Ducey Packed AZ Supreme Court Temporarily Upholds Prop. 208, With A Roadmap To Gutting It

Gov. Ducey and our lawless MAGA/QAnon Republican legislature tried to nullify the constitutional right of Arizonans to enact citizens initiatives to improve funding for public education, which they have steadfastly refused to do for many years. Voters approved the Invest In Ed Act (Proposition 208), to impose a small surtax on the wealthy to generate more funding for public education. Wealthy Arizonans and their lickspittle lackeys in the MAGA/QAnon Republican legislature sued to nullify the election results and the will of the voters.

The Ducey packed Arizona Supreme Court upheld Prop. 208 today, but it was not a clear victory as it should have been. The Ducey packed Arizona Supreme Court “split the baby” and gave the plaintiffs a roadmap to eventually gutting this voter approved citizen initiative in the future.

The Arizona Mirror reports, Arizona Supreme Court sets the stage to overturn Prop 208 tax increase for school funding:

The Arizona Supreme Court refused to block a voter-approved tax hike on the state’s top earners, rejecting a challenge brought by Republican lawmakers and a local business, who argued that the tax violated the state constitution.

But the victory for public school advocates is likely only temporary, as the court ruled that Proposition 208’s spending on teachers and school operations is subject to constitutional restrictions on spending — and said it’s very likely that the spending will far exceed the constitutional limits.

From the Opinion:

That is not the case for Prop. 208. Here, severance of the unconstitutional provisions strikes A.R.S. § 15-1281(D)(1), (2), and (3) from the statute. This leaves Prop. 208 with no statutory authority to spend approximately 85% of the funds raised by the tax and placed in the Student Support and Safety Fund (“Fund”). Fund monies remain perennially sequestered—they may not be transferred to any other fund, do not revert to the state general fund, and do not lapse. A.R.S. § 15-1281(A). The Joint Legislative Budget Committee projects that Prop. 208 will generate “$827 million in revenue . . . in the first full year of implementation,” and Prop. 208’s ballot materials included this projection as an inducement for enacting its new tax.6 Thus, unlike in Myers, severing the allocation provisions in A.R.S. § 15-1281(D)(1), (2), and (3) materially impacts the initiative’s operation such that the remainder of Prop. 208 cannot stand on its own.

Applying the first prong of the Randolph test, under the remaining statutory provisions of Prop. 208, hundreds of millions of tax dollars will be sequestered in a designated state fund, unable to be spent, to the extent they exceed the expenditure limit. This result makes the remaining portion of Prop. 208 unworkable and thus not severable from its unconstitutional provisions.

Under Randolph’s second prong, Prop. 208 likewise does not survive because the result of the residual provisions is irrational or absurd. A statutory provision resulting in tax revenues being impounded with no prospect of being spent or refunded is such a result … Given that the tax increase was not itself the measure’s objective, but rather how its objectives would be achieved, leaving the Taxing Provision in place without the Allocation Provision is simply not rational. Collecting taxes that cannot be spent does little or nothing to provide increased support for school districts. Indeed, that eventuality would be “so irrational or absurd as to compel the conclusion that an informed electorate would not have adopted” the taxing provision without the provision requiring that the money be allocated to schools.

The Court in its entirety agrees that Prop. 208 cannot constitutionally authorize spending in violation of the Education Expenditure Clause.

Because there was no evidence that the spending will exceed those restrictions, the court ordered the lawsuit remaned to the trial court to determine whether it does. If the trial court determines it does, the ballot measure would be gutted and unable to direct money to public schools.

Prop. 208 imposes an additional 3.5% income tax surcharge on individuals who earn more than $250,000 per year or couples who earn at least a half million. The additional money, which legislative budget staff estimated to be about $827 million annually, is earmarked for K-12 education spending.

[On] appeal, Prop. 208’s opponents argued that the money the ballot measure would send to schools violate a constitutional restriction on how much they can spend. The initiative’s authors attempted to circumvent the constitutional cap by calling the money as “grants” to schools to increase salaries for teachers and support staff — which are explicitly exempted from the spending limits — but the Supreme Court rejected that characterization.

Because the “grants” in Prop. 208 are derived from a tax increase on wealth Arizonans, and not voluntary gifts from private people or non-governmental entities, they are subject to the local spending limits, the court ruled.

By the court’s analysis, roughly $600 million of the estimated Prop. 208 funding is subject to the constitutional spending limits [the Education Expenditure Clause]. And because the aggregate school spending [gap] statewide was only $144 million under the collective spending limit in the last fiscal year, the new education spending “will far outpace (the) permissible spending” and be unconstitutional.

From the Opinion:

To the extent they exceed the constitutional expenditure limitations, Prop. 208’s direct payments to school districts under A.R.S. § 15-1281(D)(1), (2), and (3) are unconstitutional, and these provisions are not severable from the remainder of Prop. 208. However, the record before this Court is insufficient to establish whether such payments will in fact exceed the constitutional expenditure limitation.

