Howard Fischer reported last week, State asks court to deny $1 billion owed to schools:
Attorneys for state lawmakers are urging a judge to reject a request by Arizona schools for more than $1 billion in inflation funding they were not given, saying it’s impossible and would wreck the budget.
The legal team headed by Bill Richards points out the state is already looking at a $1 billion deficit for the coming budget year, which includes an extra $336 million in funding Maricopa County Superior Court Judge Katherine Cooper already ordered the state to start paying.
The order obligates the state for similar amounts every year from now on to restore school funding to where it should have been had lawmakers not illegally withheld inflation funds in the first place.
“The only conclusion that can be drawn from the current deficit situation is that the state does not have funds available to pay the retroactive amounts demanded by the plaintiffs,” the state legal filling says. “And such relief is legally and factually impossible.”
But Don Peters, who represents the schools, says that’s a lie. He said there are two clear options.
One is to further cut existing spending on other things to do this,” Peters said, adding quickly that the schools he represents are not specifically advocating that or any particular solution.
Acknowledging that is not an option the Legislature is likely to favor, Peters said, “‘I don’t want to’ is not a legal defense.”
Mr. Peters is correct. When the promisor (legislature) caused contract performance to be impossible or if it were foreseeable, or predictable that contract performance would have become impossible, the promisor is not entitled to the defense of impossibility. Nor is it factually impossible. As Mr. Peters points out, the legislature can raise taxes — and is in fact constitutionally obligated to do so.
I previously posted about this in late October. Our lawless legislature asserts the ‘impossibility’ defense to inflation adjusted education appropriations:
“Impossibility” or “impracticality” is a contract defense to performance of contract that I have not previously seen asserted in response to a legislatively referred state statute, Prop. 301 (2000), regarding a legislative budget act.
I do not know the particulars of the case law cited by the Arizona legislature, but I did find this case from the Missouri Supreme Court from June 2013 that discussed the impossibility defense to a state statute, as asserted by local school districts in that particular case, in which the Court rejected the defense. Gina Breitenfeld, Appellant vs. School District of Clayton, et al. (No. 92653) (.pdf) (at Page 31):
The “impossibility” arguments that the defendant school districts raised against the enforcement of section 167.131 echo the doctrine of impossibility (or impracticality) that typically is applied in the realm of contract law. In the context of contracts, “impossibility” is explained as follows: “If a party, by contract, is obligated to a performance that is possible to be performed, the party must make good unless performance is rendered impossible by an Act of God, the law, or the other party.” Farmers’ Elec. Co-op., Inc. v. Missouri Dep’t of Corr., 977 S.W.2d 266, 271 (Mo. banc 1998). This concept, however, is not applied unless the party arguing an “impossibility” defense has demonstrated that virtually every action possible to promote compliance with the contract has been performed. Id. (“A party pleading impossibility as a defense must demonstrate that it took virtually every action within its powers to perform its duties under the contract.”); see also Bolz v. Hatfield, 41 S.W.3d 566, 573 (Mo.App. 2001). This reflects the admonition that “[a] party cannot by its own act place itself in a
position to be unable to perform a contract, then plead that in ability to perform as an excuse for nonperformance.” Farmers’ Elec., 977 S.W.2d at 271.
Our lawless legislature clearly does not qualify for this defense.
First, Prop. 301 (2000) is a legislatively referred state statute from which the legislature now seeks to avoid compliance. The party that proposed its performance requirement is unilaterally seeking to avoid its own performance. Performance was not rendered impossible by the other party, i.e., the school districts.
The Arizona Voter Protection Act, Prop. 105 (1998), would require a “three-fourths vote to amend measure, to supersede measure, or to transfer funds designated by the measure, and only if each furthers the purpose of the measure.” The failure of the legislature to pay the inflation adjusted appropriation to the school districts was not in furtherance of the purpose of Prop. 301 (2000), as the Arizona Supreme Court has already ruled.
Second, the Arizona legislature cannot demonstrate that “virtually every action possible to promote compliance with the contract has been performed.” The state of Arizona possesses a power which a private party to a contract, or a political subdivision of the state without legislative authorization does not: the power to compel the payment of taxes.
