Department of Local Government Finance v. Griffin

ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:

STEVE CARTER GERALD M. BISHOP
Attorney General of Indiana Merrillville, Indiana

FRANCES BARROW JOHN S. DULL
Deputy Attorney General Merrillville, Indiana
Indianapolis, Indiana
EDWARD R. HALL
Merrillville, Indiana

ATTORNEYS FOR AMICUS CURIAE:

JULIA BLACKWELL GELINAS
TIMOTHY KENNEDY Indianapolis, Indiana
ANGELA SMITH
Hall, Render, Killian, THOMAS WHEELER, II
Heath & Lyman, P.S.C. Indianapolis, Indiana
Indianapolis, Indiana

IN THE

SUPREME COURT OF INDIANA

DEPARTMENT OF LOCAL )
GOVERNMENT FINANCE, )
)
Appellant (Respondent Below), )
)
v. ) No. 49S10-0209-TA-489
)
MICHAEL GRIFFIN and )
LAKE COUNTY, )
)
Appellees (Petitioners Below). )

APPEAL FROM THE INDIANA TAX COURT
The Honorable Thomas G. Fisher, Judge
Cause No. 49T10-0009-TA-98

March 5, 2003

SHEPARD, Chief Justice.

Michael Griffin requested a tax refund of the real property taxes he
paid toward Hospital Care for the Indigent for the 1996-1998 tax years. It
was denied. Griffin appealed to the Indiana Tax Court, claiming among
other things that the tax violates Article 10, §1 of the Indiana
Constitution. The Tax Court agreed. It is apparent that the system
devised by the legislature protects local taxpayers from open-ended
liability for indigent care and also apportions local costs with local
benefits. We conclude that the tax is constitutional, and thus reverse.

Facts and Procedural History

Griffin is clerk-treasurer for the Town of Highland and an owner of
property in Lake County. On January 12, 2000, Griffin filed two 17T Forms
with the Lake County Auditor requesting a refund for the taxes he paid
toward Hospital Care for the Indigent (“HCI”) for 1996, 1997, and 1998.
During these three years, Lake County’s tax rate for HCI ranged from
$0.4824 to $0.5024 per $100 of assessed value. Griffin v. Dept. of Local
Gov’t Fin., 765 N.E.2d 716, 718 (Ind. Tax Ct. 2002). The formula for the
HCI tax rate is based on an extrapolation of historical HCI costs in each
particular county,[1] thus producing disparate rates from county to county.
See State Bd. of Tax Comm’rs v. Montgomery, 730 N.E.2d 680, 681 (Ind.
2000); Griffin 765 N.E.2d at 720.

In his refund claim, Griffin asserted that disparity between counties
rendered the HCI tax illegal and unconstitutional. Therefore, he requested
a review of his taxes by the Department of Local Government Finance
pursuant to Ind. Code. § 6-1.1-26-2.

The Department held a hearing in which Griffin claimed that the HCI
tax violated Ind. Const. art. 10, §1. The Department did not pass on the
constitutionality of the tax, saying this was outside of its authority; it
denied Griffin’s refund claim. Griffin appealed the Department’s
determination to the Indiana Tax Court, asking the court to declare the HCI
tax unconstitutional, illegal, and in excess of statutory authority.
Griffin also sought an injunction preventing collection of the tax. Lake
County joined in the petition as an interested party.

Following cross-motions for summary judgment, the Tax Court ruled (1)
that the HCI tax is a state tax, not a local tax, (2) that the HCI rate
formula is not limited by other code provisions limiting property tax rates
generally, and (3) that because the HCI tax rates vary from county to
county, that variance results in property not being taxed in a uniform or
equal manner as required under Article 10, § 1. Griffin, 765 N.E.2d at 722-
24. Consequently, the Tax Court granted Griffin partial summary judgment
and reversed the Department’s final determination. Id. at 724.

