Griffin v. DEPT. OF LOCAL GOVT. FINANCE

• Decision Date: 09 September 2003
• Docket Number: No. 49T10-0009-TA-98.,49T10-0009-TA-98.
• Citation: 794 N.E.2d 1171
• Parties: Michael GRIFFIN and Lake County, a political subdivision of the State of Indiana, Petitioners, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.
• Court: Indiana Tax Court

794 N.E.2d 1171

Michael GRIFFIN and Lake County, a political subdivision of the State of Indiana, Petitioners, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.

No. 49T10-0009-TA-98.

Tax Court of Indiana.

September 9, 2003.

Gerald M. Bishop, John S. Dull, Merrillville, IN, Attorneys for Petitioner.

Steve Carter, Attorney General of Indiana, Frances Barrow, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT

FISHER, J.

In August of 2000, the Petitioner, Michael Griffin, filed an original tax appeal in which he charged that Indiana's Hospital Care for the Indigent Tax (HCI tax) violated Article 10, § 1 of the Indiana Constitution, Article 1, § 23 of the Indiana Constitution, and the Fourteenth Amendment to the United States Constitution. This Court subsequently issued an opinion on Griffin's appeal, holding that the HCI tax violated Article 10, § 1 of the Indiana Constitution because it resulted in the non-uniform and unequal taxation of substantially similar property throughout the state. Griffin v. Dep't of Local Gov't Fin., 765 N.E.2d 716 (Ind. Tax Ct.2002) (Griffin I). As a result, the Court did not address Griffin's other constitutional challenges. See id. at 718 n. 2.

On March 5, 2003, the Indiana Supreme Court reversed this Court's holding in Griffin I. Dep't of Local Gov't Fin. v. Griffin, 784 N.E.2d 448 (Ind.2003) (Griffin II). Consequently, the case now returns to this Court to resolve the remaining constitutional issues initially raised by Griffin:

I. Does the HCI tax violate Article 1, § 23 of the Indiana Constitution?

II. Does the HCI tax violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution?

III. Does the HCI tax violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution?

ANALYSIS AND OPINION

Standard of Review

Both Griffin and the Department of Local Government Finance (Department) have filed motions for summary judgment on the remaining constitutional issues. Summary judgment is proper only when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. See Ind. Trial Rule 56(C). See also W.H. Paige & Co. v. State Bd. of Tax Comm'rs, 732 N.E.2d 269, 270 (Ind. Tax Ct.2000)

. Cross motions for summary judgment do not alter this standard. W.H. Paige, 732 N.E.2d at 270.

Discussion

Background

In Griffin II, our Supreme Court described the HCI program:

Before 1986, each of Indiana's counties bore all responsibility for indigent health care. The legislature enacted the HCI provisions in 1986 and then recodified them in 1992 at Ind[iana]Code §§ 12-16-2-1 to XX-XX-XX-X. The general purpose was to provide cost-free emergency medical care to indigent patients who did not qualify for Medicaid. The HCI program transferred the administration of indigent health care to the State and imposed an HCI tax levy to finance it.

Under the present arrangement, the Department [] review[s] each county's property tax levy ... and ... enforce[s its] requirements[.] Each county annually imposes the levy as a property tax for that county and collects it like other state and county ad valorem property taxes. Unlike the general property tax levy, the Indiana Code prescribes the amount of the HCI levy for each county; it is the previous year's levy increased by the percentage of growth in assessed value of all property in the state. Certain statutory limits on property tax rates may be exceeded [to] meet the requirements of the county hospital care for the indigent fund.

[A]n HCI fund [is established] in each county. The balance of each county's HCI fund is transferred to the state HCI fund. The State administers the HCI program and reimburses providers of emergency medical care to the indigent for their expenses from the state HCI fund. In 1993, the legislature modified the HCI program to secure additional federal Medicaid funds by using $35 million of the state HCI fund as matching money.

The initial HCI levy for each county had been set at the average of its indigent hospital care expenditures over 1984-86, with certain adjustments. The HCI tax rate thus varies from county to county because of the difference in the counties' historical expenditures on hospital services for the indigent during the years immediately before the HCI program was enacted.

Griffin II, 784 N.E.2d at 451-52 (internal citation, quotation, and footnotes omitted).

It was against this backdrop that Griffin asserted the HCI tax violated Article 10, § 1 of the Indiana Constitution. More specifically, he argued that because the HCI tax rates varied from county to county, as opposed to one tax rate applied uniformly and equally across the state,¹ the HCI tax violated Indiana's constitutional guarantee that all property within the state be assessed and taxed at a uniform and equal rate. See IND.CONST. art. 10, § 1(a).

