Arizona Court of Appeals Division One holds that a hospital assessment does not require a super-majority vote when it is not a tax and is authorized by statute, not prescribed by formula, amount, or limit, and set by a state officer or agency.

HB 2010, which expands Arizona’s indigent healthcare program, includes a levy on hospitals to be set by the director of the Arizona Health Care Cost Containment System (AHCCCS).  The bill passed by a simple majority vote.  A group of legislators who voted against it filed suit, arguing that Article 9, Section 22 of the Arizona Constitution requires the bill to be passed by a super-majority vote.

Article 9, Section 22 of the Arizona Constitution requires a super-majority vote for acts that increase state revenues, including imposition of new taxes or new fees or assessments.  However, Section 22 does not apply to “[f]ees and assessments that are authorized by statute, but are not prescribed by formula, amount or limit, and are set by a state officer or agency.”  The Court of Appeals held that the hospital assessment falls under this exception.

First, the Court concluded that the levy was an assessment, rather than a tax, because AHCCCS is the entity imposing the levy, the levy applies only to hospitals within the discretion of the AHCCCS director, and the levy benefits the hospitals.

Second, the three requirements of the exception are met.  No party challenged that the assessment is set by a state officer or agency.  The assessment is “authorized by statute,” as the plain language of the exception includes no requirement that the authorizing statute must be passed by a super-majority before the exception applies.  The assessment is also not prescribed by formula, amount, or limit.  The legislators argued that federal laws containing regulations that must be followed to receive federal funding constitute a formula or limit.  The Court rejected this argument, holding that the exception refers only to a formula or limit found in a state law – specifically the state statute authorizing the assessment.  Furthermore, although the authorizing statute states that the assessment is “subject to approval by the federal government,” that approval is not a “limit” because the AHCCCS director has full discretion to choose the amount of the assessment and any exceptions.  Finally, the existence of a condition which, if not met, would remove the assessment entirely is not a “limit” on the assessment itself.

Judge McMurdie authored the opinion of the Court, in which Presiding Judge Jones and Judge Norris joined.