Having decided to apply its holding prospectively only, the Tax Court
denied Griffin’s request for a refund. Griffin v. Dep’t of Local Gov’t
Fin., 770 N.E.2d 957, 960 (Ind. Tax Ct. 2002). It also enjoined assessment
or collection of the HCI tax but stayed its injunction until January 1,
2003, to allow the State reasonable time to revise the HCI tax rate or
consider other solutions. Id. Accordingly, a taxpayer was not entitled to
a refund of the HCI taxes due and payable before January 1, 2003.

Both sides petitioned for review. The Department challenges the
ruling that the HCI tax is unconstitutional. (Department Br. at 10-11.)
Griffin and Lake County request a review of the limited remedy the Tax
Court afforded. (Pet’r Br. at 2.) Griffin also challenged the HCI tax as
violating Ind. Const. art. 1, § 23, and the Equal Protection and Due
Process Clauses of the Fourteenth Amendment. The Tax Court did not address
these other claims, presumably because it viewed the Article 10 claim as
dispositive.

Having granted review, we deem the issues to be: (1) whether Ind. Code
§ 12-16-14-1 et seq., which establishes the HCI tax, violates Article 10,
§1; (2) whether the Tax Court erred in refusing to order a refund; and (3)
whether the Tax Court erred in staying its injunction against collection of
the HCI tax. Our decision on the first of these resolves the other two.
We begin with a brief review of Hospital Care for the Indigent.

What is the HCI Program?

We recently had occasion to analyze the structure and operation of the
HCI program in State Bd. of Tax Comm’rs v. Montgomery, 730 N.E.2d 680, 681
(Ind. 2000). Before 1986, each of Indiana’s counties bore all
responsibility for indigent health care. Id. The legislature enacted the
HCI provisions in 1986 and then recodified them in 1992 at Ind. Code §§ 12-
16-2-1 to 12-16-16-3. Id. The general purpose was to provide cost-free
emergency medical care to indigent patients who did not qualify for
Medicaid. Id. The HCI program transferred the administration of indigent
health care to the State and imposed an “HCI tax levy” to finance it. Id.

Under the present arrangement, the Department must “review each
county’s property tax levy under this chapter and … enforce the
requirements of this chapter with respect to that levy.” Id. (citing Ind.
Code § 12-16-14-4 (1998)). Each county annually imposes the levy as a
property tax for that county and collects it like other state and county ad
valorem property taxes. Ind. Code § 12-16-14-2 (1998). Unlike the general
property tax levy,[2] the Indiana Code prescribes the amount of the HCI
levy for each county; it is the previous year’s levy increased by the
percentage of growth in assessed value of all property in the state.
Montgomery, 730 N.E.2d at 681[3]. Certain statutory limits on property tax
rates may be exceeded “[t]o meet the requirements of the county hospital
care for the indigent fund.” Id. (citing Ind. Code § 6-1.1-18-3(7)
(1998)).

The act establishes an HCI fund in each county. Montgomery, 730
N.E.2d at 681. The balance of each county’s HCI fund is transferred to the
state HCI fund. Id. The State administers the HCI program and reimburses
providers of emergency medical care to the indigent for their expenses from
the state HCI fund. Griffin, 765 N.E.2d at 720-21 (citing Ind. Code § 12-
16-14-8 (1998)). In 1993, the legislature modified the HCI program to
secure additional federal Medicaid funds by using $35 million of the state
HCI fund as matching money. Id. at 721.

The initial HCI levy for each county had been set at the average of
its indigent hospital care expenditures over 1984-86, with certain
adjustments. Montgomery, 730 N.E.2d at 681. The HCI tax rate thus varies
from county to county because of the difference in the counties’ historical
expenditures on hospital services for the indigent during the years
immediately before the HCI program was enacted.

Taxation is Specially Legislative and Deference is Substantial

Every statute stands clothed with the presumption of
constitutionality until clearly overcome by a contrary showing. Boehm v.
Town of St. John, 675 N.E.2d 318, 321 (Ind. 1996). The party challenging
the constitutionality of the statute bears the burden of proof, and all
doubts are resolved against that party. Id. at 321. If there are two
reasonable interpretations of a statute, one of which is constitutional and
the other not, we will choose that path which permits upholding the
statute. Id.

