Hendee v. Dewhurst

• Decision Date: 25 May 2007
• Docket Number: No. 03-06-00501-CV.,03-06-00501-CV.
• Citation: 228 S.W.3d 354
• Parties: Edd HENDEE, Individually and as Executive Director of C.L.O.U.T., Appellant, v. David DEWHURST, Tom Craddick, State of Texas, and the Texas Legislative Budget Board, Appellees.
• Court: Texas Court of Appeals

228 S.W.3d 354

Edd HENDEE, Individually and as Executive Director of C.L.O.U.T., Appellant, v. David DEWHURST, Tom Craddick, State of Texas, and the Texas Legislative Budget Board, Appellees.

No. 03-06-00501-CV.

Court of Appeals of Texas, Austin.

May 25, 2007.

Rehearing Overruled July 27, 2007.

David Rogers, Austin, Gary M. Polland, Polland & Associates, Houston, for appellant.

Christopher Malish, Foster, Malish, Blair & Cowan, L.L.P., Danica L. Milios, Asst. Solicitor Gen., Timothy Mashburn, General Counsel, Austin, for appellee.

Before Justices PATTERSON, PEMBERTON and WALDROP.

OPINION

BOB PEMBERTON, Justice.

We withdraw our opinion and judgment issued April 17, 2007, and substitute the following in its place. The Court has overruled the State Defendants' motions for rehearing and en banc reconsideration.

In response to the Texas Supreme Court's decision in the Neeley v. West Orange-Cove case,¹ the 79th Legislature during its third called session of April and May 2005, enacted H.B. 1, which the Governor signed into law on May 31 of that year. Among other things, H.B. 1 attempted to shift some of the burden of funding Texas's public schools from local property taxpayers to the state and, to that end, made additional appropriations of $3.825 billion for the biennium ending on August 31, 2007. In June 2005, Edd Hendee, individually and as executive director of the group Citizens Lowering Our Unfair Taxes (C.L.O.U.T.) (collectively, Plaintiffs), filed suit against the Lieutenant Governor, the Speaker of the House of Representatives, the Comptroller, and the members of the Legislative Budget Board (LBB),² all in their official capacities, and the State of Texas, seeking declarations that H.B. 1 was unconstitutional and unlawful. Plaintiffs' central allegation is that the appropriation called for in H.B. 1 caused the Defendants to exceed the aggregate biennial cap on the rate of growth of appropriations under article VIII, section 22 of the Texas Constitution and chapter 316 of the government code. These provisions mandate that the "rate of growth of appropriations from state tax revenues" not dedicated by the constitution not exceed the "estimated rate of growth of the state's economy." Tex. Const. art. VIII, § 22(a); Tex. Gov't Code Ann. § 316.001 (West 2005). All defendants except the Comptroller (collectively, the "State Defendants") filed a plea to the jurisdiction. The district court granted the plea without specifying its grounds, and dismissed Plaintiffs' claims against the State Defendants for want of jurisdiction.

Plaintiffs bring this interlocutory appeal from the district court's order. See Tex. Civ. Prac. & Rem.Code Ann. § 51.014(a)(8) (West Supp.2006); Perry v. Del Rio, 53 S.W.3d 818, 820-23 (Tex.App.-Austin 2001), pet. dism'd, 66 S.W.3d 239, 242 (Tex. 2001). We affirm the district court's order of dismissal in part, reverse in part, and remand for further proceedings consistent with this opinion.

BACKGROUND

Constitutional and statutory provisions

Before turning to the jurisdictional issues presented by this appeal, it is helpful to consider the constitutional and statutory context in which they arise.

Article VIII, section 22(a) of the Texas Constitution provides:

In no biennium shall the rate of growth of appropriations from state tax revenues not dedicated by this constitution exceed the estimated rate of growth of the state's economy. The legislature shall provide by general law procedures to implement this subsection.

Tex. Const. art. VIII, § 22(a). An "appropriation" refers to a legislative enactment authorizing state funds to be expended for particular purposes. The constitution elsewhere requires that "[n]o money shall be drawn from the Treasury but in pursuance of specific appropriation made by law; nor shall any appropriation of money be made for a longer term than two years." See Tex. Const. art. VIII, § 6.³ "State tax revenues not dedicated by this constitution" refers to one source of funds that the legislature could appropriate; others include non-tax revenues and tax revenues whose use is dedicated by the constitution.

