AZ Assn. Chiropractic v. Brewer
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Ariz.R.Crim.P. 31.24
IN THE COURT OF APPEALS
STATE OF ARIZONA
DIVISION ONE
ARIZONA ASSOCIATION OF
CHIROPRACTIC; ANTHONY A. GROSS,
DC; ARIZONA COLLEGE OF EMERGENCY
PHYSICIANS; CRAIG NORQUIST, MD;
ARIZONA DENTAL ASSOCIATION;
REGINA COBB, DMD; ARIZONA
MEDICAL ASSOCIATION; HENRI
CARTER, MD; ARIZONA NURSES'
ASSOCIATION; JENNIFER MENSIK,
PhD, RN; ARIZONA OCCUPATIONAL
THERAPY ASSOCIATION; NINA
CASTILLO, MS, OTR/L; ARIZONA
OPTOMETRIC ASSOCIATION;
CHRISTINA OLIVETTI, OD; ARIZONA
OSTEOPATHIC MEDICAL ASSOCIATION;
JEFFREY W. MORGAN, DO; ARIZONA
PHARMACY ALLIANCE; MARK BOESEN,
RPh; ARIZONA PHYSICAL THERAPY
ASSOCIATION; KAY WING, PT;
ARIZONA STATE ASSOCIATION OF
PHYSICIAN ASSISTANTS; AND
MICHELLE DIBAISE, PA-C,
Plaintiffs/Appellants,
v.
JAN BREWER, in her capacity as
Governor of the State of
Arizona; and DOUG DUCEY, in his
capacity as Treasurer of the
State of Arizona,
Defendants/Appellees.
1 CA-CV 10-0575
DIVISION ONE
FILED: 09/06/2011
RUTH A. WILLINGHAM,
CLERK
BY: GH
DEPARTMENT D
MEMORANDUM DECISION
(Not for Publication –
Rule 28, Arizona Rules
of Civil Appellate
Procedure)
Appeal from the Superior Court in Maricopa County
Cause No. CV2009-011326
The Honorable Sam Myers, Judge
AFFIRMED
Quarles & Brady LLP
by
Roger N. Morris
Christine Cassetta
Susan B. Trujillo
Attorneys for Plaintiffs/Appellants
Phoenix
Thomas C. Horne, Attorney General
by
Mark P. Bookholder, Assistant Attorney General
Attorneys for Defendants/Appellees
Phoenix
I R V I N E, Presiding Judge
¶1
The
Arizona
Association
of
Chiropractic
and
other
healthcare professional associations and some individual members
(collectively “Associations”) appeal summary judgment in favor
of
Arizona’s
Governor
in
their
challenge
to
legislation
directing the transfer of monies from certain special funds to
the general fund. For the reasons that follow, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2
shortfall
In 2008, the State of Arizona faced a severe budget
of
about
1.2
billion
dollars.
In
response,
the
legislature enacted House Bill (“HB”) 2620, which reduced the
budgets of many state agencies. See 2008 Ariz. Sess. Laws, ch.
53 (2nd Reg. Sess.) Responding to similar circumstances in 2009,
the legislature enacted HB 2209. See 2008 Ariz. Sess. Laws, ch.
2
285. In addition to reducing agency budgets, HB 2620 and HB 2209
directed
the
established
transfer
for
of
monies
from
and
health
medical
certain
special
regulatory
funds
agencies
(“Boards”) to the State’s general fund.
¶3
The funds derived from licensing fees collected by the
Boards from the regulated professionals. The enabling statutes
creating
the
funds
provided
that
ten
percent
of
the
fees
collected shall be deposited into the State’s general fund, with
ninety-percent
appropriation
(“A.R.S.”)
remaining
by
§§
the
32-906
in
the
Boards’
legislature.
(2008)
See
funds
Ariz.
(chiropractic),
subject
Rev.
-1406
to
Stat.
(2008)
(medical), -1212 (2008) (dental), -1611 (2008) (nursing), -3405
(2008) (occupational therapy), -1705 (2008) (optometry), -1805
(2008)
(osteopathy),
-1907
(2008)
(pharmacy),
-2004
(2008)
(physical therapy), -2506 (2008) (physician assistants).
¶4
In
April
2009,
the
Associations
filed
a
claim
in
superior court challenging the legality of HB 2620 and HB 2209,
and seeking return of the special funds or declaratory relief.
