State Treasurer Jeff DeWit considering suing state for misleading voters on Prop. 123

DeWitArizona State Treasurer Jeff DeWit is considering suing the state for adopting misleading statements for the ballot explanation for Prop. 123, the school funding inflation adjustment settlement to Cave Creek Unified School Dist. et al. v. Ducey, at the Special Election scheduled for May 2016.

I provided you with the language of the laws at issue in yesterday’s post, Deadline for public comments on Prop. 123, school inflation, which you will need to reference because Howard Fischer and the Arizona Daily Star do not provide it in this report, Lawmakers OK wording of school funding proposition:

State lawmakers voted Thursday to approve an explanation of Proposition 123 over objections by state Treasurer Jeff DeWit that it is misleading — and probably illegal.

And now he is weighing whether to ask a court to intercede ahead of the May 17 election to change the distribution formula for state land trust proceeds — and possibly refusing to comply with the law even if voters approve it.

The language, which will be placed in pamphlets mailed to voters ahead of the special election, details a plan approved by lawmakers in October to increase by more than $2 billion over the next decade the amount of money taken from the state land trust for schools. That plus other state dollars should mean an extra $3.5 billion for schools through 2025.

It also would end a 5-year-old lawsuit filed against the state by schools that say lawmakers illegally ignored a 2000 voter-approved requirement to boost state aid annually to account for inflation.

What bothers DeWit is the claim by Gov. Doug Ducey and other supporters of the ballot measure that it will not dip into the principal of the trust. DeWit says that’s a lie designed to sway votes.

The trust is now worth about $5.1 billion.

DeWit estimated the state will sell about $100 million a year in state trust land. That would put the value of the trust in 2025 at a minimum of $6.1 billion.

But DeWit said if voters approve Proposition 123, the trust will be worth just $6 billion, even when investment income is added in. That, he said, means the measure effectively would reduce what the principal would otherwise be despite what voters are being told.

That, however, is only a small part of the problem.

DeWit said he believes the larger distributions cannot take place unless Congress amends the law that gave Arizona the land in 1912 when it became a state. He said that’s important for voters to know because if Congress refuses, the entire deal to end the school funding lawsuit falls apart.

That contention was refuted by former Congressman John Shadegg. He said a 1999 amendment to that 1912 law that he sponsored is broad enough to allow Arizona voters, by approving the required amendment to the state Constitution, to decide how they want to spend the trust.

Actually the principle sponsor of the Arizona Statehood and Enabling Act Amendments of 1999 (H.R. 747 106th Congress) was Rep. Robert Stump (AZ 3d Dist.), not Shadegg. And his statements about how he reads the law are not supported by the Text of the bill.

In fact, he told lawmakers that he reads the 1999 law to allow voters to simply decide to drain the entire trust if they want.

This is absolutely false. The purpose of Proposition 102, also known as the Amend the Constitution Relating to Investment of State Trust Funds Act (1998), was to permit the state to invest in the stock market to preserve the value of the assets of the trust against inflation. There is no language that would “allow voters to simply decide to drain the entire trust if they want” as Shadegg falsely claims. This would be contrary to “SEC. 2. PROTECTION OF TRUST FUNDS OF STATE OF ARIZONA,” and contrary to the Congressional intent behind the Arizona Statehood and Enabling Act, which was to prevent Arizona from selling off the trust assets as had occurred under previous state land trust funds in other states. Congress intended to be more restrictive with Arizona and New Mexico and to preserve congressional oversight over the state land trust funds.

DeWit said after Thursday’s vote he has not decided what to do next.

By law, the legislative council, composed of state lawmakers, is required to prepare an “impartial analysis” of every ballot measure. That language is included in pamphlets sent ahead of the election to every registered voter.

One option for the treasurer is to sue, asking a judge to rule the council’s explanation is legally flawed.

“I’ve got to look at the value to Arizona towards pushing that issue,” he said.

“They’ve purposely put some misleading statements in here in an attempt to get more votes at the ballot by misleading the public,” DeWit said. “I think it’s terrible.”

An even bigger legal dispute looms if Proposition 123 is approved. It would direct DeWit to distribute more trust dollars not only to schools but to other beneficiaries of the trust, ranging from universities to state prisons.

But DeWit said the only written legal opinion he has seen tells him he can do that only if Congress first amends federal law governing the state trust. And the treasurer said he has to obey that opinion “until such time as somebody can offer a differing legal opinion and put it out there that says something to the opposite.”

That potential stalemate would have to be resolved ultimately by the state Supreme Court.

The outcome depends on how someone reads the 1999 federal law.

Before then, federal statutes strictly limited how Arizona could invest its trust dollars. Shadegg said the aim of the 1999 law was to allow some of the dollars to be put into stock which, while more risky, had a higher rate of return. [True.]

The text of the law says the change was designed to help protect the trust from the effects of inflation. [True.]

But what it also says is that Arizona was free to decide how to use its trust dollars in accordance with any voter-approved limits in the state constitution.

This is absolutely false. There is no language in the Amendments exempting Arizona from needing congressional approval to “use its trust dollars in accordance with any voter-approved limits in the state constitution.” The 1999 Amendments required congressional approval. Again, the congressional intent behind the Arizona Statehood and Enabling Act was to prevent Arizona from selling off the trust assets as had occurred under previous state land trust funds in other states. Congress intended to be more restrictive with Arizona and New Mexico and to preserve congressional oversight over the state land trust funds.

Proposition 123 would amend the constitution to allow for larger withdrawals. Shadegg said he reads the 1999 federal law as allowing that to happen as long as voters give their OK.

What Shadegg believes is irrelevant. He doesn’t know what he is talking about, and his view is not supported by the text of the law. He is misleading reporters who should know better than to stenographically report what he says as fact.

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