Taxation is a power purely within the province of the legislature.
Board v. Holliday, 150 Ind. 216, 49 N.E. 14 (1898); Board of Comm’rs v.
Adler, 77 Ind. App. 296, 133 N.E. 602 (1922). As the Department notes, the
legislature has wide discretion in taxing for the general welfare. See
Yarger v. Raver, 237 Ind. 88, 143 N.E.2d 662 (1957); Morgan County v.
Seaton, 122 Ind. 521, 24 N.E. 213 (1890). The power of the legislature
regarding matters of taxation is unlimited, except as restricted by the
Constitution. Brown v. Baltimore, 186 Ind. 81, 115 N.E. 86 (1917).

One constitutional restriction on this legislative power is Article
10, § 1, which provides, “The General Assembly shall provide, by law, for a
uniform and equal rate of property assessment and taxation and shall
prescribe regulations to secure a just valuation for taxation of all
property, both real and personal.” (Emphasis added.) These provisions
seek to distribute the burden of taxation upon the principles of
uniformity, equality, and justice. Davis v. Sexton, 210 Ind. 138, 200 N.E.
233 (1936).

Uniformity in rate, as required by the Constitution, means that the
same rate shall apply alike to all in any given taxing district. Henderson
v. London & Lancashire Ins. Co., 135 Ind. 23, 34 N.E. 565, 568 (1893).
This means that as a general proposition, Article 10 requires that a tax
for a state purpose must be uniform and equal throughout the state, a tax
for a county purpose must be uniform and equal throughout the county, and
so forth. Board of Comm’rs of Jackson County v. State, 155 Ind. 604, 58
N.E. 1037, 1039 (1900); Bright v. McCullough, 27 Ind. 223, 230 (1866).

What shall constitute a taxing district, and whether it may be
confined to, or disregard, boundary lines of counties, townships, or
municipalities, is a matter wholly within the discretion of the General
Assembly. Brown, 115 N.E. at 86. The subjects and methods of taxation are
legislative matters, and cannot be disturbed so long as the method
prescribed is applicable alike to all within the prescribed class. Davis,
200 N.E. at 241. What is important is that there be uniformity and
equality of rate as to those of the same class. Id.
Article 10 has been largely aimed at assessments. The history
surrounding the drafting and ratification of the Constitution suggests that
while Article 10 applies to assessments and taxation, assessment was the
central concern of its proponents. Delegate Daniel Read of Monroe County,
in proposing Section 1, stated:
It appears to me, that no provisions are more proper for a
Constitution, than those requiring equality of assessment for purposes
of taxation. The duty of the Legislature to devise a system which
will secure such equality and which will cause all the property of the
State to be brought under taxation, should be held forth in the
Constitution.

Comments of Delegate Read (Dec. 3, 1850), Debates in Indiana Convention,
1850, Vol. 1, p. 941 (emphasis added). Including the requirements of
uniformity and equality in assessments and taxation elevated and preserved
their importance as fundamental principles. Id.; see also, Boehm, 675
N.E.2d at 323.

We reiterated the thrust of Article 10 in Kerr v. Perry School Twp.,
162 Ind. 310, 70 N.E. 246, 247 (1904): “This provision of our fundamental
law clearly applies to assessments and taxation, and does not profess to
control the expenditure of money arising out of any assessment or taxation
of property. It deals with the uniformity and equal rate of assessment and
taxation of property within the taxing district or locality in which the
particular tax is levied.” Thus, when the rate of property assessment is
uniform throughout a taxing district, the constitutional mandate of uniform
and equal taxation has been fulfilled. South Bend Public Transportation
Corp. v. City of South Bend, 428 N.E.2d 217, 223-24 (Ind. 1981).
Delegate Read stated: “There is hardly a subject connected with our
State government, which has attracted more general attention among the
people, than the existing inequality in the assessment and taxation of
property.” Id. In proposing the inclusion of Article 10, § 1 in our
Constitution, Delegate Read sought to rectify the “manifest injustice” that
results in “permitting property, in the hands of the wealthy, which ought
to be taxed as other property, to escape taxation altogether, or to be
taxed only on a very small part of its value.” Id. at 946. Such comments
illustrate that the mischief being addressed was chiefly unequal assessment
of properties, not the rates between counties or governmental units once
the assessment was done. See e.g., Boehm, 675 N.E.2d at 322-23 (quoting
comments of Delegate Borden (Dec. 4, 1850), Debates in Indiana Convention,
1850, Vol. 1, p. 946, 950).