They moved for summary judgment arguing that the transfers were
not appropriation decisions, the funds were held in trust and
could
not
be
appropriated,
the
bills
levied
a
tax
without
specifically stating the objective or a two-thirds vote, and
raising other statutory objections under Title 35.
3
¶5
The
Governor
legislature
did
appropriate
funds.
Governor,
exercise
there
not
was
the
no
a
violate
The
finding:
of
filed
its
trial
(1)
cross-motion
transfers
legislature’s
evidence
“the
ruled
in
were
Treasurer
the
to
favor
“a
appropriation
State
argued
authority
constitutional
court
the
and
of
permissible
authority”;
held
the
the
(2)
Boards’
funds as a conduit or custodian”; and (3) regardless of whether
the funds are characterized as a tax or a fee, the Associations
failed
to
cite
constitutional
or
statutory
authority
that
prohibited the Governor “from revising the percentage of the
licensure
fees
that
goes
into
rejected
the
Associations’
the
general
“additional
fund.”
The
constitutional
court
and
statutory” claims. The Associations timely appeal.
DISCUSSION
¶6
involving
We
review
de
novo
constitutional
a
claims
grant
and
of
summary
issues
of
judgment
statutory
interpretation. Arpaio v. Maricopa County Bd. of Supervisors,
225 Ariz. 358, 361, ¶ 6, 238 P.3d 626, 629 (App. 2010). We may
affirm a grant of summary judgment if it is correct for any
reason. City of Tempe v. Outdoor Sys., Inc., 201 Ariz. 106, ¶
14, 32 P.3d 31, 36 (App. 2001).
¶7
We
start
by
recognizing
that
the
legislature
has
plenary power over the use and priority of State funds. Ariz.
Const. art. 4, Pt. 2, § 20. “[U]nless that power is limited by
4
express
or
inferential
provisions
of
the
Constitution,
the
legislature may enact any law which in its discretion it may
desire.” Ariz. Farm Bureau Fed. v. Brewer, 226 Ariz. 16, 19, ¶
7,
243
P.3d
619,
622
(App.
2010)
(citation
omitted).
The
legislature’s power to make laws is subject only to state and
federal constitutional limitations. Litchfield Elem. Sch. Dist.
No. 79 v. Babbitt, 125 Ariz. 215, 223, 608 P.2d 792, 800 (App.
1980).
There
enactment
enactment
is
is
a
strong
presumption
constitutional,
must
prove
and
beyond
the
a
that
party
a
legislative
challenging
reasonable
doubt
it
the
is
unconstitutional. Id.
¶8
The legislature’s authority is not absolute, however,
but limited to public monies. Ariz. Farm Bureau, 226 Ariz. at
19, ¶ 10, 243 P.3d at 622. “Public monies” are defined as “all
monies coming into the lawful possession, custody or control of
state agencies, boards, commissions or departments or a state
officer,
employee
or
agent
in
his
official
capacity,
irrespective of the source from which, or the manner in which,
the monies are received.” A.R.S. § 35-212(B) (2011); 1 State v.
Mecham,
173
Ariz.
474,
481,
844
P.2d
641,
648
(App.
1992).
“Public monies” includes “money belonging to, received or held
1
We cite to the current version of applicable statutes when
no revision material to this case has occurred.
5
by,
state,
county,
district,
city
or
town
officers
in
their
official capacity.” A.R.S. § 35-302 (2011).
¶9
In this case, a typical enabling statute reads:
A. The
Arizona
medical
board
fund
is
established. Pursuant to §§ 35-146 and 35147, the board shall deposit ten per cent of
all monies collected under the provisions of
this chapter in the state general fund and
deposit the remaining ninety per cent in the
Arizona medical board fund.
B. Monies deposited in the fund are subject
to § 35-143.01.
A.R.S.
§
32-1406
(Arizona
medical
board).
Section
35-143.01
provides:
A. All monies deposited in special agency
funds
of
self-supporting
regulatory
agencies, as provided in § 35-142, to be
used by such agency for administration and
enforcement, shall be subject to annual
legislative appropriation.
B.
Unless
otherwise
provided
by
the
legislature, a special fund self-supporting
regulatory agency shall not expend more
monies
than
are
appropriated
by
the
legislature for a fiscal year, and any
monies remaining at the end of the fiscal
year revert to the special agency fund.
(Emphasis added.)
¶10
Here, the special funds derived from fees that were
legitimately collected by the Boards in an official capacity. By
definition,
they
were
“public
monies”
subject
to
appropriation. Section 35-143.01(A) plainly states so.