Subsection (b) of article VIII, section 22 authorizes the legislature to override the appropriations limit otherwise imposed by subsection (a) by adopting a resolution, approved by a record vote of each house, finding that an emergency exists and identifying the nature of that emergency, in which case the legislature's excess appropriation may not exceed the amount specified in the resolution. Id. art. VIII, § 22(b). Further, these limits expressly do not alter, amend or repeal the Texas Constitution's "pay-as-you-go" or balanced budget limitation of article III, section 49a. Id. art. VIII, § 22(c). The "pay-as-you-go" limitation generally requires that before any bill containing an appropriation can be considered passed and be sent to the governor, the comptroller must certify that each amount appropriated is within the amount of revenue estimated to be available in the corresponding affected funds. Id. art. III, § 49a(b).⁴

Article VIII, section 22 was borne of a tax reform effort in the late 1970s.⁵ It was one of several components of a "Tax Relief Amendment" to the constitution proposed earlier that year by the 65th legislature during a special session called for that purpose by Governor Dolph Briscoe. H.J.R. 1, 65th Leg., 2d C.S. It was apparently modeled on a Tennessee provision. See Janice C. May, The Texas State Constitution: A Reference Guide 310 (1996). Article VIII, section 22 was ratified by the voters in November 1978.

As the second sentence of Article VIII, section 22(a) requires, the legislature enacted laws to implement the provision. The legislature did so during the regular session beginning in January 1979, immediately following article VIII, section 22's ratification. See generally Acts 1979, 66th Leg., R.S., ch. 302. With some intervening amendments, these enactments are now codified in chapter 316 of the government code. See id. art. 9, § 1.

Section 316.001, government code, tracks the mandate of article VIII, section 22(a): "The rate of growth of appropriations in a biennium from state tax revenue not dedicated by the constitution may not exceed the estimated rate of growth of the state's economy." Tex. Gov't Code Ann. § 316.001. Other provisions of chapter 316 address how "the estimated rate of growth of the state's economy" is calculated and provide mechanisms for ensuring that, as article VIII, section 22(a) requires, the rate of growth in appropriations does not exceed the estimated rate of growth of the state's economy. The LBB is charged with several key responsibilities within this statutory scheme.

Under section 316.002(b), the LBB is to determine both "the estimated rate of growth of the state's economy" and the rate of appropriations growth by comparing those figures from the baseline of the current biennium to the next biennium. Id. § 316.002(b) (West 2005). It calculates "the estimated rate of growth of the state's economy" from the current biennium to the next biennium by "dividing the estimated Texas total personal income for the next biennium by the estimated Texas total personal income for the current biennium." Id. § 316.002(a)(1), (b). "Using standard statistical methods, the board shall make the estimate by projecting through the biennium the estimated Texas total personal income reported by the United States Department of Commerce or its successor in function." Id. § 316.002(b). However, section 316.002(c) contemplates that "[i]f a more comprehensive definition of the rate of growth of the state's economy is developed and is approved" by a committee of the governor, lieutenant governor, speaker of the house of representatives, and comptroller, "the board may use that definition." Id. §§ 316.002(c), 316.005 (West 2005). The State Defendants represent that such an alternative, "more comprehensive" definition has never been adopted.

Section 316.002 also requires the LBB to establish "the level of appropriations for the current biennium from state tax revenues not dedicated by the constitution." Id. § 316.002(a)(2). This figure is itself partly an estimate, for reasons relating to the nature of appropriations.⁶ Even without additional legislative action, the amount of an appropriation, as well as its funding source, may change during a biennium, such as when changes in economic conditions not originally forecasted impact the amount or composition of funding sources subject to an appropriation. Because the "level of appropriations for the current biennium from state tax revenues not dedicated by the constitution" is calculated during the current biennium, it is comprised of both actual appropriations of non-dedicated tax revenues (appropriated non-dedicated tax revenues that have already been spent, and whose amount is thus finally ascertainable) and estimated appropriations of non-dedicated tax revenues (the amount of such funds that the LBB anticipates will be spent pursuant to appropriations during the remainder of the biennium). Reflecting the potential for unforeseen changes in the amount or funding source of appropriations later in the biennium, the LBB determines "the level of appropriations for the current biennium from state tax revenues not dedicated by the constitution" "subject to adjustments resulting from revenue forecast revisions or subsequent appropriations certified by the Comptroller."⁷

The LBB applies the "rate of growth of the state's economy" to the "the level of appropriations for the current biennium from state tax revenues not dedicated by the constitution" to yield the appropriations limit, or "spending cap": "the amount of state tax revenues not dedicated by the constitution that could be appropriated for the next biennium within the limit established by the estimated rate of growth of the state's economy." Id. § 316.002(a)(3). Reflecting the potential that the current-biennium...