Monroe County Pub. School Dist. v. Zyra
| Decision Date | 21 March 2008 |
| Docket Number | CA 08-00043. |
| Citation | 853 N.Y.S.2d 821,51 A.D.3d 125,2008 NY Slip Op 02672 |
| Parties | In the Matter of MONROE COUNTY PUBLIC SCHOOL DISTRICTS, Namely BRIGHTON CENTRAL SCHOOL DISTRICT, et al., Appellants, v. WAYNE E. ZYRA, as President of MONROE COUNTY LEGISLATURE, et al., Respondents. |
| Court | New York Supreme Court — Appellate Division |
HURLBUTT, J.P.
The issue before us on appeal in this hybrid CPLR article 78 proceeding/declaratory judgment action is whether the exercise by respondent-defendant Monroe County (County) of what is known as the "sales tax intercept option" offered by Laws of 2005 (ch 58, part C) allows the County to reduce its statutory sales tax sharing obligation to petitioners-plaintiffs, school districts outside the City of Rochester (School Districts), to their proportionate share of the monies received by the County after deduction of the amount intercepted by the State to pay the County's Medicaid obligation. We agree with the School Districts that no such reduction is authorized and that the judgment should therefore be modified accordingly.
Background
By way of background, we address first the County's Medicaid obligation. Under the Social Services Law, counties are responsible for the provision of payment for "[m]edical assistance for needy persons" (Social Services Law § 363), commonly referred to as Medicaid, and they also are subject to reimbursement from the federal and state governments (see Social Services Law § 368-a). Over the past several years, the costs of Medicaid services have risen precipitously; indeed, according to the affidavit of a county budget official, the County's Medicaid costs rose from $80.3 million in 1995 to $155.2 million in 2005. In an effort to ease the burden of those rising costs on the counties, the State Legislature enacted Laws of 2005 (ch 58, part C), which provides for a sequential "cap" on the increase in the counties' respective shares of Medicaid expenses. From the base year of 2005, the Medicaid expense of each county is limited to its 2005 expense, plus an additional 3.5% in 2006, an additional 3.25% in 2007, and an additional 3% in 2008 and each year thereafter (L 2005, ch 58, part C, § 1 [a]-[d]). This "expenditure cap amount" must be paid by the counties to the State in equal weekly payments (§ 1 [f]).
Section 2 of the enactment affords counties the option of limiting their Medicaid costs via the sales tax intercept (see L 2005, ch 58, part C, § 2 [b]; Tax Law § 1261 [f]), and Monroe County has chosen to exercise that option. Thus, instead of a capped rate of increase in its Medicaid expenses, the County will satisfy its Medicaid obligation by the intercept and transfer by the State Tax Commissioner to the State Comptroller of a percentage of the County's sales tax revenues. That percentage, denominated the Medicaid factor (see Tax Law § 1261 [f] [2]), is determined by calculating the County's sales tax base for state fiscal year 2006-2007, and by then dividing the County's 2006-2007 expenditure cap amount under Laws of 2005 (ch 58, part C, § 1) by the amount of the sales tax base (see Tax Law § 1261 [f] [2] [A]). The State Tax Department's calculation of the County's Medicaid factor is 0.0161, or 1.61%. Each month, the State Tax Department calculates the sales tax base based on the sales tax payment owed to the County by the State and multiplies that amount by the Medicaid factor of 1.61%. The resulting sum, described in section 1261 (f) (4) as the monthly Medicaid amount, is then subtracted from the amount of sales tax owed to the County pursuant to section 1261 (c) and is paid into the general fund of the state treasury (see § 1261 [f]).
We next address the sales tax allocations for the counties. County sales tax collection and distributions are governed by article 29 of the Tax Law, which was enacted in 1965. All such sales taxes are collected by the State Tax Commission (see Tax Law § 1250). After deducting amounts necessary for refunds and for the costs of administering, collecting and distributing such taxes, the State Tax Commission makes monthly remittances to the counties of the taxes, penalties and interest imposed by them (§ 1261 [b], [c]). The Tax Law authorizes counties to share their sales tax proceeds with cities, towns, villages, and school districts (see Tax Law §§ 1262, 1262-a—1262-s), and Monroe County has done so for many years. Separate agreements, codified in sections 1210 (25), 1262, and 1262-g of the Tax Law, mandate the allocation of sales tax proceeds according to what is undisputedly a complex formula. In 2006, the distribution was as follows:
County 31.34%
City of Rochester (City) 31.34%
Towns 20.68%
Villages 2.24%
School Districts (outside City) 14.4%
______
TOTAL 100%
According to the 2008 county budget, estimated 2007 distributions were as follows:
County $123.5 million
City of Rochester 123.5 million
Towns 81.9 million
Villages 8.8 million
School Districts (outside City) 56.8 million
____________
TOTAL $394.5 million
The County has estimated taxable sales in 2008 of $10.06 billion, which at the county sales tax rate of 4% would yield $402.4 million in sales tax proceeds. Under the County's interpretation of the sales tax intercept legislation, however, the County's budgeted sales tax revenue is reduced by the Medicaid factor of 1.61% of sales, or approximately $162 million, leaving 2.39% of sales, or approximately $240.4 million. Application of the respective statutory percentages to that sum results in approximate sales tax allocations of:
County $ 82.9 million
City of Rochester 82.9 million
Towns 40.3 million
Villages 4.8 million
School Districts (outside City) 29.5 million
____________
TOTAL $240.4 million
In order to hold the City, towns and villages harmless from the reduced sharing amounts, the County has entered into intermunicipal agreements guaranteeing the municipalities the same dollar amount of sales tax revenue had the intercept option not been elected. No such agreement was made with respect to the School Districts, however. The result, according to the School Districts, is an aggregate shortfall of approximately $29 million.
Procedural History
In May 2006, the County commenced an action seeking a judgment declaring that, should it select the Medicaid intercept option, its statutory sharing obligation would apply only to the sales tax proceeds received by the County after the deduction for the intercept. Supreme Court granted the relief sought, but we reversed the judgment and dismissed the complaint on the ground that it sought an advisory opinion, and thus the court lacked subject matter jurisdiction (County of Monroe v City of Rochester, 39 AD3d 1272 [2007]).
On September 26, 2007, the County Legislature passed the resolution required in order to adopt the Medicaid intercept option (see L 2005, ch 58, part C, § 2 [b] [i], [ii]). Various school districts in the County commenced this hybrid CPLR article 78 proceeding/declaratory judgment action approximately one month later, and the parties thereafter stipulated to an amended petition and complaint that, inter alia, added two school districts as petitioners-plaintiffs. The motion of the School Districts for a preliminary injunction was treated by the court as a motion for summary judgment, and respondents-defendants cross-moved for summary judgment. In granting the cross motion, the court agreed with the County concerning the interpretation of the effect of its exercise of the Medicaid intercept option and, inter alia, granted judgment declaring, in substance, that the County is required to allocate to the School Districts only their share of sales tax proceeds received by the County after the deduction for the intercept. Although we have applied most of the same rules of statutory construction applied by the court, we disagree with the court's statutory interpretation. Instead, we conclude that the sales tax sharing obligation of the County applies to all of its sales tax proceeds, without regard to the Medicaid intercept.
Discussion
The issue before us is that of legislative intent, and its resolution hinges on the meaning of Tax Law § 1261 (f) (8), enacted by Laws of 2005 (ch 58, part C, § 7). Section 1261 (f) (8) provides that ...
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