In a letter to certain legislator-plaintiffs, Superintendent of Public Instruction Hoffman explained that current “aggregate expenditures of local monies for all school districts is $6,165,430,899 for fiscal year 2020– 21,” but the “aggregate expenditure limitation for all school districts [is] $6,309,587,438,” leaving just a $144,156,539 gap between school expenditures and their expenditure limit. Thus, if the expenditure limit remains at current levels, Prop. 208’s projected $827 million in revenues will far outpace its permissible spending, even accounting for Prop. 208 expenditures that are not subject to the expenditure limit. Furthermore, the EEC projects that the expenditure limit amount will decrease by 4.6%, or approximately $300,000,000. See EEC, Feb. 24, 2021 Letter to Governor Ducey, https://azdor.gov/sites/default/files/media/REPORTS _ESTIMATES _2022_SchoolDist-Feb21.pdf. These facts strongly suggest that Prop. 208 will produce far more revenue than it can constitutionally spend. Invest in Education takes a contrary position.

In any event, there is no record before the Court upon which we can make such a determination. Citing a lack of “expertise on school finance,” and the need for an evidentiary hearing, the trial court had no opportunity to determine whether Prop. 208 funds might exceed the expenditure limit. Based on the limited record before us, it appears that Prop. 208 funds could likely exceed the constitutional spending limitation placed on school districts. However, we cannot with certainty decide whether Prop. 208 revenues will exceed the expenditure limit. Therefore, we remand to the trial court for a determination of this issue.

During the 2021 legislative session, Republican lawmakers and Gov. Doug Ducey took actions to negate the effects of Prop. 208 [in violation of the Voter Protection Act.] The income tax cut they approved created a 4.5% cap on income taxes, effectively reducing the underlying tax rate for those who are subject to Prop. 208 to 1.5%, though they’ll still pay the full amount of the surcharge from the voter-approved tax and that money must still be used for the educational purposes laid out in the ballot measure.

A separate law enacted by Ducey and the legislature exempts businesses that file income taxes under individual tax rates from the effects of Prop. 208.

The Opinion is by Chief Justice Brutinel, joined by Justices Bolick, Lopez, Beene, Montgomery and designated Judge McMurdie. Justice Timmer concurred in part, and dissented in part.

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6 thoughts on “Ducey Packed AZ Supreme Court Temporarily Upholds Prop. 208, With A Roadmap To Gutting It”

  1. It would have been nice if you had addressed even one of my points instead of ignoring them all and going off on a tangent. But this is Blog for Arizona.

  2. Kavanaugh’s always has glib answers supporting one party rule and has always been full of it. The facts are the elite one percent that give Kavanaugh and his pals their marching orders have thrown every possible obstruction at 208. They hated the petitions, they hated the wording even before it went on the ballot. They fought court battles to keep it off. They spent millions trying to defeat it. When voters voted strongly to support it, they threw every kitchen sink argument to overturn it. They even rewrote essentially the whole tax code to try and stop the effects on the rich. Now they have a new argument, and a compliant SSC to get a way to stop it. These anti voter crooks need to be thrown out.

  3. This blog posting is exceedingly deceptive and AZBlueMeanie should be ashamed that he posted it. Even liberal zealots deserve the whole truth.

    First of all, the blog posting’s title deceptively suggests that it was the additional court members that Governor Ducey appointed to the Supreme Court who are the cause of this ruling. However, this ruling was nearly unanimous, so the added members the governor put on the court has nothing to do with this ruling. So called court packing is not an issue.

    Meanie then fails to mention that the group that placed this initiative on the ballot was warned by non-partisan Legislative Council that the wording was probably unconstitutional and that if they wanted to get that money to the schools, they should do it by a constitutional amendment and not a regular initiative. Legislative Council’s reasoning was that the school spending cap was introduced by a constitutional amendment and initiatives cannot override the constitution, a position that the Arizona Supreme Court confirmed in its ruling. The group ignored that advice probably because constitutional changes require more signatures and now they’re paying the price.

    Finally, Meanie suggests that this court ruling undermines the will of the people to enact law by initiative but he fails to acknowledge that the spending limit, which is the reason why this extra money probably can’t be spent, was initiated not by the legislature but by a vote of the people when they amended the Arizona constitution at the ballot box. So, the bottom line is that the people who placed this initiative on the ballot were actually unconstitutionally trying to subvert the will of the voters who change the constitution and put the spending limit in place.

  4. Angela C Keller-Sanchez should probably learn to write a coherent sentence before bagging on teachers.

  5. Is this the same prop that teachers picketed for so they could get a raise and then a flu season later refused to go back to work in person? I believe it is. Hmmm— well we only need one teacher to instruct thousands of students online. That’s what our friendly Chinese Communist Party has forced us to experience this last influenza agenda season. In other words— we don’t need all these whiney teachers anyway. McDonalds pays more and has always needed instructors for a well managed work force.

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