SUPREME COURT OF ARIZONA
En Banc
LEAGUE OF ARIZONA CITIES AND ) Arizona Supreme Court
TOWNS, ) No. CV-08-0379-SA
)
Petitioner, )
)
v. ) O P I N I O N
)
DEAN MARTIN, Arizona State )
Treasurer, in his official )
capacity and JANET NAPOLITANO, )
Governor of the State of Arizona, )
)
Respondents. )
_________________________________ )
JURISDICTION ACCEPTED; RELIEF GRANTED
________________________________________________________________
PERKINS, COIE, BROWN, & BAIN, P.A. Phoenix
By Paul F. Eckstein
Charles A. Blanchard
Steven J. Monde
Aaron S. Welling
Attorneys for League of Arizona Cities and Towns
TERRY GODDARD, ARIZONA ATTORNEY GENERAL Phoenix
By Mary R. O’Grady, Solicitor General
Christopher Munns, Assistant Attorney General
Attorneys for Dean Martin, State Treasurer
LEWIS AND ROCA, L.L.P. Phoenix
By Robert G. Schaffer
Kimberly A. Demarchi
Emily S. Cates
Stefan M. Palys
Sarah E. Selzer
Attorneys for Janet A. Napolitano, Governor
________________________________________________________________
B E R C H, Vice Chief Justice
¶1 We have been asked to decide whether a statutory
measure requiring Arizona’s incorporated cities and towns to
deposit money into the state general fund is an appropriation
that may be included in the general appropriations bill. See
Ariz. Const. art. 4, pt. 2, § 20. We hold that it is not such
an appropriation.
I. FACTUAL AND PROCEDURAL BACKGROUND
¶2 On June 26, 2008, the Arizona Legislature passed House
Bill 2209 (“HB 2209”), which is the general appropriations act
for the 2008-2009 fiscal year. 2008 Ariz. Sess. Laws, ch. 285
(2d Reg. Sess.). Section 47 of the bill requires the
petitioning cities and towns to pay approximately eighteen
million dollars into the state general fund during the current
fiscal year:
A. Notwithstanding any other law, in fiscal year
2008-2009, counties, incorporated cities and towns
shall deposit $29,748,400 into the state general fund.
The amount transferred to the state general fund by
each county, incorporated city and town shall be
calculated by the joint legislative budget committee
staff, who shall publish the allocations by August 31,
2008. The joint legislative budget committee staff
shall base its allocation on the distributions
provided under section 28-6538, subsection A,
[1]
paragraphs 2, 3, and 4, Arizona Revised Statutes.
B. Notwithstanding any other law, a county may meet
any statutory funding requirements of this section
from any source of county revenue designated by the
county, including funds of any county wide special
1
The allocations are based on the formula used to determine
distributions from the Arizona Highway User Revenue Fund
(“HURF”) to the counties, incorporated cities, and towns. Under
that formula, the cities and towns must deposit $18,329,822 into
the general fund, while the counties are responsible for
$11,418,578.
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taxing district in which the board of supervisors
serves as the board of directors.
C. Contributions made pursuant to this section are
excluded from the county expenditure limitations.
Id. § 47. The Governor signed HB 2209 into law on June 27,
2008. The legislature then promptly adjourned sine die. Four
days later, the 2008-2009 fiscal year began. It ends on June
30, 2009. See Ariz. Const. art. 9, § 4; Ariz. Rev. Stat.
(“A.R.S.”) § 35-102 (2000).
¶3 Two weeks after the passage of HB 2209, the League of
Arizona Cities and Towns (the “League”) contacted the Governor’s
Office to express concern over § 47’s constitutionality. The
League and its counsel met with the Governor’s staff at least
four times between August and October 2008 to discuss the
dispute over § 47. When discussions failed to resolve the
issue, the League filed a special action in this Court on
November 14, approximately four and one-half months after HB
2209 was signed into law.2 The petition named as respondents the
Governor of Arizona and the Arizona State Treasurer.3 Following
2
The League represents only the cities and towns. The
counties are not parties to this action and have not challenged
the constitutionality of § 47.
3
The Treasurer agrees with the League that § 47 violates
Article 4, Part 2, Section 20 of the Arizona Constitution.
Since this lawsuit was briefed and argued, Janice K. Brewer has
succeeded Janet Napolitano as Governor of Arizona. The Court
has received no filings by the Office of the Governor indicating
a change in legal position.