In the end, of course, the Convention chose language covering both
assessment and taxation. Legislative history suggests intent to apply a
more muscular restraint on assessment.

The HCI Tax is Neither “Local” Nor “State”

As the parties to this case have done, much of the caselaw about
Article 10 has analyzed the dispute at hand by inquiring whether the tax at
issue is “state” or “local.” Once this question has been answered, the
disposition has flowed from the notion that state taxes must be uniform
throughout the state and that local taxes must be uniform within the
jurisdiction in which they are levied.

Of course, Article 10 does not even use the words “state” or “local.”
Instead, it commands that assessment and taxation be “uniform and equal.”

Article 10 challenges have typically involved taxes levied and spent
by a locality or by the state government. The HCI tax is levied to fulfill
a responsibility shared by the state and the county. Indeed, this joint
effort produces additional funds from the federal government to be used
also for the general welfare of the people.

The nature of a tax is determined by its operation and incidence
rather than by legislative title or designation. See Wright v. Steers, 242
Ind. 582, 179 N.E.2d 721 (1962). On this basis, the HCI tax cannot be
simply classified as a “local” or “state” tax because the facts surrounding
the tax and its operation demonstrate that it is part of a combined effort
by local, state, and federal governments.

As the Department observes, financing health care for indigent persons
has historically been recognized as a local responsibility. (Department
Br. at 15.) During the early decades under our present Constitution, this
Court noted, “Every county shall relieve and support all poor and indigent
persons lawfully settled therein, whenever they shall stand in need
thereof.” Seaton, 24 N.E. at 213.[4]

It is each county’s responsibility to establish an HCI fund consisting
of a property tax levy in each county. Ind. Code § 12-16-14-1. While the
state manages the fund, the county fiscal body imposes the tax annually on
all the taxable property of the county and collects it as other state and
county ad valorem property taxes are collected. Ind. Code § 12-16-14-2.

Finally, the HCI tax now plays a role in Medicaid, itself a joint
activity of the federal and state governments. Essentially, the federal
government reimburses the states for Medicaid expenditures on the basis of
a formula tied to the per-capita income in each state. Ashley County
Medical Center v. Thompson, 205 F. Supp.2d 1026, 1030 (E.D. Ark. 2002).

The federal share of Medicaid expenditures, known as “Federal
Financial Participation,” or “FFP,” varies from fifty to eighty-three
percent of a state’s total Medicaid expenditures. Id. The Medicaid
statute requires only that each State plan “provide for financial
participation by the State equal to not less than 40 per centum of the non-
Federal share.” Id., citing 42 U.S.C. § 1396a(a)(2).

As the Thompson court observed, local units of government are also
allowed to fund Medicaid. “The portion of a State’s Medicaid expenditures
not covered by federal matching funds is properly referred to as the ‘non-
Federal share,’ and sixty percent of the non-Federal share of a state’s
Medicaid expenditures may be funded by sources other than the State.” Id.

The combined efforts of state, local, and federal governments to
advance the welfare of the indigent suggest to us that the HCI tax is not
solely for state or county purposes, but to satisfy a joint responsibility.
It seems inadequate to test the constitutionality of the HCI program
simply by asking whether the property tax portion is “state” or “local.”

