Ariz. Farm Bureau Fed'n v. Brewer

• Decision Date: 12 November 2010
• Docket Number: No. 1 CA-CV 09-0756.,1 CA-CV 09-0756.
• Parties: ARIZONA FARM BUREAU FEDERATION; Arizona Wheat Growers Association; Yuma Fresh Vegetable Association; and Western Growers Association, Plaintiffs/Appellees, Arizona Grain Research and Promotion Council, an agency of the State of Arizona, Plaintiff-Intervenor/Appellee, v. Jan BREWER, in her capacity as Governor of the State of Arizona, Defendant/Appellant.
• Court: Arizona Court of Appeals

243 P.3d 619

226 Ariz. 16

ARIZONA FARM BUREAU FEDERATION; Arizona Wheat Growers Association; Yuma Fresh Vegetable Association; and Western Growers Association, Plaintiffs/Appellees,Arizona Grain Research and Promotion Council, an agency of the State of Arizona, Plaintiff-Intervenor/Appellee,

v.Jan BREWER, in her capacity as Governor of the State of Arizona, Defendant/Appellant.

No. 1 CA-CV 09-0756.

Court of Appeals of Arizona, Division 1, Department D.

Nov. 12, 2010.

Michael A. Parham, Phoenix, Attorney for Plaintiff/Appellees.

The Law Offices of Curtis, Goodwin, Sullivan, Udall & Schwab, P.L.C. By Michelle Swann, Kelly Y. Schwab, Phoenix, Attorneys for Plaintiff-Intervenor/Appellee.

Terry Goddard, Attorney General By William A. Richards, Assistant Attorney General, Mark P. Bookholder, Assistant Attorney General, Phoenix, Attorneys for Defendant/Appellant.

OPINION

IRVINE, Judge.

¶ 1 The Governor of the State of Arizona (the "Governor") ¹ challenges the trial court's ruling in favor of Arizona Farm Bureau Federation, Arizona Wheat Growers Association, Yuma Fresh Vegetable Association, Arizona Grain Research and Promotion Council and Western Growers Association (collectively, "Appellees"). We conclude that the disputed fund transfers were not prohibited by law. Therefore, we reverse the judgment of the trial court and remand for entry of judgment in favor of the Governor.

FACTS AND PROCEDURAL HISTORY

¶ 2 On April 18, 2008, the Arizona Legislature passed, and the Governor signed, House Bill 2620 ("HB 2620"). 2008 Ariz. Sess. Laws, ch. 53 (2d Reg.Sess.). In an attempt to balance the 2007-2008 state budget, HB 2620 directed the transfer of certain monies from 104 state funds to the state general fund. Three affected funds, which are the subject of this appeal, were: (1) the Arizona Iceberg Lettuce Research Council Fund ("Lettuce Fund"); (2) the Arizona Citrus Research Council Fund ("Citrus Fund"); and (3) the Arizona Grain Research Fund ("Grain Fund"), (collectively, the "Agricultural Funds").² The Lettuce Fund is administered by the Arizona Iceberg Lettuce Research Council ("Lettuce Council"), the Citrus Fund by the Arizona Citrus Council ("Citrus Council") and the Grain Fund by Arizona Grain Research and Promotion Council ("Grain Council") (collectively, the "Councils").

¶ 3 On August 29, 2008, groups representing a variety of agricultural producers filed suit against the Governor and Arizona State Treasurer Dean Martin ("Treasurer").³ The complaint alleged HB 2620 was unconstitutional and sought injunctive relief and declaratory judgment. Appellees filed motions for summary judgment, and the Governor filed a cross-motion for summary judgment. After hearing oral argument, the trial court granted Appellees' motions for summary judgment and denied the Governor's motion. The trial court found that:

[T]he monies in the funds at issue consist of fees and donations collected for specific purposes; specifically, the marketing, promotion and research of agricultural products produced in the State of Arizona.

The Court further finds that the fees and donations used in furthering agricultural interest are not general fund monies that can be swept or utilized for any legislative purpose. Instead, deposits in the various funds are earmarked as set forth in their enabling statutes and the Legislature cannot modify the purposes without legislation allowing such modification.

¶ 4 The court entered a final judgment ordering the Governor to return the moniestransferred from the Agricultural Funds. The Governor timely appealed.⁴

DISCUSSION

¶ 5 The Governor argues the trial court erred when it entered judgment in favor of Appellees. Specifically, she asserts HB 2620 is constitutional legislation that permitted the transfer of the Agricultural Funds to the general fund.

¶ 6 We review de novo a grant of summary judgment determining the constitutionality of legislation and interpretation of statutes. Bentley v. Bldg. Our Future, 217 Ariz. 265, 270, ¶ 11, 172 P.3d 860, 865 (App.2007) (grant of summary judgment and statutory interpretation); Long v. Napolitano, 203 Ariz. 247, 253-54, ¶ 15, 53 P.3d 172, 178-79 (App.2002) (constitutionality of legislation). If possible, we will construe HB 2620 "to give it a reasonable and constitutional meaning." Long, 203 Ariz. at 254, ¶ 16, 53 P.3d at 179.

