Biggs v. Betlach

• Decision Date: 17 November 2017
• Docket Number: No. CV-17-0130-PR.,CV-17-0130-PR.
• Citation: 404 P.3d 1243
• Parties: Andy BIGGS, et al., Plaintiffs/Appellants, v. Thomas J. BETLACH, Defendant/Appellee, Edmundo Macias; Gary Gorham ; Daniel McCormick; and Tim Ferrell, Intervenor–Defendants/Appellees.
• Court: Arizona Supreme Court

404 P.3d 1243

Andy BIGGS, et al., Plaintiffs/Appellants,

v. Thomas J. BETLACH, Defendant/Appellee,Edmundo Macias; Gary Gorham ; Daniel McCormick; and Tim Ferrell, Intervenor–Defendants/Appellees.

No. CV-17-0130-PR.

Supreme Court of Arizona.

Filed November 17, 2017

Christina Sandefur (argued), Aditya Dynar, Scharf–Norton Center for Constitutional Litigation at the Goldwater Institute, Phoenix, Attorneys for Andy Biggs, Andrew Tobin, Nancy Barto, Judy Burges, Chester Crandell, Gail Griffin, Al Melvin, Kelli Ward, Steve Yarbrough, Kimberly Yee, John Allen, Brenda Barton, Sonny Borrelli, Paul Boyer, Karen Fann, Eddie Farnsworth, Thomas Forese, David Gowan, Rick Gray, John Kavanagh, Adam Kwasman, Debbie Lesko, David Livingston, Phil Lovas, J. D. Mesnard, Darin Mitchell, Steve Montenegro, Justin Olson, Warren Petersen, Justin Pierce, Carl Seel, Steve Smith, David Stevens, Bob Thorpe, Kelly Townsend, Michelle Ugenti, Jeanette Dubreil, Katie Miller, and Tom Jenney

Douglas C. Northup, Timothy Berg (argued), Patrick Irvine, Carrie Pixler Ryerson, Fennemore Craig, P.C., Phoenix, Attorneys for Thomas J. Betlach, Timothy M. Hogan, Joy Herr–Cardillo, Arizona Center for Law in the Public Interest, Phoenix, and Ellen Sue Katz, William E. Morris Institute for Justice, Phoenix, Attorneys for Edmundo Macias, Gary Gorham, Daniel McCormick, and Tim Ferrell

Roopali H. Desai, D. Andrew Gaona, Coppersmith Brockelman PLC, Phoenix and Ann–Marie Alameddin, Arizona Hospital and Healthcare Association, Phoenix, Attorneys for Amicus Curiae Arizona Hospital and Healthcare Association and Amicus Curiae American Cancer Society Cancer Action Network

James S. Burling, Pacific Legal Foundation, Sacramento, CA, Attorneys for Amici Curiae Pacific Legal Foundation and Howard Jarvis Taxpayers Association

Brett W. Johnson, Andrew Sniegowski, Snell and Wilmer LLP, Phoenix, Attorneys for Amicus Curiae Health System Alliance of Arizona

CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE CHIEF JUSTICE PELANDER and JUSTICES BRUTINEL, TIMMER, GOULD, and LOPEZ and JUDGE STARING joined.^*

CHIEF JUSTICE BALES, opinion of the Court:

¶ 1 In 2013, by a simple majority vote, the legislature enacted H.B. 2010 to expand coverage under Arizona's indigent health care program, Arizona Health Care Cost Containment System ("AHCCCS"), with federal monies funding most of the costs. To fund the remaining costs, the legislature provided in A.R.S. § 36–2901.08(A) that the director of AHCCCS "shall establish, administer and collect an assessment" from Arizona hospitals.

¶ 2 We hold that the hospital assessment is not subject to article 9, section 22 of the Arizona Constitution, which generally requires that acts providing for a net increase in state revenues be approved by a two-thirds vote in each house of the legislature. This requirement does not apply to statutorily authorized assessments that "are not prescribed by formula, amount or limit, and are set by a state officer or agency." Ariz. Const. art. 9, § 22 (C)(2). Because the exception applies here, we reject the constitutional challenge to the assessment.

I.

¶ 3 In 2010, Congress enacted the Patient Protection and Affordable Care Act ("ACA"), which provides federal funding to states that choose to expand eligibility under their state Medicaid program to all "individuals under the age of 65 with incomes below 133 percent of the federal poverty level." See Nat'l Fed'n of Indep. Bus. v. Sebelius , 567 U.S. 519, 576, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012). Under the ACA, the federal government pays most of the costs for the expansion, but federal funding is contingent on a state satisfying various conditions, including paying a share of the costs. See id. at 576, 586, 132 S.Ct. 2566. Pursuant to the ACA, Arizona enacted H.B. 2010 to expand AHCCCS eligibility to all individuals with incomes not exceeding 133 percent of the federal poverty level. 2013 Ariz. Sess. Laws, ch. 10, §§ 5, 44 (1st Spec. Sess.). To pay for the expanded coverage, H.B. 2010 required the director of AHCCCS to levy an "assessment" on Arizona hospitals. A.R.S. § 36–2901.08(A).