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oral argument, we issued an order accepting jurisdiction. This
opinion explains our grant of relief.
II. DISCUSSION
A. Special Action Jurisdiction
¶4 Our decision to accept jurisdiction of a special
action is highly discretionary. Ariz. R.P. Spec. Act. 3, State
Bar Committee Note; see also Forty-Seventh Legislature v.
Napolitano, 213 Ariz. 482, 485, ¶ 11, 143 P.3d 1023, 1026
(2006). Several factors support our exercise of jurisdiction in
this matter. The case presents novel constitutional issues of
statewide importance. See Forty-Seventh Legislature, 213 Ariz.
at 485, ¶ 11, 143 P.3d at 1026; Randolph v. Groscost, 195 Ariz.
423, 425, ¶ 6, 989 P.2d 751, 753 (1999). In addition, “this
case involves a dispute at the highest levels of state
government” and requires a swift determination because it
concerns the state budget for the current fiscal year. Rios v.
Symington, 172 Ariz. 3, 5, 833 P.2d 20, 22 (1992); see also
State Comp. Fund v. Symington, 174 Ariz. 188, 192, 848 P.2d 273,
277 (1993) (noting that “prompt resolution is needed [in cases
affecting the state budget] so that the legislative and
executive branches will know where they stand and can take such
action as they determine necessary relative to budgetary
matters”).
¶5 The Governor urges us to decline jurisdiction because
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of the League’s delay in filing suit. Although the Governor
frames the issue as a jurisdictional challenge, we analyze it
under our laches jurisprudence because it does not implicate our
authority to decide the case; rather, it relates to our exercise
of discretion whether to take the case.
¶6 “Laches will generally bar a claim when the delay [in
filing suit] is unreasonable and results in prejudice to the
opposing party.” Sotomayor v. Burns, 199 Ariz. 81, 83, ¶ 6, 13
P.3d 1198, 1200 (2000). Delay alone will not establish a laches
defense, however. Id. at ¶ 8; Harris v. Purcell, 193 Ariz. 409,
412, ¶ 16, 973 P.2d 1166, 1169 (1998). Rather, in determining
whether the delay was unreasonable, “we examine the
justification for delay, including the extent of plaintiff’s
advance knowledge of the basis for challenge.” Harris, 193
Ariz. at 412, ¶ 16, 973 P.2d at 1169. The delay must also
result in prejudice, either to the opposing party or to the
administration of justice, id., which may be demonstrated by
showing injury or a change in position as a result of the delay.
Flynn v. Rogers, 172 Ariz. 62, 66, 834 P.2d 148, 152 (1992)
(citing Jerger v. Rubin, 106 Ariz. 114, 117, 471 P.2d 726, 729
(1970)); Tovrea v. Umphress, 27 Ariz. App. 513, 521, 556 P.2d
814, 822 (1976); see also Lubin v. Thomas, 213 Ariz. 496, 497,
¶ 10, 144 P.3d 510, 511 (2006) (finding prejudice to system).
¶7 The Governor contends that by waiting to bring its
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action until November, the League prevented prompt judicial
resolution of the matter and exacerbated the already precarious
budget situation. The League counters that the parties’ ongoing
negotiations justified the delay. It further maintains that no
prejudice has occurred because substantial budget adjustments
are still required before the end of the fiscal year to balance
the State budget.
¶8 Section 47 requires the cities and towns to deposit
roughly $18.3 million into the general fund by the end of the
current fiscal year, which concludes on June 30, 2009. When the
petition was filed, more than seven months remained before the
League members’ payments were due. Even now, nearly five months
remain. Thus, while we recognize the complexities associated
with balancing the budget during the course of the fiscal year,
in this case, adequate time remains for the legislature to make
adjustments. The time remaining before the payment deadline
distinguishes this case from other cases in which we have found
delays in filing suit unreasonable. Those cases often dealt
with last-minute challenges to ballot propositions filed shortly
before impending printing deadlines. See, e.g., Sotomayor, 199
Ariz. at 83, ¶ 7, 13 P.3d at 1200 (holding unreasonable
petitioners’ failure to file a special action until the day
before the voter information pamphlet printing deadline);
Mathieu v. Mahoney, 174 Ariz. 456, 459, 851 P.2d 81, 84 (1993)
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(finding unreasonable filing the complaint days before the
absentee ballot printing deadline). Here, the League did not
wait until an imminent deadline approached to file its special
action.