Local Share Is Based On Experience

The Tax Court noted that Indiana’s ninety-two counties have seventy-
two different tax rates. See Griffin, 765 N.E.2d at 720. The reason for
this, of course, is because the HCI property tax levy is based on an
extrapolation of historical HCI costs in each particular county. The
intended purpose of basing the HCI property tax classification system on
such historical costs was to impose burdens in just proportions to the
benefits received by each county’s residents. (Amicus Curiae Br. at 2.)

Before HCI, a county was responsible for the “necessary costs” of
care, but there was no limitation on the amount of “necessary costs” a
county might have to bear. Ind. Code § 12-5-6-6 (1998). Taxpayers who
lived in a county with a higher percentage of indigent residents risked
responsibility for very significant expenses for medical care.

Because of this open-ended burden, the legislature made certain
changes to the program in 1986 so as to reduce the counties’ burdens.
(Amicus Curiae Br. at 5-6.) For the first time, the amount of a county’s
financial obligation was capped.[5] Id. at 6.

The amount of a county’s financial responsibility for indigent
medical care was calculated via a formula that took into account that
county’s actual HCI expenditures from 1984-1986.[6] Id. By definition,
the limit of a county’s financial obligation under the HCI program was not
influenced by the HCI payment experience of any other county. Id. This
formula remains in place today.[7]

Local Taxes Always Vary. The theory of every republican government
is that taxes should be levied equally, but this is impossible, even in the
simplest states of society. State ex rel. Lewis v. Smith, 158 Ind. 543,
547, 63 N.E. 25, 27 (1902). The difficulty becomes more and more
pronounced as civilization becomes more complex, because the circumstances
and pursuits of the people become more diversified. Id. “‘A just and
perfect system of taxation,’ said Chancellor Kent, ‘is yet a desideratum in
civil government.’” Id. (citing 2 Kent, Comm. 332). “‘Perfectly equal
taxation,’ it has again been said, ‘will remain an unattainable goal as
long as laws and government and men are imperfect.’” Id.

We recognized in Bright, 27 Ind. at 229-30, that the wants of towns
and cities cannot be equal. Some require a higher, and some a lower, rate
of taxation. Id.; see also, Robinson v. Schenck, 102 Ind. 307, 1 N.E. 698
(1885). Article 10 simply intended that the uniformity and equality of
rate should be co-extensive with the territory to which the tax applies.
Bright, 27 Ind. at 229-30. In like fashion, the wants of counties cannot
be equal either, thus requiring varying rates of taxation among counties.

Even Delegate Read acknowledged the aspirational nature of requiring
uniformity and equality by implying that he did not expect the full
achievement of absolute and precise exactitude: “I do not suppose, sir,
that these inequities can be corrected by the Constitution, nor even wholly
by the laws. But I would lay down the rule in the Constitution.” Comments
of Delegate Read (Dec. 3, 1850), Debates in Indiana Convention, 1850, Vol.
1, p. 946.

Article 10 “does not require that the rate of assessment shall be
uniform and equal for all purposes throughout the State; and we think its
meaning clearly is that the rate of assessment and taxation must be uniform
and equal throughout the locality in which the tax is to be levied.”
Bright, 27 Ind. at 230. Based on this precept, we are hard pressed to see
the constitutional evil in a program involving money from three levels of
government that sets the rate of local contribution so that it varies in
harmony with expenses for indigent health care in the local area. Pursuant
to its broad discretion, the General Assembly properly decided that, for
purposes of financing indigent health care, the counties were not similarly
situated and varied the tax burden accordingly.