6
legislative
¶11
The Associations argue that the transferred funds have
not been previously appropriated by the legislature. They fail,
however, to cite any applicable constitutional provision that
requires an appropriation. The cases they rely on to support the
contention
that
the
legislature
must
“‘identify
some
appropriation that must be reduced’ if it wishes to transfer
some
money
from
special
funds
to
the
general
fund”
are
distinguishable.
¶12
In Rios v. Symington, a prior appropriation was not
required
not
to
authorize
legislative
transfers,
but
because
Article V, Section 7 prevented the governor from vetoing items
in a bill unless it contained “several items of appropriations”
of money. 172 Ariz. 3, 11, 833 P.2d at 20, 28. In League of
Ariz. Cities and Towns v. Martin, 219 Ariz. 556, 560-61, ¶¶ 1418,
201
P.3d
517,
521-22
(2009),
the
Arizona
Supreme
Court
addressed the validity of transfers in a different section of HB
2209 under Article IV, Part 2, Section 20. There, the Court
looked for a prior appropriation because the legislature failed
to
specify
that
the
amount
would
come
from
public
revenue
previously set aside for cities and towns. In effect, the Court
held that the legislature could not simply appropriate money
that did not belong to the State.
¶13
and
The transferred sums here, in contrast, were collected
held
by
state
agencies.
Because
7
they
were
public
monies
subject to legislative appropriation, the transfers did not have
to reduce a prior appropriation.
¶14
The Associations next contend that the transfers of
regulatory
fees
unconstitutional
into
the
general
taxes
because
fund
they
converted
were
them
ultimately
into
used
for
purposes of the general fund. The Associations argue that Hawaii
Insurers
Council
v.
Lingle,
201
P.3d
564
(Haw.
2008)
is
on
point. We disagree.
¶15
In Hawaii Insurers, the Hawaii Supreme Court found its
legislature violated the separation of powers doctrine because
the fees that were transferred to the general fund were taken
from
an
agency
whose
budget
is
allocated
by
the
insurance
commissioner, a member of the executive branch. Id. at 568, 572.
The agency was required to keep a reserve intended to handle
emergencies for the protection of policy holders. Id. at 568.
¶16
Here,
the
Boards
are
not
independent
of
the
legislature, but rely on it to approve their annual budget and
other
appropriation
otherwise
provided
matters.
by
the
See
A.R.S.
legislature,
§
a
35-143.01
special
(“Unless
fund
self-
supporting regulatory agency shall not expend more monies than
are appropriated by the legislature for a fiscal year . . . .”).
Because
the
appropriation
Arizona
power
legislature
over
the
has
Boards’
not
funds,
violation of the separation of powers doctrine.
8
delegated
there
is
its
no
¶17
The
Associations
violated
Article
IX,
also
section
contend
that
17(2)(b)(iii),
the
of
transfers
the
Arizona
constitution because the funds were held by the State in trust
or
a
custodial
capacity.
We
recently
rejected
a
similar
challenge to HB 2620 in Arizona Farm Bureau Federation, a case
involving
the
transfer
to
the
general
fund
of
monies
from
special funds set up for farmers. 226 Ariz. at 21, ¶¶ 2-3, 243
P.3d at 621.
¶18
In Arizona Farm Bureau Federation, two of three fee
collection
statutes
named
the
grower,
shipper
or
handler
“a
trustee of the monies until they are paid” to the councils and
referenced a statute that allowed the treasurer to invest trust
and treasury monies. 226 Ariz. at 21, ¶¶ 18-19, 243 P.3d at 624
(citing A.R.S. § 35-313) (emphasis added). Despite such terms,
we
declined
to
infer
a
trust
relationship,
reasoning
“the
legislature knows how to create a trust when it wishes to do so,
and it does so with more specific language.” Id. at 22, ¶ 24,
243 P.3d at 625. Finding no explicit statement of a “clear and
unequivocal” intent to create a trust, we held that none was
created. Id. at 21-22, ¶¶ 20-21, 25, 243 P.3d at 624-25.
¶19
The statutes here likewise state no legislative intent
to create a trust. Rather, they indicate a contrary intent that
monies in the special funds are not considered “trust monies.”
