Judge tosses one ed tax challenge

Posted 1/15/21

PHOENIX — A judge has tossed out one of the challenges to a voter-approved education tax.

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Judge tosses one ed tax challenge


PHOENIX — A judge has tossed out one of the challenges to a voter-approved education tax.

In a new ruling, Maricopa County Superior Court Judge John Hannah rejected claims by challengers that Proposition 208 illegally constrains the ability of lawmakers to control the state budget.

Mr. Hannah deferred a decision on the other grounds the business interests and some Republican lawmakers say makes the Invest in Ed measure illegal. But the judge did rebuff their claim that unless he acts quickly that the legislative budgeting process will be thrown into “chaos” and some Arizonans will have to pay more in estimated taxes.

Nothing in the latest action guarantees the 3.5% income tax surcharge on earnings above $250,000 for individuals and $500,000 for couples ever will take effect. That requires Mr. Hannah to consider the main point of the complaint, which is that it is unconstitutional for voters to approve new taxes, at least not without a two-thirds vote. The measure got just 51.75% of the tally.

Ultimately, whichever side loses this legal fight will seek Supreme Court review.

But it does indicate Mr. Hannah does not find any of the allegations of illegality so convincing that he is ready to quash the levy.

The tax is designed to raise $940 million a year for K-12 education.

Business interests that tried unsuccessfully to keep it from even getting on the ballot then filed a new lawsuit with a laundry list of allegations of why voters had no right to approve it in the first place.

One complaint they wanted addressed immediately was an argument over verbiage that says the new dollars received cannot be used to supplant or replace other funds they are receiving. The purpose behind this was to ensure lawmakers didn’t reduce other state aid.

Attorneys for challengers argued that impermissibly interferes with the constitutional authority of the legislature to decide the best use of state dollars.

But Mr. Hannah said the wording does no such thing. He said it actually is directed at the school districts and charter schools who will be getting the new funds, telling them they can’t use them to replace other dollars they already are getting.

“It does not limit or affect what the legislature does with general fund revenues,” the judge said.

In fact, Mr. Hannah noted, the legislature itself has enacted measures that tell schools they cannot replace state funding with cash from other sources.

Beyond that, the judge rebuffed the bid by challengers for a quick ruling on other claims. They argued that, absent a quick ruling, there would be “chaos” and “instability” at the legislature as it tries to put together a budget for the new fiscal year that begins July 1.

But Mr. Hannah pointed out that presumes the legislature and its interests are somehow superior to the interests of voters. He said that’s not the way the Arizona Constitution reads.

“The people did not commit to the legislature the whole law-making power of the state, but they especially reserved in themselves the power to initiative and defeat legislation by their votes,” the judge wrote.

In fact, he said the power of the people to craft their own laws “is therefore part of the legislative process.”

And Mr. Hannah said courts have no place interceding in “what amounts to a legislative dispute between the legislature on one hand and the people exercising their legislative authority on the other.”

The judge was no more impressed with arguments that he needs to rule quickly because the tax would create a “financial hardship” on high-income taxpayers who will have to make their first estimated tax payments in April.

Arizona does require estimated payments for individuals whose taxable income for both the prior year and current year exceeds $75,000 for individuals and $150,000 for married couples filing jointly. And that clearly includes those affected by Proposition 208.

But Mr. Hannah pointed out another section of the state tax code says an individual complies with the law by making at least the same payments as the prior year, before there was any new obligation from Proposition 208. That, he said, makes the hardship claim “factually flawed.”

Even if it wasn’t, the judge pointed out Arizona law prohibits courts from enjoining collection of taxes prior to any final ruling about their legality.

Mr. Hannah did not say when he will rule on the remaining claims, notably that any tax increase requires a two-thirds vote, even one approved at the ballot. But during a hearing last month, the judge indicated he wasn’t buying the argument that when voters approved a constitutional amendment requiring that margin for legislatively approved taxes they also were enacting limits on themselves.

“Isn’t the law pretty clear that the people acting through initiative can constrain the legislature in a way that’s different?” he asked.

While proponents peg the additional revenues at $940 million a year, legislative budget analysts have estimated the actual new collections will be just $827 million.

Of whatever is raised, 50% of the money would be in “grants to school districts and charter schools ... for the purpose of hiring teachers and classroom support personnel.” Those funds also can be used to raise salaries.

Another 25% is for student support personnel, with 10% earmarked to help retain teachers in the classroom, 12% for career and technical education and the balance into a fund to help pay the college tuition of those who go into teaching.