We addressed the issue of varying taxes among towns and counties in
Kent v. Town of Kentland, 62 Ind. 291, 292 (1878). In that case, we upheld
statutes that authorized cities to collect a school tax of persons who
lived outside the city limits, if their children were sent to school within
the city. We held that this system did not conflict with Article 10,
because throughout the state it operated alike on all persons in the same
circumstances. Id. at 292. Justice Horace Biddle wrote:
We can see nothing unconstitutional in any of these acts. They are
“uniform and equal” in the rate of assessment and taxation, operate
throughout the State, and upon all persons in the same circumstances,
alike. Of course, the facts upon which these laws act are not equal
and uniform, but continually vary; and a municipal law can no more act
without facts, than the law of gravitation can act without matter.
The laws, by which counties and townships levy and collect taxes for
their own use, are uniform and equal, yet the rates of assessment and
taxation in one county or township, as compared with another county or
township, are not uniform and equal, and may vary from year to year.
Those changes in fact do not affect the uniformity and equality of the
law.

Id.

Similarly, in Wright v. House, 188 Ind. 247, 121 N.E. 433 (1919), we
found no constitutional violation in a statute requiring the State and
counties to share the expense of highway improvements in those counties.
There, we stated:
The fund to be provided in any county under the provision of the
act to pay its part of the costs of the improvement of highways is
raised by a general tax on the property of the county levied and
collected as other taxes are levied and collected. The fact that
the tax rate in counties where extensive improvements are made
under the law may be greater than the tax rate in other counties
where no improvements are made, or in counties where the
improvements thereunder are less extensive, does not signify that
the rates of taxation are not uniform within the meaning of the
Constitution. Each county is a separate unit for the purpose of
taxation, and it cannot be maintained that, within the county
making the improvement, the tax levy is unequal.

Id. at 437.

By contrast to the present scheme of approximate balance between local
tax burden and local benefit, Griffin proposes a single state-wide rate the
revenue from which would be deployed wherever services were rendered. This
would provide a mathematical equality of burden, of course. In light of
the historic rule of local finance for local service in this field, we are
not persuaded that the Constitution prohibits the legislature from matching
burden with benefit.

Principal Effect Has Been to Reduce Local Tax Burden

While Griffin complains about paying a higher HCI rate than some
others do and about HCI funds being used to leverage federal Medicaid
dollars, the net result has been to generate more money to aid the poor
without provoking the higher property taxes the former system produced.

The legislature’s 1993 decision to use some HCI revenue for this
purpose is illustrative. Some $35 million per state fiscal year of the
state HCI fund is now transferred to the Medicaid indigent care trust fund
to be used to leverage federal Medicaid dollars.[8] P.L. 277-1993 Section
82; (see also, R. 694). Allowing these funds to go through the Medicaid
program generates more money for medical care provided by Indiana hospitals
by leveraging approximately two additional federal dollars for every one
local dollar contributed. (Department Br. at 8.) Undoubtedly, a portion
of the additional Medicaid funds make their way to Lake County hospitals.
The General Assembly decided that if this Medicaid revenue program
generated more than $45 million in federal matching funds in a fiscal year,
then the excess fund, up to $18 million, would be returned to the State HCI
fund annually. P.L. 277-1993; (Department Br. at 8).

In 1995, the legislature revised the HCI program again eliminating the
physical transfer of monies used to procure federal Medicaid matching funds
back to the state HCI fund for payment of HCI hospital claims. Instead, it
used the $35 million appropriated from the state HCI fund,[9] to make lump-
sum payments variously referred to as “Medicaid payments to hospitals in
lieu of HCI payments” or “HCI Add-On.”[10]

Amounts remaining in the state HCI fund were to be used to reimburse
non-hospital indigent care providers, e.g., physicians. (Department Br. at
9.)[11] Under the 1995 amendments, the hospitals received lump sum
payments in addition to their base in-patient payment rate. This was based
on HCI payments during fiscal year 1992 divided by the hospital’s total
Medicaid patient days during that period. See Ind. Code § 12-15-15-8 (as
amended 1995) (repealed 1998). Money in the HCI fund at the end of the
state fiscal year may not revert to the state general fund. Ind. Code § 12-
16-14-9. The 1995 changes caused the HCI fund balance to grow to
approximately $17 million.