¶9 But even had the delay been unreasonable, delay alone
will not satisfy the test for laches. Sotomayor, 199 Ariz. at
83, ¶ 8, 13 P.3d at 1200. The complaining party must also prove
prejudice. Id. In this case, the Governor has not demonstrated
prejudice because she has not shown substantial harm caused by
the League’s delay. When § 47 was passed, the State’s budget
deficit was projected to be approximately $400 million. The
anticipated deficit has steadily grown and is currently reported
to be nearly $1.6 billion. JOINT LEGISLATIVE BUDGET COMM., JLBC –
MONTHLY FISCAL HIGHLIGHTS: JANUARY 2009, at 1 (2009),
http://www.azleg.gov/jlbc/mfh-jan-09.pdf. Section 47 requires
the cities and towns to make a payment that represents only a
small fraction of the current deficit.
¶10 The Governor suggests that measures might have been
taken to find alternate sources of revenue to replace the amount
at issue here had it been known that the League would challenge
§ 47. Yet she knew months before the special action was filed
of the League’s claim that § 47 is unconstitutional. Governor
Napolitano did not exercise her constitutional authority to
convene an extraordinary session of the legislature to address
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this issue, see Ariz. Const. art. 5, § 4 (authorizing
extraordinary session). Even after this action was filed,
neither she nor the legislature requested a special session, see
id. art. 4, pt. 2, § 1(2) (authorizing a special session upon
petition of two-thirds of members of each house). If a special
session was not called during that time to resolve a $1.6
billion deficit it seems unlikely one would have been called to
find an alternate source for funding the $18.3 million payment
at issue here. We therefore do not find that the delay in this
case caused prejudice.
¶11 The availability of an alternative remedy also
undermines the Governor’s claim of prejudice. The cities and
towns receive payments from the State through the Urban Revenue
Sharing Fund (the “URSF”), A.R.S. § 43-206 (Supp. 2008). For
the current fiscal year, the legislature appropriated
$727,677,400 from the general fund to the URSF. See 2006 Ariz.
Sess. Laws, ch. 351, § 14 (2d Reg. Sess.).4 The Treasurer
distributes monies from the URSF to the cities and towns in a
proportional amount each month. A.R.S. § 43-206(C). At this
time, the URSF contains several months’ worth of appropriated
4
This appropriation was made in lieu of the transfer
required by § 43-206(A). 2006 Ariz. Sess. Laws, ch. 351, § 14.
Under the formula provided in § 43-206(A), the URSF would have
contained $709,936,400 for the current fiscal year, $17,741,000
less than the amount the legislature appropriated. House Fact
Sheet for S.B. 1160, 48th Leg., 2d Reg. Sess. (2008).
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monies that have not yet been distributed. See id. The
legislature could suspend, reduce, or eliminate part of the
remaining payments to the incorporated cities and towns. If
that were to happen, contrary to the Governor’s prejudice claim,
funds of other state entities would not be required to offset
the expected $18.3 million deposit from the League’s members.5
¶12 The Governor urges us not to overlook the burden that
the League’s delay imposes on the state budget process. We
agree that parties wishing to challenge the budget must do so in
a timely manner and, in some circumstances, a four-month delay
will be too long. See Mathieu, 174 Ariz. at 460, 851 P.2d at 85
(“Litigants and lawyers involved in [public] litigation must be
keenly aware of the need to bring such cases with all deliberate
speed or else the quality of judicial decision making is
seriously compromised.”). But we disagree with the Governor’s
conclusion that the League’s delay was unreasonable or caused
5
The League argues that any reduction in the existing URSF
appropriation of approximately $728 million would require a two-
thirds vote of each house of the legislature because it would
change the allocation of taxes among the state and cities. See
Ariz. Const. art. 9, § 22(7). We need not decide that issue
because Chapter 351 of the 2006 session laws appropriates monies
from the general fund for fiscal year 2008-2009 in lieu of an
amount equal to fifteen percent of net state income taxes for
fiscal year 2006-2007. Thus, even if reducing the URSF
appropriation below the formula-based amount might be subject to
a supermajority vote, an issue we do not decide here, reducing
the appropriation to that amount would not change the allocation
of taxes among the State and cities for purposes of Article 9,
Section 22.
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prejudice under the circumstances of this case.