The Supreme Court, however, rejected Griffin's argument; it determined that Article 10, § 1 of the Indiana Constitution requires that the same HCI tax rate shall apply alike to all in any given taxing district, whatever that taxing district may be (i.e., the state, a county, a township, or a municipality). Griffin II, 784 N.E.2d at 452-53 (emphasis added). The Supreme Court also explained that despite the fact that the HCI tax is a "combined effort[ ] of [the] state, local, and federal government[] to advance the welfare of [Indiana's] indigent[,]" id. at 455, there was no "constitutional evil in ... set[ting] the rate of local contribution so that it varies in harmony with expenses for indigent health care in the local area." Id. at 456. Consequently, the Supreme Court implicitly acknowledged the legislature's classification of taxpayers on a county-by-county basis. See id. (stating that "the General Assembly [complied with the requirements of Article 10, § 1 when it] decided that, for purposes of financing indigent health care, the counties were not similarly situated and varied the tax burden accordingly[]"). Furthermore, because all taxpayers within each county are subject to the same HCI tax rate, the Supreme Court held there was no Article 10, § 1 violation. See id. at 459.

Griffin's Remaining Constitutional Claims

The Court now turns to Griffin's remaining constitutional claims. The Court notes, however, that its standard of review for alleged violations of the Indiana Constitution is well established: the statutes providing for the HCI tax are presumed constitutional until Griffin, as the party challenging their constitutionality, clearly overcomes the presumption by a contrary showing. See State Bd. of Tax Comm'rs v. Town of St. John, 702 N.E.2d 1034, 1037 (Ind.1998)

(St. John V).

I. Article 1, § 23 of the Indiana Constitution: The Privileges and Immunities Clause

Article 1, § 23 of the Indiana Constitution provides: "The General Assembly shall not grant to any citizen, or class of citizens, privileges or immunities, which, upon the same terms, shall not equally belong to all citizens." IND. CONST. art. 1, § 23. According to Griffin, the HCI tax is unconstitutional under Section 23 because it arbitrarily "establish[es] a class of taxpayers (property owners in the County with the lowest ... HCI tax) and provid[es] them with a privilege not equally shared by members of the same class (taxpayers in those counties who ... pay a higher HCI tax)." (Pet'r Mem. In Support of [Its] Mot. for Partial Summ. J. at 20.)

Claims asserted under Article 1, § 23 are subject to the two-part test enunciated in Collins v. Day, 644 N.E.2d 72 (Ind.1994). First, the disparate treatment must be "reasonably related to inherent characteristics which distinguish the unequally treated classes." Id. at 78-79. Second, the preferential treatment must be uniformly applicable and equally available to all persons similarly situated. Id. at 80.

In applying this test, the Court must first determine whether HCI tax is reasonably related to the inherent characteristics that define, or distinguish, the classes. In this case, each class (i.e., county) is not defined by its HCI tax rate. Rather, each class is defined by its historical expenditures on indigent health care. As the Indiana Supreme Court discussed within the context of Griffin's Article 10, § 1 claim, the HCI funding formula reflects the legislative determination that the local areas should contribute to the HCI fund in proportion to the HCI benefits they in turn receive. See Griffin II, 784 N.E.2d at 456

. Lake County's HCI tax rate is the highest in the state for no other reason than it has "historically received much more HCI service than [ ] other counties." Id. at 458 n. 14. Thus, the distinction between counties is neither arbitrary nor unreasonable, but rationally related to the legislative goal of "matching burden with benefit." Id. at 457.

Turning to the second prong of the Collins test, this Court must ensure that the preferential treatment provided by HCI tax is uniformly applicable to all similarly situated persons. See Collins, 644 N.E.2d at 80

. Griffin argues that the HCI tax is unconstitutional as applied: "although [ ] similarly situated to [ ]other taxpayers in, for example, Marion County, [Lake County taxpayers are] subjected to a substantially different tax burden—despite the fact that the funds collected [by all counties] are used for the same purpose[.]" Griffin's argument must again fail, for it ignores the fact that he, as a member of the Lake County class, is in a class separate from the other 91 classes of taxpayers throughout the state.

Furthermore, within his respective class, Griffin is treated no differently than any other taxpayer in Lake County—they all pay the HCI tax at the same rate. Likewise, a taxpayer in Allen County pays the HCI tax at the same rate as all other taxpayers in Allen County; a taxpayer in Marion County pays the HCI tax at the same rate as...