Barber v. Ritter

Decision Date03 November 2008
Docket NumberNo. 07SC373.,07SC373.
Citation196 P.3d 238
PartiesDouglas H. BARBER; Heggem-Lundquist Paint Company, a Colorado corporation; and Rick Kerber, d/b/a Kerber's Oil Company, Petitioners/Cross-Respondents, v. Bill RITTER, Jr., as Governor of the State of Colorado; and Cary Kennedy, as Treasurer of the State of Colorado, Respondents/Cross-Petitioners.
CourtColorado Supreme Court

Head & Associates, P.C., John F. Head, Denver, Colorado, Attorneys for Petitioners/Cross-Respondents.

John W. Suthers, Attorney General, Monica M. Márquez, Assistant Solicitor General, Maurice G. Knaizer, Deputy Attorney General, Public Officials Unit, State Services Section, Denver, Colorado, Attorneys for Respondents/Cross-Petitioners.

Brad D. Bailey, Assistant City Attorney, City of Littleton, Littleton, Colorado, Attorney for Amicus Curiae City of Littleton.

Justice BENDER delivered the Opinion of the Court.

Introduction

In this case involving article X, section 20 of the Colorado Constitution ("Amendment 1"),1 we review the court of appeals' opinion in Barber v. Ritter, 170 P.3d 763 (Colo.App. 2007).2 In that opinion, the court of appeals held that Petitioners/Cross-Respondents Douglas Barber, Heggem-Lunquist Paint Company, and Rick Kerber ("Petitioners"), as Colorado taxpayers, established standing to challenge the transfer of over $442 million from thirty-one special funds to the state's General Fund, but that the legislative acts authorizing the fund transfers did not violate article X, section 20 of the Colorado Constitution. The court of appeals further held that the transfer of monies from all but three of the funds did not violate article XI, sections 3 and 4 of the Colorado Constitution.3 As to the transfers from the remaining three funds, the Colorado Children's Trust Fund, the Severance Tax Trust Fund, and the Unclaimed Property Trust Fund, the court of appeals held that the trial court should not have granted summary judgment in favor of Respondents/Cross-Petitioners and remanded the case for further proceedings.

We affirm the decision of the court of appeals that Petitioners have taxpayer standing to challenge the transfers and that the transfers did not violate article X, section 20 of the Colorado Constitution. We hold that a charge is a "fee," and not a "tax," when the express language of the charge's enabling legislation explicitly contemplates that its primary purpose is to defray the cost of services provided to those charged. Because the purpose for which the charge is imposed, rather than the manner in which the monies generated by the charge are ultimately spent, determines the characterization of the charge as a fee or a tax, the transfer of fees from a cash fund to a general fund does not alter the essential character of those fees as fees.

A transfer of fees from a special cash fund to a general fund does not result in a net revenue gain within the meaning of Amendment 1 because fees are included in the definition of Amendment 1 revenue from the time they are collected. As such, a transfer of fees does not result in the production of additional revenue.

Under its plenary constitutional power to appropriate, the General Assembly has the authority to revoke or amend a public trust without seeking taxpayer approval. We therefore hold that the court of appeals erred in determining that summary judgment was inappropriate as to Petitioners' article XI claims and reverse.

We remand this case to the court of appeals to be returned to the trial court with directions to enter judgment in favor of Bill Ritter, Jr., as Governor of Colorado, and Cary Kennedy, as Treasurer of Colorado.

Facts and Proceedings Below

During an economic downturn in Colorado between 2001 and 2004, the General Assembly enacted a series of bills to address revenue shortfalls in the state's general tax fund ("General Fund"). These acts directed the state treasurer to transfer over $442 million from thirty-one special cash funds to the state's General Fund as an extraordinary remedial measure.4 These cash funds are financed by fees, surcharges, and special assessments. The fees charged in connection with these cash funds are used to subsidize the cost of governmental services provided to those charged, or to otherwise defray the social costs of their activities. The monies residing in each of the cash funds at issue in this case are included in the state's "fiscal year spending," as that term is defined in section 2(e) of Amendment 1. Section 2(e) exempts from "fiscal year spending" monies from several sources including, for example, pension earnings and federal funds. Fees, surcharges, and special assessments, which make up the cash funds at issue in this case, are subject to Amendment 1 spending limits. Colo. Const. art. X § 20(2)(e).5

As explained below, Petitioners have asserted a specific connection to five of these thirty-one funds based on payments made to these funds. As to the remaining funds, Petitioners acknowledge that they have not paid money into the funds and that their only connection to the funds is as citizens and taxpayers.