¶13 Laches is an equitable doctrine based on the principle
of fundamental fairness. Harris, 193 Ariz. at 414, ¶ 24, 973
P.2d at 1171. When determining whether laches should preclude a
claim, we consider all factors, including not only the length of
the League’s delay, but also the magnitude of the problem at
issue. Employing this approach leads us to conclude that the
League’s delay does not bar this action.
B. Is § 47 an Appropriation?
¶14 The Arizona Constitution strictly limits the contents
of general appropriations bills: “The general appropriation
bill shall embrace nothing but appropriations for the different
departments of the State, for State institutions, for public
schools, and for interest on the public debt. All other
appropriations shall be made by separate bills, each embracing
but one subject.” Ariz. Const. art. 4, pt. 2, § 20. Any
legislation in a general appropriations bill that is neither an
appropriation of money for a specific purpose nor a provision
necessary for the proper expenditure of that money is improper.
State v. Angle, 54 Ariz. 13, 21, 91 P.2d 705, 708 (1939).
¶15 We have set forth the standards for determining
whether legislation is an “appropriation” on several occasions.
In Hunt v. Callaghan, we defined an appropriation as “the
setting aside from the public revenue of a certain sum of money
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for a specified object, in such manner that the executive
officers of the government are authorized to use that money, and
no more, for that object, and no other.” 32 Ariz. 235, 239, 257
P. 648, 649 (1927) (citations omitted). The essential parts of
this definition are the “certain sum,” the “specified object,”
and the “authority to spend.” Rios, 172 Ariz. at 7, 833 P.2d at
24 (quoting Black & White Taxicab Co. v. Standard Oil Co., 25
Ariz. 381, 406, 218 P. 139, 148 (1923) (Lockwood, J.,
dissenting)). The legislature may set aside money from the
public revenue by “authoriz[ing] spending from the general fund
or . . . authoriz[ing] payments of ascertainable amounts from a
special fund.” Forty-Seventh Legislature, 213 Ariz. at 487,
¶ 20, 143 P.3d at 1028. We have also determined that under
certain circumstances the legislature may make an appropriation
by transferring money from a previously appropriated sum back
into the general fund. See Rios, 172 Ariz. at 9, 833 P.2d at
26.
¶16 In Rios v. Symington, we addressed whether fund
transfers shifting money from special funds into the general
fund constituted appropriations. Id. at 8-9, 833 P.2d at 25-26.
In that case, we applied the three-part test for an
appropriation to each special fund at issue and ruled that all
were created by appropriations. Id. at 6-8, 833 P.2d at 23-25.
We then held that fund transfers reducing the amount of a prior
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appropriation also constituted appropriations. Id. at 8, 833
P.2d at 25. The reason was apparent: “When the Legislature
transfers monies from a previously-made appropriation, the
obvious effect is to reduce the amount of the previous
appropriation.” Id. at 9, 833 P.2d at 26. Rios emphasized that
before a transfer of funds from a special fund may be considered
an appropriation, the special fund itself must meet the test for
an appropriation. Id. at 6, 9, 833 P.2d at 23, 26. Rios thus
obliges the legislature to identify some appropriation that must
be reduced to make the payment demanded by § 47 if it wishes to
include the transfer in the general appropriations bill.
¶17 While § 47 identifies an ascertainable sum to be paid,
the question remains whether § 47 identifies and reduces
something that meets the definition of an appropriation. We
conclude that it does not. The legislature did not expressly
attach the assessed amount to any public revenue that it had
previously set aside for the cities and towns. Because § 47
fails to identify any prior appropriation, it fails to meet the
definition of an appropriation.
¶18 The Governor argues that the cities and towns received
monies from the State far exceeding the $18.3 million at issue,
and the Court should infer that these were the prior
appropriations intended to be reduced by § 47. The Governor
first identifies $17.7 million of additional funding to the
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Urban Revenue Sharing Fund as a specific appropriation for
fiscal year 2008-2009 that § 47 could constitutionally reduce.
See supra note 4. But the Governor admits that this extra
funding does not cover the total $18.3 million requirement
imposed on the cities and towns, leaving a portion of the § 47
payment obligation unattached to any prior appropriation. More
importantly, § 47 does not identify the additional urban revenue
sharing funding as an appropriation that the legislature
designated for reduction. The Governor also points to various
discretionary grants made for the benefit of the cities and
towns as appropriations that § 47 might be deemed to reduce.