“Trust
monies,”
are
defined
as
9
“treasury
monies
other
than
operating monies.” A.R.S. § 35-310(5) (2011); Ariz. Farm Bureau,
226 Ariz. at 22, ¶ 23, 243 P.3d at 625. Under Title 35, when
interest from treasury monies is paid to the state general fund,
those
special
funds
are
considered
“operating
monies.”
See
A.R.S. § 35-310(2) (Supp. 2010).
¶20
The enabling statutes here provide that interest from
the special funds “accrues to the general fund.” A.R.S. § 35142(A),
(F).
The
Comptroller’s
affidavit
also
confirmed
that
“all interest earned on the monies in the Funds is deposited
into the [general fund].” By definition, the special funds were
not “trust monies.”
¶21
Nor can we find a custodial relationship even though
the enabling statutes reference a statute that provides “the
state
A.R.S.
treasurer
§
shall
35-142(A)(8).
be
the
custodian
Section
35-142
of
all
appears
such
in
funds.”
Title
35,
Article I, which deals with “Budgetary and Fiscal Provisions For
State Agencies.” Statutes that appear in Title 35, Article I, do
not limit the legislature’s authority, but govern how the Boards
can spend their money. See Ariz. Farm Bureau, 226 Ariz. at 2021, ¶ 14, 243 P.3d at 624-25.
¶22
Additionally,
the
use
of
the
term
“custodian”
is
ambiguous. The State Comptroller testified in his affidavit that
he
is
“the
custodian
of
financial
records”
for
the
Boards’
funds. (Emphasis added.) He stated that “[t]he State of Arizona
10
has classified and reported [those] Funds in the State’s audited
financial statements among the State’s special revenue funds and
not among its trust or agency funds.” He attests that they are
not set up as “funds for which money is held in trust.”
¶23
The Associations correctly argue that the State does
not always get title to the monies in its possession. Kotterman
v.
Killian,
193
Ariz.
Nevertheless,
they
custodian
conduit”
or
273,
fail
to
of
284,
show
the
972
how
funds.
P.2d
the
The
606,
617
State
funds
was
here
(1999).
“a
did
mere
not
derive from a purely federal source. Cf. Navajo Tribe v. Ariz.
Dep’t of Admin., 111 Ariz. 279, 280-81, 528 P.2d 623, 624-25
(1974). Nor are they like workers’ compensation funds, which
have a limited purpose and an ascertainable beneficiary. See
Moran v. Derryberry, 534 P.2d 1282, 1286 (Okla. 1975); Workers’
Comp. Fund v. State, 125 P.3d 852 (Utah 2005).
¶24
Although we recognize that the legislature originally
reserved
the
statutory
purposes,
the
enabling
funds
for
statutes
do
the
not
Board’s
show
“an
regulatory
irrevocable
dedication of the monies in the funds.” Ariz. Farm Bureau, 226
Ariz. at 23, ¶ 30, 243 P.3d at 626 (citing Arpaio, 225 Ariz. at
363, ¶ 19, 238 P.3d at 631). Nor do they provide that the monies
shall be used solely for the benefit of the Boards’ licensees.
Id.
at
23,
¶
29,
243
P.3d
at
626
(finding
no
custodial
relationship because funds were “not used for the sole benefit
11
of the crop producers who pay the fees or any donors who donate
monies”). The enabling statutes identify no beneficiary of the
funds and do not guarantee any licensee a particular benefit.
Id. Indeed, the statutes do not permit any particular licensee
to legally challenge how the Boards use their fees. Id. at ¶ 28.
¶25
Under these circumstances, we conclude that neither a
trust
nor
custodial
relationship
existed.
Consequently,
the
Associations failed to prove a clear violation of Article IX,
Section 17(2)(b)(iii).
¶26
The Associations further contend that the trial court
erred in concluding that the legislature intended to transfer
the
monies
in
the
Board’s
funds
without
first
amending
the
enabling statutes, in violation of Article IV, Part 2, ¶ 14.
Addressing the Association’s claim that the transfer of funds
was unconstitutional, the trial court ruled as follows:
[The
Associations]
only
challenge
the
constitutionality of the legislation that
changes (ultimately) the percentage that
goes into the general fund. Whether or not
the character of the funds is construed as a
fee or a tax is ultimately a distinction
without a difference; Plaintiffs cite no
constitutional or legislative authority that
prohibits the legislature from revising the
percentage of the licensure fees that goes
into the General fund.
(Emphasis
added.)
The
Associations
assert
that
the
phrase
“revising the percentage of licensure fees that goes into the
General fund” refers to a legislative revision of the enabling
12
statutes’ ninety-to-ten allocation of monies between the special
and general funds.