Most subsequent legislative efforts have further ameliorated Griffin’s
complaint about his county’s disproportionate share of HCI tax. The
General Assembly reduced Lake County’s share of the property tax levy by
$4,000,000. Ind. Code § 12-16-14-3.4. It also reduced St. Joseph County’s
share by $1,000,000. Ind. Code § 12-16-14-3.7.[12]

The legislature added Ind. Code § 12-15-15-9 specifically aimed to
address concerns about disparity in payments between some counties’ HCI
contributions and the reimbursements of providers within those counties.
P.L. 126-1998 Section 5. This section, which is retroactive to the 1997-98
fiscal year, required the Family and Social Services Administration
(“FSSA”) to prepare a formula that “minimizes the difference between the
aggregate amount paid under this section to all hospitals in a county for a
state fiscal year and the amount of the county’s HCI property tax levy for
that state fiscal year.” Id. Between the effects of federal leveraging
and the impact of this formula, an even greater amount of money was
returned to Lake County providers than to providers in other counties.
Specifically, in April 1999, by operation of the HCI county equity payment
methodology developed by FSSA, the State forwarded Lake County hospital
providers HCI county equity payments totaling $6,757,188 for the State’s
1998 fiscal year. (R. at 749.)

In its November 1992 report, the Indiana Commission on State Health
Policy characterized the HCI program as “underdefined and misaligned.” It
noted:
Indiana spent approximately $33 million in total county funds for
providing emergency services under the Hospital Care for Indigent
(HCI) Program.… The program is inadequate in addressing the health
care needs of the uninsured in Indiana.… If Indiana were to use this
money under the Medicaid program, the state would have approximately
$66 million more to serve the health care needs of Indiana’s
uninsured….

Indiana Commission on State Health Policy, Hoosier Health Reform at 21-24
(Nov. 1992) (quoted in R.M. Haycox, A year of Change for our Health Care
System, 1992 Survey of Recent Developments in Indiana Law, 26 Ind. L. Rev.
1003, 1012 (1993)). This is exactly what the legislature chose to do.

In the end, the question that is posed by the foregoing facts is:
Aren’t Griffin and his fellow property tax payers better off with the
Medicaid leveraging than without it?[13] The question answers itself, but
we will pause to lay out the answer anyway.

Lake County residents historically received much more HCI service than
residents in other counties.[14]
Moreover, the HCI program cannot be examined in isolation because
disproportionate share hospital (“DSH”) payments, a related part of
Medicaid, are also relevant here. Through DSH, Lake County providers have
received significantly more reimbursements than those in many other
counties. (R. at 695-96.) When DSH is taken into account, the total
benefits received outweigh the tax levy. For example, in state fiscal year
1995, Lake County hospitals and providers received $27,755,978 in DSH and
HCI reimbursements compared with an HCI tax levy of $14,320,445. (R. at
699, 708.) For state fiscal year 1996, Lake county hospitals and providers
received $26,928,506 in DSH and HCI reimbursements compared with an HCI tax
levy of $15,242,100. Id.

Furthermore, during the fiscal year 1998, the total amount collected
by the HCI program statewide was $144,313,918. (R. at 148.) The total
amount of HCI and Medicaid reimbursements paid statewide during that fiscal
year was $52,231,742. Id. During that period, Lake County taxpayers paid
$16,931,455 in HCI tax. Of the reimbursements made during that year,
however, $17,682,517 was allocated to Lake County. Id. Thus, Lake County
ended with a positive balance for state fiscal year 1998 of $751,062.

In comparing the proportions of Lake County’s HCI contributions and
reimbursements with the statewide contributions and reimbursements, a
differential of 4% exists. Nevertheless, as demonstrated above, Lake
County has received more than what it has contributed. The HCI tax formula
has thus been effective in allocating the tax burden according to the costs
it has incurred. Put another way, the tax is proportionate to the
expenses.

