Griffin v. Dept. of Local Gov't Finance, 49T10-0009-TA-98.

• Decision Date: 28 June 2002
• Docket Number: No. 49T10-0009-TA-98.,49T10-0009-TA-98.
• Parties: Michael GRIFFIN and Lake County, Petitioners, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.
• Court: Indiana Tax Court

770 N.E.2d 957

Michael GRIFFIN and Lake County, Petitioners, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.

No. 49T10-0009-TA-98.

Tax Court of Indiana.

June 28, 2002.

ORDER AND JUDGMENT ENTRY

FISHER, J.

The Petitioner, Michael Griffin, in this case requests that the Court grant him a $180.29 refund of the Hospital Care for the Indigent (HCI) tax¹ and enjoin the State from collecting the HCI tax. The Respondent, the Department of Local Government Finance (DLGF), asks the Court to deny Griffin's motion and instead stay the effect of its April 3, 2002 decision in Griffin v. Department of Local Government Finance, 765 N.E.2d 716 (Indiana Tax Ct.2002), which held that the HCI tax violated Article 10, Section 1 of the Indiana Constitution. Griffin v. Dep't of Local Gov't Fin., 765 N.E.2d 716, 724 (Indiana Tax Ct.2002).

When the Court rendered its decision in Griffin, by separate order it set the matter for further proceedings to determine the nature and extent of Griffin's refund. Id. On May 6, 2002 Griffin filed a motion to enjoin collection of the HCI tax. On June 17, 2002, the DLGF requested that Griffin's motion be denied and that the Court stay its April 3, 2002, order granting Griffin's motion for partial summary judgment on the issue of whether the HCI tax violated Article 10, Section 1 of the Indiana Constitution. On June 24, 2002, the Court held a hearing on the matter.

The parties have urged the Court to weigh the immediate harm of an unconstitutional HCI tax levy against the potential harm to the State's 750,000 Medicaid recipients if the Court enjoins collection of the HCI tax. Griffin notes that HCI revenue represents only 1.25% of the State's $4 billion Medicaid budget. Because HCI revenue represents only a small portion of the State's Medicaid budget, Griffin argues that any large-scale effect of an HCI refund on Medicaid does not outweigh the harm to taxpayers who have been assessed for an unconstitutional tax. Accordingly, he asks that collection of the HCI tax be enjoined and that he be refunded with interest the HCI tax he paid for fiscal years 1996-98, totaling $180.29. The DLGF argues, on the other hand, that if federal Medicaid matching funds are taken into account,² a loss of $50 million in HCI revenue ultimately would represent a loss of $126 million from the State's Medicaid budget, making it more difficult to pay for health care for Indiana's neediest citizens. As a result, the DLGF asks this Court to stay the effect of its April 3, 2002 decision, allow the DLGF time to appeal the Court's ruling to our Supreme Court, and allow the legislature time to fix the HCI tax.

It is appropriate for the Court in this case to balance Griffin's immediate interest in enjoining the State from further collecting HCI tax against the State's immediate interest in collecting HCI revenues. See Smith v. Smith, 159 Ind. 388, 65 N.E. 183, 185 (1902) (holding that a court should balance the fiscal needs of the State and the claims of a citizen who seeks to enjoin collection of an illegal tax). In striking this balance, the Court may grant Griffin's request for an injunction "only at that stage of the proceedings when his substantial right may be protected ... with the minimum amount of prejudice to the public[.]" Id.; see also Town of St. John v. State Bd. of Tax Comm'rs, 691 N.E.2d 1387, 1389-90 (Ind. Tax Ct.1998)

(St. John IV), rev'd on other grounds. Furthermore, the remedy of an injunction "against an illegal and void tax is the proper one[.]" Yocum v. First Nat. Bank of Brazil, 144 Ind. 272, 43 N.E. 231, 232 (1896). An injunction is also appropriate where it prevents a multiplicity of suits related to the same subject matter. Gray v. Foster, 46 Ind.App. 149, 92 N.E. 7, 9 (1910).

In testimony, Griffin offered his opinion as to various approaches that might offset the financial effect of enjoining collection of the HCI tax, which would include either a refund or a credit to taxpayers. Griffin argues that because the $2 million of HCI revenue that is actually spent statewide on emergency medical care for indigent patients is a relatively small amount, emergency medical care for indigents will not be jeopardized if this Court opens the door to statewide HCI tax refunds or credits. Griffin conceded, however, that there likely would be an effect on the State's Medicaid budget were immediate relief granted to him. In particular, Family and Social Service Administration (FSSA), which runs the State's Medicaid program, could lose tens of millions of dollars of federal matching funds as a result of any HCI refund. Nevertheless, Griffin suggests that FSSA could (1) trim its budget, (2) suspend its operations until the legislature fixes the HCI tax, (3) cut optional programs, or (4) rely on intergovernmental transfers to solve any budget shortfalls. Finally, Griffin submitted evidence showing that Lake County has received more than 160,000 requests for HCI tax refunds and that were those refunds granted, Lake County would run out of money before the end of the year.³

The DLGF presented evidence showing that the State has already factored projected HCI revenue into its $4 billion Medicaid budget for Fiscal Year 2003, which begins July 1, 2002. Overall, the State stands to lose $126 million in Medicaid funds if collection of the HCI tax is enjoined. In particular, FSSA, which relies on HCI revenue to secure federal matching Medicaid dollars, serves more than 750,000 Indiana residents and currently faces a budget shortfall of $250 million. It must somehow balance its budget before the end of Fiscal Year 2003. According to FSSA officials, to immediately enjoin...