The Arizona Constitution requires the enactment of a balanced budget for the upcoming fiscal year before July 1. But two months into the fiscal 2010, the budget in place was not signed or balanced, even on paper.
Twin actions by the Legislature and the governor put in place a $10- billion spending plan with only $7 billion-plus in revenue.
First, Gov. Jan Brewer line-item vetoed a set of budget bills early in July, which authorized state agencies to spend money at a level that the state can’t afford. Then a few days later, the Legislature restored funding for education and put in another $400 million for schools, essentially bringing spending to $10 billion without addressing the revenue shortfall. Brewer signed the latter bills.
“I don’t think there is any doubt that we are (out of compliance),” said Sen. John Huppenthal, a Republican from Chandler.
The failure of policymakers to enact a balanced budget on time has so dismayed Huppenthal he is mulling introducing a constitutional amendment that would “term-limit” the entire Legislature if it fails to come up with a balanced budget within a few days after the new fiscal year begins.
Suing lawmakers and the governor to compel them to comply with the state Constitution seems to be a straightforward option, but the big question, according to constitutional experts, is: What’s the judicial relief?
That’s another way of saying, so what?
Huppenthal, who joined the Legislature in the 1990s, called passing a balanced budget a “fundamental and minimal requirement” on lawmakers.
This balanced-budget requirement is spelled out in at least three provisions of the Arizona Constitution: Sections 3, 4, and 5 under Article 9.
Indeed, Arizona is like other states that have a statutory or constitutional requirement to produce a spending plan that is not in the red.
Section 3 states that the Legislature “shall provide by law for an annual tax sufficient, with other sources of revenue, to defray the necessary ordinary expenses of the state for each fiscal year.”
Section 4 states that the fiscal year “shall commence on the first day of July in each year.”
Finally, Section 5 states that the state’s aggregate amount of “direct and contingent” debts shall not exceed $350,000.
There is no allowance in the state Constitution for what has transpired during the past two months, said Kevin McCarthy, president of the Arizona Tax Research Association, a public finance and tax policy think tank.
McCarthy said the Constitution “does not contemplate us being in mid- August and not having a budget.”
When asked categorically if the Legislature is out of compliance with its - some say only - constitutional mandate, Senate President Bob Burns replied: “Well, I guess that’s up to the lawyers to decide.”
“Somebody would have to sue the state,” Senate Minority Leader Jorge Luis Garcia said when asked the same question.
That’s easier said than done.
For one, litigating before the state Supreme Court is an expensive ordeal.
But that’s the least of the problems for anyone who is contemplating filing a case against lawmakers and the governor for their failure to comply.
A more practical problem is that at any point after the filing of the suit, lawmakers could reach agreement with the governor and pass a budget, potentially rendering the case moot.
“There are creative arguments that you can make that it is not moot because this is going to be a continuing problem,” said Nick Dranias, a constitutional lawyer with the Goldwater Institute. “But you don’t want to be in that position. It costs a lot of money to litigate something even for a nonprofit like us, and it is hard to let us gear up for this thing and then they could fix it, you know, and then we are stuck in fighting on the defense.”
In fact, lawmakers were in the thick of negotiations with Brewer to pass a fiscal 2010 budget as of Sept. 3.
Pay-as-you-go budgetIt is clear that the framers of the Arizona Constitution wanted the state to be on yearly pay-as-you-go basis, according to Paul Bender, dean emeritus of ASU’s Sandra Day O’Connor College of Law.
“The way I read this,” Bender said, referring to Section 3, “by the beginning of each fiscal year the Legislature has to have passed tax laws of whatever kind - and the Legislature can pass almost any kind of tax laws it wants, although there are some limits - in order to defray the necessary ordinary expenses of the state for that year, which basically is (to) balance the budget.”
Prof. John Leshy, who wrote a reference guide to the Arizona Constitution and now teaches at the University of California-Hastings College of the Law, agrees.
The first sentence in Section 3 is generally understood to be a balanced budget requirement because “it seems to say that,” Leshy said.
Additionally, Dranias said the debt clause is the requirement.
Nearly every state that has a debt clause has interpreted it, with varying degrees of strength, to limit the extent that a state government can borrow money to fill gaps in its budget, he said.
“Think of it this way: If all you can do is to borrow $100 a month, you are sort of limited to something that approaches a balanced budget in your own personal checking account,” Dranias said.
It works the same when a state has a $350,000 debt limitation and its budget is at least $6 billion annually, he added.
But there are ways that policymakers get around this clause by, for example, calling it short-term borrowing and saying they would pay it back before the year is over, according to the Goldwater lawyer.
A question of enforcementBender and Leshy said the question is whether the court can enforce this provision and if so, how?