Conclusion

As Justice John H. Gillett once observed, despite occasional
imposition of disproportionate taxation, “the courts must admit that there
exists in the general assembly a large measure of discretion in the
enactment of a scheme of taxation.” Smith, 63 N.E. at 27. In its broad
discretionary authority, our legislature developed a “scheme of taxation”
that takes into account the historical differences that exist among
counties with respect to HCI costs and sends more funds for increased
health care in local areas than property taxpayers pay. Given the high
level of deference owed the legislature on matters of taxation, we are
unable to say that the HCI system violates Article 10.

SULLIVAN, BOEHM, and RUCKER, JJ., concur.
DICKSON, J., dissents without separate opinion.
-----------------------
[1] See Ind. Code § 12-16-14-3 (1998) for an explanation of the formula
each county must apply in order to impose the HCI property tax levy.
[2] “Levy” is a term used to describe the aggregate dollar amount of
property taxes imposed to fund a given operation of local government. The
levies imposed under the general property tax are subject to review by the
Department. See Ind. Code §§ 6-1.1-17-1 to 20 (1998).
[3] This description, although not precisely correct, is adequate for
purposes of this opinion and hopefully more easily understood than the
statutory formulation:
Each county shall impose a[n] [HCI] property tax levy equal to the product
of:
1) the [HCI] property tax levy imposed for taxes first due and payable
in the preceding year; multiplied by
2) the statewide average assessed value growth quotient, using all the
county assessed value growth quotients determined under Ind. Code 6-
1.1-18.5-2 for the year in which the tax levy under this section
will be first due and payable.
Ind. Code § 12-16-14-3 (1998).
[4] The legislature has enacted many statutes in addition to the HCI
statute that finance medical and other welfare costs for indigents at
county expense. See e.g., Ind. Code § 12-17-3-1 et seq. (1998) (services
for care of dependent and delinquent children and CHINS through county
welfare fund); Ind. Code § 12-26-10-4 (1998) (county general fund to bear
costs of care for indigent individuals pending admission to a state
institution).
[5] See Ind. Code §§ 12-5-6-6(a)-(c) (1986).
[6] See Ind. Code §§ 12-5-6-16(c), (e) (1986), as added by P.L. 16-1986 §
72, eff. July 1, 1986.
[7] See Ind. Code § 12-16-14-3, as revised by P.L. 283-2001, § 27, eff.
July 1, 2002. The amount of the HCI tax levy for each county is annually
increased by a percentage of growth in assessed value of all property in
the state. Montgomery, 730 N.E.2d at 681.
[8] Federal law permits States to use state or local taxes or
intergovernmental transfers as the state match for federal financial
participation under Medicaid. 42 U.S.C. § 1396b(w)(6)(A). Federal law
does not permit a selective tax on providers. Id.
[9] See P.L. 340-1995, § 8.
[10] See Ind. Code § 12-15-15-8 (as amended 1995) (repealed 1998); see
also, S.R. at 3, submitted with the Department’s Motion for Summary
Judgment.
[11] See S.R. at 6, submitted with the Department’s Motion for Summary
Judgment.
[12] In the 2001 legislative session, the General Assembly modified the HCI
program and its funding formula. (Department Br. at 10.) This new
legislation repeals the HCI program by 2003 and institutes an uninsured
parents program. Id.
[13] Enjoining the collection of the HCI tax would result in an immediate
loss of $50 million in HCI revenue and cause the further loss of $126
million in federal Medicaid funds. Id.

[14] The following table demonstrates Lake County’s proportionate share of
the total HCI claims* paid for service dates 1992-1998:
Service Dates Lake Co. HCI Claims Paid Total HCI Claims Paid
Lake Co. % of Total HCI Claims
1992 8,775,191 27,331,727 32%
1993 2,670,427 6,993,488
38%
1994 4,528,888 15,051,332 30%
1995 481,569 976,647
49%
1996 532,631 964,815
55%
1997 653,327 1,103,046
59%
1998 516,986 820,151
63%
(See Amicus Curiae Br. at 20, n. 14); R. at 133-51. (*Note that effective
July 1, 1993, “HCI claims” include only claims paid to physicians and
ambulance providers under Ind. Code § 12-16-7.)