¶ 7 We begin by recognizing that the legislature has broad powers to decide how state funds are prioritized and used. Ariz. Const. art. 4, pt. 2, § 20. "[T]he power of the legislature is plenary and unless that power is limited by express or inferential provisions of the Constitution, the legislature may enact any law which in its discretion it may desire." Whitney v. Bolin, 85 Ariz. 44, 47, 330 P.2d 1003, 1004 (1958); see also Citizens Clean Elections Comm'n v. Myers, 196 Ariz. 516, 519-20, ¶ 10, 1 P.3d 706, 709-10 (2000) (legislature's powers are limited only by prohibitions in the state and federal constitutions). When a legislative enactment is challenged, the courts "must find that the [a]ct is clearly prohibited by either the Federal Constitution or the Constitution of Arizona in order to hold it invalid." Earhart v. Frohmiller, 65 Ariz. 221, 224, 178 P.2d 436, 438 (1947).

¶ 8 Certain restrictions have been recognized on the legislature's authority to make fund transfers such as those at issue here. First, express provisions of the Arizona Constitution prohibit the legislature from touching certain funds. For example, fuel tax revenues must be expended on costs associated with public highways, roads and streets, traffic law enforcement, and the Arizona Highways Magazine. Ariz. Const. art. 9, § 14. Similar restrictions are in place for pension funds for public employees. Id. at art. 29, § 1. Monies in permanent funds established for state and school lands may not be transferred into another permanent fund or used "for any object other than that for which the land producing the same was granted or confirmed." Id. at art. 10, § 7(B). Similarly, the rent from school lands is to be apportioned solely for common and high school education in Arizona. Id. at art. 11, § 8(B).

¶ 9 Second, the provisions of the Arizona Constitution known as the Voters Protection Act limit the legislature's ability to "divert funds ... allocated to a specific purpose by an initiative measure approved by a majority of the votes." Ariz. Const. art. 4, pt. 1, § 1(6)(D). "The legislature may take such action only with a three-fourths vote of each house and, even then, its actions must further the purpose of the initiative." Ariz. Early Childhood Dev. & Health Bd. v. Brewer, 221 Ariz. 467, 469, ¶ 6, 212 P.3d 805, 807 (2009).

¶ 10 Third, courts have held that the legislature does not have unlimited authority over funds held by the state that, although technically public funds, are actually owned by or held subject to the claims of third parties. See Navajo Tribe v. Ariz. Dep't of Admin., 111 Ariz. 279, 528 P.2d 623 (1974). In Navajo Tribe, federal funds received pursuant to a federal contract were placed into the state's general fund for particular purposes relating to job training and employment projects. A dispute arose over whether these funds could be expended without specific legislative approval. Our supreme court explained:

Payment of funds into the state treasury does not necessarily vest the state with title to those funds. Only monies raised by the operation of some general law become public funds. Custodial funds are not state monies. The term 'public funds'refers to funds belonging to the state and does not apply to funds for the benefit of contributors for which the state is a mere custodian or conduit. The same is true of the term 'general fund.' This is made clear by the language of ARS § 35-142, 'funds receive [sic] for and belonging to the state.' It is within the power of the legislature to make appropriations relating to state funds, but funds from a purely federal source are not subject to the appropriative power of the legislature.

Id. at 280-81, 528 P.2d at 624-25 (citations omitted). Appellees describe the protections applied in Navajo Tribe as protecting funds held by the state in trust or as a custodian. Although the legal basis for these protections has not been fully developed in prior cases, we have recently interpreted Navajo Tribe as applying to funds held by the state on behalf of a third party. Arpaio v. Maricopa County Bd. of Supervisors, 225 Ariz. 358, 363, ¶¶ 16-17, 238 P.3d 626, 631 (App.2010). The third party with an interest in the funds may be the source of the funds, as in Navajo Tribe (federal funds), or someone claiming a benefit from the use of the funds, such as a pensioner or insured.⁵

¶ 11 The trial court's ruling essentially relied on a separate limitation on the legislature's power. It found the legislature could not transfer funds that had been collected for a specific purpose without specifically modifying the statutory purposes. In other words, the monies in the funds could only be used for the purposes for which the funds were created unless the legislature amended the authorizing statutes. In effect, the trial court found the legislature had limited its own authority over the funds through previous legislation.

¶ 12 In this case, no express provision of the Arizona Constitution limits the legislature's power over the Agricultural Funds. Equally, none of the funds were established by a public vote, so none are protected by the Voter Protection Act. Therefore, any limits on the legislature's authority must be based on the limits contained in the statutes governing the funds or the interests of third parties in the funds. We first address the limitations contained within the statutes themselves.

¶ 13 The enabling statutes for the Agricultural Funds ("enabling statutes") provide that the Councils have various statutorily defined powers and duties, including the assessment and collection of fees. Ariz.Rev.Stat. §§ 3-468.04(C), -526.04(C...