Petitioner Douglas Barber is a real estate broker licensed by the Colorado Division of Real Estate. He has been a licensed real estate broker since 1975. The Real Estate Recovery Fund was a special fund created to reimburse members of the public for certain losses caused by brokers. The fund was financed through licensee disciplinary fines, reinstatement fees, and interest income. In addition, if the fund balance fell below $350,000, then the Real Estate Commission was required to set and collect a "recovery fund fee" from licensees when they renewed their licenses. Real estate brokers renew their licenses once every three years. Thus, when the Commission sets and collects a "recovery fund fee," it does so over a three-year cycle during which each licensee pays the fee one time.

In 2003, the General Assembly directed the state treasurer to transfer $3.2 million from the Real Estate Recovery Fund to the General Fund. Following that transfer, the balance dropped below $350,000, which prompted the Commission to assess a $31 recovery fund fee for the next three-year renewal cycle from 2005 to 2007.

In 2005, while this case was pending in the court of appeals, the General Assembly repealed the Real Estate Recovery Fund and the Commission stopped collecting the fee. As a result, Barber never paid the $31 recovery fund fee and never will.

Petitioner Heggem-Lundquist Paint Company does interior finishes for the construction industry and individual homeowners. Under Colorado law, Heggem-Lundquist must obtain workers' compensation insurance for its employees. Heggem-Lundquist pays approximately $400,000 per year in workers' compensation insurance premiums.

Pursuant to statute, all insurance companies pay a percentage surcharge on the workers' compensation premiums written in Colorado. The funds collected through the surcharge are allocated among four funds, including three funds at issue in this case: the Workers' Compensation Cash Fund, the Subsequent Injury Fund, and the Major Medical Insurance Fund. The surcharge rate has remained at 3.818% since 2003. The surcharge is assessed until the funds are "actuarially sound," meaning that the funds have sufficient reserves to cover future liabilities and expenses for all claims in the funds.

In 2002 and 2003, the General Assembly passed several bills directing the treasurer to transfer nearly $400 million from the various workers' compensation funds to the General Fund. Of that amount, $221.5 million was later restored. Heggem-Lundquist asserted that, but for the transfers, the funds would have become actuarially sound and the surcharge would have ended on July 1, 2004. Thus, as a result of the transfers, the period of time during with the surcharge was assessed was extended.

The surcharge is paid by insurance companies and not by employers themselves. While insurance companies may choose to pass that cost on to employers who purchase coverage, they are not obligated to do so.

Petitioner Rick Kerber does business as Kerber's Oil Company. He purchases fuel from Sinclair Oil Company, which he delivers in bulk to consumers. Kerber pays an environmental response surcharge on every tank of fuel he purchases. This surcharge goes into the Petroleum Storage Tank Fund, which provides funding for remediation of contamination caused by leaking petroleum storage tanks. The surcharge amount depends on the balance in the fund.

In 2002, the General Assembly directed the treasurer to transfer $4 million from the Petroleum Storage Tank Fund to the General Fund. Approximately nine months after the transfer, the fund balance fell below $5 million, which prompted a surcharge increase from $50 per tankload of fuel to $75.

While this case was pending in the court of appeals, the General Assembly authorized repayment of some of the transfers if certain fiscal conditions were met. These conditions were met in November 2005, and in January 2006, the treasurer restored the $4 million that had been transferred from the Petroleum Storage Tank Fund.

Petitioners filed this action against Respondents in August 2004, asserting three claims: (1) the transfers from the special funds to the General Fund represented a "tax policy change directly causing a net tax revenue gain," a "new tax," or a "tax rate increase," without voter approval in violation of Amendment 1 because the transferred monies, which they allege became general tax dollars as a result of the transfer, would be expended to defray "general governmental expenses unrelated to the respective purposes for which the cash funds were created"; (2) some of the funds involved were "public trusts," and therefore the state as trustee had an obligation to repay the money it had transferred; and (3) the transfers created unconstitutional debt in violation of sections 3 and 4 of article XI of the Colorado Constitution. Petitioner...

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