¶ 4 After the governor signed H.B. 2010, then-state-senator Andy Biggs and thirty-five other legislators who had voted against the bill (the "Opponents") and three citizens filed this action against AHCCCS Director Thomas Betlach and others (collectively the "Director"). The lawsuit sought to enjoin implementation of the hospital assessment, alleging that it violates article 9, section 22 of the Arizona Constitution because § 36–2901.08 was not approved by a two-thirds vote. Although the superior court initially dismissed the case for lack of standing, we reversed and remanded for further proceedings. Biggs v. Cooper ex rel. Cty. of Maricopa , 236 Ariz. 415, 420 ¶ 21, 341 P.3d 457, 462 (2014).

¶ 5 On remand, the parties filed cross-motions for summary judgment. The superior court ruled that § 36–2901.08 was properly enacted by a simple majority because the law does not impose a tax but instead falls within an exception listed in article 9, section 22. The court of appeals affirmed. Biggs v. Betlach , 242 Ariz. 55, 57 ¶ 2, 392 P.3d 499, 501 (App. 2017).

¶ 6 We granted review because the application of article 9, section 22 to the hospital assessment presents legal issues of statewide importance. We have jurisdiction under article 6, section 5(3) of the Arizona Constitution and A.R.S. § 12–120.24.

II.

¶ 7 Under article 9, section 22 of the Arizona Constitution, "[a]n act that provides for a net increase in state revenues, as described in subsection B is effective on the affirmative vote of two-thirds of the members of each house of the legislature." Ariz. Const. art 9, § 22 (A). Subsection (B) states that this supermajority requirement applies to "[t]he imposition of any new tax" and "[t]he imposition of any new state fee or assessment or the authorization of any new administratively set fee." Id. § 22 (B)(1), (5). Subsection (C) exempts from the supermajority requirement "[f]ees and assessments that are authorized by statute, but are not prescribed by formula, amount or limit, and are set by a state officer or agency." Id. § 22 (C)(2).

¶ 8 Opponents argue that § 36–2901.08 is unconstitutional because it was not approved by a two-thirds majority, yet it imposes a "new tax" or authorizes a "new administratively set fee," and the (C)(2) exception does not apply.

¶ 9 "Determining constitutionality is a question of law, which we review de novo." Gallardo v. State , 236 Ariz. 84, 87 ¶ 8, 336 P.3d 717, 720 (2014). "When the statute in question involves no fundamental constitutional rights or distinctions based on suspect classifications, we presume the statute is constitutional and will uphold it unless it clearly is not." Cave Creek Unified Sch. Dist. v. Ducey, 233 Ariz. 1, 5 ¶ 11, 308 P.3d 1152, 1156 (2013) ; see also Hall v. Elected Officials ' Ret. Plan , 241 Ariz. 33, 38 ¶ 14, 383 P.3d 1107, 1112 (2016) (observing that the party challenging a statute bears the burden of overcoming a presumption of constitutionality).

¶ 10 "The Constitution should be construed so as to ascertain and give effect to the intent and purpose of the framers and the people who adopted it." Brewer v. Burns , 222 Ariz. 234, 239 ¶ 26, 213 P.3d 671, 676 (2009) (internal citation and quotation omitted). "We give effect to the purpose indicated, by a fair interpretation of the language used, and unless the context suggests otherwise words are to be given their natural, obvious and ordinary meaning." Id. (internal citation and quotation omitted).

A.

¶ 11 We first consider whether the hospital assessment is a "tax" for purposes of article 9, section 22. The Constitution uses the word "tax" as distinct from "fees and assessments," but does not itself define these terms.

¶ 12 Opponents argue that if the hospital assessment constitutes a "tax" for purposes of section 22, the two-thirds approval requirement applies, and it is unnecessary to consider the exception under (C)(2), which refers only to "[f]ees and assessments." The Director, in contrast, contends that we need not determine whether the hospital assessment is a "tax" because the term "assessment" can, in some contexts, encompass taxes, and therefore we should uphold the hospital assessment if it qualifies for the (C)(2) exception. Cf. May v. McNally , 203 Ariz. 425, 431 ¶ 24, 55 P.3d 768, 774 (2002) (using term "assessment" in First Amendment context to refer to both taxes and fees).

¶ 13 We agree with Opponents that we must determine whether the hospital "assessment"—however labeled—is truly a "tax" within the meaning of section 22. In specifying when the two-thirds vote requirement applies, section 22 distinguishes taxes from fees and assessments. Subsection (B) addresses taxes in subparagraphs (1), (2), (3), and (7), while subparagraphs (4), (5), and (6) reference fees or assessments. Ariz. Const. art. 9, § 22 (B). Taxes are not mentioned in the (C)(2) exception, in contrast to (C)(3), which excepts "[t]axes, fees or assessments that are imposed by counties, cities, towns and other political subdivisions of this state." Id. § 22 (C)(3). To treat "tax" as subsumed within "assessment" for purposes of (C)(2) would contradict the constitutional language and potentially allow the legislature to circumvent the tax-specific limitations imposed by article 9, section 22.

¶ 14 Because the Constitution does not define the terms "tax," "fee," or "assessment" for purposes of section 22, we look to more general caselaw for guidance, as do the parties. In doing so, we recognize that courts in other contexts—as May reflects—have sometimes used "assessment" as a generic term that includes both taxes and fees. For purposes of this case, however, we must distinguish "assessments" from "taxes," though it is not necessary here to delineate between "fees" and "assessments," as both are subject to the (C)(2) exception. We reject Opponents' suggestion, based on cases involving...