.  Accordingly, because public funds are subject to the legislative power to amend their appropriation, the legislature was free to change how the monies in the special revenue funds should be used. 

Second, the Court held that the Bill did not need to expressly amend the statutes which enabled each special revenue fund (“enabling statutes”).  The Bill stated that the County could use “any source” of county revenue to meet its obligations to transfer monies to the State, and the County designated the specific special revenue funds for that purpose.  The Court reasoned that because the legislature created the funds in the first place it was free to “redirect the use of those funds” without making a specific amendment to the original enabling statute for each fund.  Thus, the direction to use “any source” in effect amended the enabling statutes and allowed the County to use the special revenue funds to send monies to the State.

Finally, the Court rejected the Sheriff’s argument that the Bill is unconstitutional under Article 9, Section 22 of the Arizona Constitution.  That Section states that a two-thirds super-majority is required to pass any act imposing “a new tax, fee, or assessment providing for a net increase in state revenue.”  According to the Court, Section 22 applies to statutes that “increase the overall burden on the tax and fee paying public.”  The Bill only required a transfer of funds from state entity to state entity, not any increased burden on the public.  Thus, the Bill did not have to meet Section 22’s super-majority requirement.

Judge Winthrop authored the opinion.  Judges Barker and Johnsen concurred.

Posted by: Joseph N. Roth

Posted On: 9/1/2010