¶27
To the extent the ruling may be construed this way, we
agree that it was erroneous. Article IV, Part 2, ¶ 14 of the
Arizona Constitution plainly states, “No Act or section thereof
shall be revised or amended by mere reference to the title of
such Act, but the Act or section as amended shall be set forth
and published at full length.” This provision does not apply in
this case, however, because there is no evidence the legislature
intended to amend the enabling statutes, and the statutes were
in fact not amended. Furthermore, there is no requirement that
the legislature must first amend the enabling statutes before it
may redirect monies to the general fund where, as here, the
legislature created statutory funds. See Arpaio, 225 Ariz. at
363, ¶ 18, 238 P.3d at 631 (citation omitted).
¶28
To
interpreted
the
to
extent
mean
that
the
trial
it
does
court’s
not
ruling
matter
can
whether
be
the
transfers were fees or taxes because they merely increased the
amount of monies already appropriated to the general fund, it is
correct. Under Arizona law, the transfer of monies from special
funds to the general fund does not increase tax revenue if, as
here, those monies were merely transferred from “funds already
within the government’s possession.” See id. at 364, ¶ 24, 238
P.3d at 632.
13
¶29
The
Associations
next
argue
that
the
legislature
effectively levied new taxes without first “stating distinctly
the
object
applied.”
of
the
Ariz.
tax,
Const.
to
which
Art.
IX,
object
§§
3,
only
9.
it
The
shall
be
funds
here,
the
funds
however, derived from licensing fees, not taxes.
¶30
Even
assuming
that
the
transfers
of
converted the fees into taxes for the purposes of Article 9,
Sections
3
and
9
apply
only
to
property
taxes.
Ariz.
Farm
Bureau, 226 Ariz. at 24, ¶ 35, 243 P.3d 627. The fees paid for
“the
privilege
excise”
tax.
professional
of
Id.
engaging
at
licensing
¶
in
an
occupation
36.
Because
fees,
they
these
would
is
funds
be
clearly
derived
excise
an
from
taxes,
to
which Article IX does not apply. Id. at ¶ 35.
¶31
The
Associations
additionally
contend
that
the
transfers in HB 2209 raised tax revenue without a two-thirds
vote of each house of the legislature, in violation of Article
IX, section 22 of the Arizona Constitution. We disagree.
¶32
Article IX, Section 22 requires any act that imposes a
new tax, fee, or assessment providing for a net increase in
state revenue be passed by a two-thirds super majority of both
houses of
the
legislature.
Arpaio
v.
Maricopa
County
Bd.
of
Supervisors, 225 Ariz. at 364, ¶ 24, 238 P.3d at 632. In Arpaio,
we
held
that
the
transfer
of
14
public
funds
already
in
the
government’s possession did not violate Section 22, because the
burden on the tax- and fee-paying public did not increase. Id.
¶33
Like Arpaio, the transfers here did not increase the
overall tax burden on the licensees, but merely shifted public
monies already in the possession of the State treasurer. See id.
Accordingly, HB 2209 did not require a super-majority vote under
Article IX, Section 22.
¶34
Finally, the Associations argue that the legislature’s
appropriation
unexpended
or
violated
A.R.S.
unencumbered
§
35-143.01(C)
balance”
does
not
(stating
revert
“[a]ny
to
the
general fund at the end of a fiscal year) and A.R.S. § 35-142(F)
(allowing monies to be used to pay claims for the general fund,
but requiring that “sufficient monies remain” for payment of the
Boards’ own claims). As noted in ¶ 19, however, these statutes
appear
in
Title
35,
Article
1,
which
does
not
limit
the
legislature’s plenary power over the appropriation of funds, but
how the Boards may spend their money. See Ariz. Farm Bureau, 226
Ariz.
at
20-21,
¶
14,
243
P.3d
at
624-25;
accord
Crane
v.
Frohmiller, 45 Ariz. 490, 496, 45 P.2d 955, 958 (stating only
the
Constitution
can
limit
the
supreme
authority
of
the
legislature over appropriation matters). The trial court did not
err in summarily denying these statutory arguments.
15
CONCLUSION
¶35
For these reasons, we affirm.
/s/
PATRICK IRVINE, Presiding Judge
CONCURRING:
/s/
JOHN C. GEMMILL, Judge
/s/
PHILIP HALL, Judge
16
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