In fact, the Arizona legislature has a constitutionally prescribed duty to raise taxes sufficient to pay for the maintenance of the public education system. Arizona Constitution, Article 11, Section 10, clause 2: “In addition to such income the legislature shall make such appropriations, to be met by taxation, as shall insure the proper maintenance of all state educational institutions, and shall make such special appropriations as shall provide for their development and improvement.”
Not only did the Arizona legislature fail its constitutionally prescribed duty to raise taxes to insure the proper maintenance of all state educational institutions, state legislators and GOP gubernatorial nominee, State Treasurer Doug Ducey, led the opposition to a citizens initiative to provide additional tax revenue for education, Prop. 204 in 2012. This is the exact opposite of taking “virtually every action within its powers to perform its duties” with respect to public education.
The Arizona legislature will assert that Prop. 108 (1992) requires a tw0-thirds super-majority in each chamber to pass any tax increase, which renders this “impossible” because of the ideological extremism of Tea-Publicans in the legislature. Lack of will to do what is just and necessary is not the same thing as “impossible.” If enough Republicans joined with Democrats in the legislature to pass long overdue tax reforms, a two-thirds majority is achievable. In any event, the legislature could refer the undemocratic Prop. 108 back to the voters for repeal.
Finally, the Arizona legislature has unclean hands and is not entitled to a remedy at law or equity. The Arizona legislature acted in bad faith — at the same time it was making the deepest cuts to education funding in the country, Study: Arizona 1st in cuts to schools, Governor Brewer and our Tea-Publican controlled legislature were also enacting a series of corporate welfare tax cuts that will reduce state revenues. The Legislature approved the phase-in of $226 million in corporate tax cuts in 2011. The cuts began in July and were projected to cost the state $100 million the first year, and will reduce revenues by $538.0 million in FY 2018 when all the provisions are fully implemented. Our lawless legislature robbed Peter to pay Paul.
As a result of these tax cuts, the Legislature’s Finance Advisory Committee estimates the state will end this budget year with a $520 million deficit, and up to $1 billion deficit in the coming fiscal 2016. “A party cannot by its own act place itself in a position to be unable to perform a contract, then plead that inability to perform as an excuse for nonperformance.”
Our lawless legislature should not be heard to plead poverty when it is responsible for actively undermining the fiscal and economic health of this state and its ability to perform.
A second defense asserted by the legislature is a separation of powers/political question argument:
[T]he ultimate defense is the contention by lawmakers that Cooper has no authority to order them to cough up the cash.
Richards acknowledged the Arizona Supreme Court ruled last year the Legislature and Gov. Jan Brewer had, beginning in 2009, illegally ignored a 2000 voter-approved measure hiking the state’s 5 percent sales tax by six-tenths of a cent and adding requirement to increase state aid to schools each year to account for inflation.
Once approved at the polls, the requirement became subject to the Voter Protection Act, a constitutional provision that prohibits lawmakers from repealing, altering or ignoring the measure.
Richards contends the only power the act gives to Cooper — or any court — is to declare what lawmakers did was illegal, precisely what the Supreme Court already has done.
“They certainly do not go so far as to authorized the issuance of complex remedial measures involving retroactive funding calculations that require the courts ignore existing school funding, tax and public finance laws and to make complex policy determinations,” the lawyers argued. “The relief sought here … exceeds the jurisdiction and authority of the court.”
Peters said while the court may not specifically order the Legislature to cut the budget elsewhere or hike taxes, Cooper does have options, including taking control of state finances, which has happened elsewhere.
“But there’s no issue with the power of the court to make sure the judgment’s enforced,” Peters said. “The question is, how do you do that.”
There is precedent in Arizona for such a move.
Two decades ago the Supreme Court declared the system of funding school construction violated a constitutional provision that the state provide for a “general and uniform” school system.
The justices did not order a specific solution, but told lawmakers to come up with a more equitable system — an order that included a threat to block the state from spending any money at all on education until they did it legally.
Lawmakers eventually adopted a system that has withstood legal challenges.
On the other hand, the Arizona Supreme Court has previously failed to enforce spending required by the voters through a citizens initiative. The Court has gone both ways on this separation of powers/political question defense and has been inconsistent. If the school districts are to lose, it will be on this separation of powers/political question defense.
If the courts will not enforce the constitutional rights of citizens against their elected representatives, the only recourse left is at the ballot box. Good luck with that, as we learned on Election Day.