“[Section 3] sets out a general principle that the Legislature is supposed to follow, but if the Legislature doesn’t follow it, is the remedy for the courts to step in? Or is the remedy to vote the Legislature out of office?” Leshy said.
“Is there a political remedy and a judicial remedy or just a political remedy?” he added.
That’s where things get interesting.
In fact, the Arizona Legislature passed and sent to the governor two budget packages for fiscal 2010 that supporters said were balanced.
Brewer line-item vetoed the first set last July. Then the Legislature sent the governor another budget proposal on Aug. 25.
Lawmakers can therefore argue in court that they passed a balanced budget but Brewer would not sign it, Bender said.
“That’s the first problem with a lawsuit - whose fault is it?” Bender said, noting that the state Constitution does not expressly say the governor is supposed to sign legislation resulting in a balanced budget.
That means the Legislature can argue that it did what it had to do to comply with the Constitution, and that it is the governor’s fault that no budget is in place.
On the other hand, the governor can also argue that she is not obligated to sign just anything that the Legislature sends her way.
But Bender said assuming that lawmakers did not pass legislation to balance the budget, the question remains - what is the relief?
“What is the court supposed to say to the Legislature - ‘Hey guys, you didn’t send the governor legislation that would balance the budget. You have a constitutional duty to do that. I order you to do it’,” Bender said.
The same situation arises in the case where the governor is at fault.
“What is the court going to do - say to the governor, ‘Hey, don’t you dare veto that bill they just sent you’,” Bender said. “And suppose she says, ‘Well, that’s what you think,’
“What’s the court going to say - we will put you in jail until you do it?”
If there is one reason why the courts should not get involved in a political question, this seems to be one of them, according to Bender.
But given the court’s recent actions, Bender isn’t so sure the judiciary will stand idly by.
Stepping inThe court has, in fact, shown an appetite to wade into what many would consider a political question involving other branches of government.
When the Legislature passed a budget packet in June, the Senate held off on sending the bills to the governor. The Republican-controlled Legislature wanted to use the budget as leverage in its negotiations with Brewer.
Brewer sued the Legislature, and the Arizona Supreme Court heard the case.
On June 23, the court ruled that the Legislature cannot pass bills and then withhold them to prevent the governor from exercising her power to approve or veto legislation. The court, however, declined to order the Legislature to immediately send the budget bills to Brewer’s desk.
In explaining its decision later, the court’s majority brushed off the Legislature’s argument that the court should not intervene in the dispute, which the lawmakers deemed to be a political fight that should be left to the legislative and executive branches.
The court said the Legislature must send bills that are finally passed to the governor with no more delay than is reasonably necessary to complete ministerial tasks.
The court’s action on the issue of transmittal of bills shows courage of the court to enforce the Constitution against political branches, said Dranias, who is the director of the Joseph and Dorothy Donnelly Moller Center for Constitutional Government at the Goldwater Institute.
The court signaled it would be paying very close attention to the Constitution and would not be “cowed into submission to the political branches when they start playing games,” he said.
Assuming a case is filed and the court intervened, what the public likely would see is more along the lines of the court invalidating the “debt-like” provisions in the budget, Dranias said.
“The nice thing about it is, imagine you did a sale-lease back for $3 billion - whatever it is - and the Supreme Court ruled that’s not an enforceable agreement. What more does it need to say? It doesn’t really need to. It is self-enforcing,” Dranias said.
The assumption is a budget with debt-like provisions is in place. But absent an enacted budget, it would be hard to say what exactly policymakers are doing to fill the deficit, Dranias said.
“(But) assuming that today was the last day of any future special session and you are left with $3 billion in the hole, there is no question that would be unconstitutional,” Dranias said. “But they are not going to do that.”
Dranias said he anticipates the Legislature would borrow money on a short-term basis or maybe even issue IOUs and then argue that doing so evades the debt clause.
Yet if somebody were to sue, some of the provisions in the current budget proposal would provide the best opportunity to do so, according to McCarthy, who has been with the Arizona Tax Research Association since the 1980s.
“There are so many different gimmicks that will be employed, and on paper it is obvious the budget doesn’t have ongoing revenues to meet ongoing spending,” McCarthy said.
Arizona Treasurer Dean Martin said last month that even if the current budget proposal were signed into law, the state would still need to go into external borrowing by up to $1.5 billion any time between the end of December this year and the middle of February next year.
“Clearly the Constitution contemplates the Legislature will do this in good faith (and) they will try their best, but you can’t force them to do that,” Bender said. “I mean they (justices) can’t tell the Legislature you got to take the treasurer’s advice or you have to take the advice of one of your committees.”