Those funds, however, are often subject to restrictions, such as
use or reimbursement limitations imposed by the federal
government, and many are not appropriated to the cities and
towns themselves, but to various executive agencies for use by
the cities and towns. And again, those grants are not
identified in § 47 as the prior appropriations now being
reduced. Because § 47 does not reduce any identified prior
appropriation, it violates Article 4, Part 2, Section 20, and is
therefore unconstitutional.6 See Angle, 54 Ariz. at 21, 91 P.2d
6
In its petition for special action, the League also argued
that § 47 violates Article 9, Section 22 of the Arizona
Constitution because it imposes a new tax, fee, or assessment
without approval by a two-thirds vote of both houses of the
legislature. Because we conclude that § 47 is unconstitutional
under Article 4, Part 2, Section 20, we do not reach this issue.
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at 708.
C. Attorneys’ Fees
¶19 The League has requested an award of attorneys’ fees
pursuant to A.R.S. § 12-348(A) (2003). That section requires an
award of attorneys’ fees “to any party other than . . . a city,
town or county which prevails by an adjudication on the merits
in . . . [a] special action proceeding brought by the party to
challenge an action by the state against the party.” Id.
(emphasis added). Under the statute, the cities and towns are
prohibited from recovering fees. Accordingly, the League, which
asserted standing in this matter as the representative of the
cities and towns, cannot be awarded attorneys’ fees under § 12-
348(A).
III. CONCLUSION
¶20 For the foregoing reasons, we conclude that § 47 is
not an appropriation and therefore was not properly included in
the general appropriations bill. It therefore violates Article
4, Part 2, Section 20 of the Arizona Constitution. The League’s
request for attorneys’ fees is denied.
_______________________________________
Rebecca White Berch, Vice Chief Justice
CONCURRING:
_______________________________________
Ruth V. McGregor, Chief Justice
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_______________________________________
Michael D. Ryan, Justice
_______________________________________
Andrew D. Hurwitz, Justice
_______________________________________
W. Scott Bales, Justice
B A L E S, Justice, Concurring
¶21 While joining in the Court’s opinion, I write briefly
to explain why I conclude this action is not barred by laches.
The legislature has ample time within this fiscal year to remedy
the identified constitutional problem and to achieve nearly the
same budget reduction sought by § 47 without impacting
recipients of appropriations other than the cities and towns.
¶22 As a general matter, I would be inclined to accept the
Governor’s argument that a party cannot wait several months to
challenge the validity of an appropriations bill. Delay in
bringing such challenges obviously poses the risk of unduly
prejudicing governmental entities that could be forced to absorb
significant budget adjustments over the remaining fiscal year.
These concerns, however, are not implicated here given the
unique circumstances of this case.
¶23 The legislature, as the Court recognizes, see n. 6
supra, could achieve almost all the $18.3 million budget savings
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intended by § 47 by instead rescinding $17.7 million from the
existing $728 million appropriation to the Urban Revenue Sharing
Fund (URSF). Because monies are distributed to cities and towns
from the URSF on a monthly basis, there are hundreds of millions
of dollars still remaining in the URSF for this fiscal year.
The legislature could, by a majority vote of each house, reduce
the outstanding appropriation by some $17.7 million, the
difference between the amount the legislature appropriated in
2006 and the amount calculated by the statutory formula in
A.R.S. § 43-206(A).
¶24 If the Legislature can achieve nearly the same result
by reducing this year’s urban revenue sharing appropriation to
cities and towns, one might ask if our decision unduly elevates
form over substance. This is an area, however, in which the
form of legislation has constitutional significance. Section 47
does not identify any appropriation of state funds from which
the cities and towns are to provide the mandated deposit of
money. This fact readily distinguishes § 47 from lump sum
reductions that can be linked to identifiable appropriations to
departments or subunits of the state. Such reductions are
treated as “appropriations” that may be included in a general
appropriations bill and are subject to the Governor’s line item
veto. Rios v. Symington, 172 Ariz. 3, 10-11, 833 P.2d 20, 27-28
(1992). By today holding that § 47 cannot be included in a
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general appropriations bill because it does not reduce any
identifiable appropriation, the Court’s decision not only honors
the language of Article 4, Part 2, Section 20 of the
constitution, but also promotes accountability and transparency
in the state’s budgeting process.
________________________________
W. Scott Bales, Justice
CONCURRING:
_________________________________
Andrew D. Hurwitz, Justice
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