Wash. State Farm Bureau Feder. v. Gregoire

• Decision Date: 21 November 2007
• Docket Number: No. 78637-2.,78637-2.
• Court: Washington Supreme Court
• Parties: WASHINGTON STATE FARM BUREAU FEDERATION; Washington State Grange; National Federation of Independent Business; Building Industry Association of Washington; Evergreen Freedom Foundation; Washington Association of Realtors®; and Steve Neighbors, Respondents, v. Christine GREGOIRE, governor of the state of Washington; State Expenditure Limit Committee, an agency of the state of Washington; and state of Washington, Petitioners.

174 P.3d 1142

162 Wash.2d 284

WASHINGTON STATE FARM BUREAU FEDERATION; Washington State Grange; National Federation of Independent Business; Building Industry Association of Washington; Evergreen Freedom Foundation; Washington Association of Realtors®; and Steve Neighbors, Respondents, v. Christine GREGOIRE, governor of the state of Washington; State Expenditure Limit Committee, an agency of the state of Washington; and state of Washington, Petitioners.

No. 78637-2.

Supreme Court of Washington, En Banc.

Argued November 28, 2006.

Decided November 21, 2007.

Richard M. Stephens, Samuel A. Rodabough, Brian Donald Amsbary, Groen Stephens & Klinge LLP, Diana M. Kirchheim, Pacific Legal Foundation, Bellevue, WA, for Respondents.

Jeffrey Todd Even, Maureen A. Hart, Office of The Attorney General, Olympia, WA, for Petitioners.

Tracy N. LeRoy, Baker Botts LLP, Houston, TX, Michele G. Radosevich, Davis Wright Tremaine LLP, Seattle, WA, for Amici Curiae Washington Coalition for Open Government and American Legislative Exchange Council.

Kristopher Ian Tefft, Association of Washington Business, Olympia, WA, for Amicus Curiae Association of Washington Business.

Narda D. Pierce, Benedict Garratt Pond & Pierce, PLLC, Olympia, WA, for Amicus Curiae Gary Locke.

Michele G. Radosevich, Davis Wright Tremaine LLP, Seattle, WA, Steven Huefner, Moritz College of Law, Columbus, OH, Peter Wattson, Minnesota Senate Counsel, St. Paul, MN, for Amicus Curiae National Conference of State Ligislatures.

Margarita V. Latsinova, Jason W. Crowell, Stoel Rives LLP, Seattle, WA, for Amicus Curiae National Governors Association.

Hugh Davidson Spitzer, Foster Pepper PLLC, Seattle, WA, for Amici Curiae Washington Education Association, Washington Federation of State Employees AFL-CIO and Washington State Labor Council.

FAIRHURST, J.

¶ 1 The Washington State Farm Bureau Federation¹ (WSFB) challenges certain taxes enacted by Engrossed Substitute House Bill (ESHB) 2314.² WSFB claims that these taxes raise revenues in excess of the fiscal year 2006 state expenditure limit and, therefore, pursuant to the Taxpayer Protection Act (TPA), are ineffective until approved by the voters. Chapter 43.135 RCW. WSFB further argues that Engrossed Substitute Senate Bill (ESSB) 6896,³ section 7(6), which amended the TPA's process for calculating the state expenditure limit, was not effective in establishing the fiscal year 2006 expenditure limit at a level greater than the ESHB 2314 tax revenue increase. We disagree.

¶ 2 It is a fundamental principle of our system of government that the legislature has plenary power to enact laws, except as limited by our state and federal constitutions. Each duly elected legislature is fully vested with this plenary power.⁴ No legislature can enact a statute that prevents a future legislature from exercising its law-making power.⁵ That which a prior legislature has enacted, the current legislature can amend or repeal. Like all previous legislatures, it is limited only by the constitutions. To reason otherwise would elevate enactments of prior legislatures to constitutional status and reduce the current legislature to a second-class representative of the people.

¶ 3 What is true of statutes enacted by the legislature is likewise true of initiatives, for when the people pass an initiative, they exercise legislative power that is coextensive with that of the legislature. A law passed by initiative is no less a law than one enacted by the legislature. Nor is it more. A previously passed initiative can no more bind a current legislature than a previously enacted statute.⁶

¶ 4 The statutes that comprise the TPA, including those originating as initiatives, stand on the same footing with all other statutory enactments, equally subject to amendment by current and future legislatures. It is neither the prerogative nor the function of this court to substitute our judgment for that of the legislature or the people with respect to which laws are given effect. If a statute is constitutional, we will not invalidate it.

¶ 5 We are compelled by these principles to hold that section 7(6) of ESSB 6896, being a constitutionally valid enactment, is effective in establishing the fiscal year 2006 state expenditure limit. Because the ESHB 2314 taxes do not generate revenues in excess of the fiscal year 2006 expenditure limit as established, WSFB's challenge fails. Having resolved the matter, we decline to reach the other issues raised in this case, including the validity of other actions affecting the fiscal year 2006 expenditure limit, the constitutionality of the voter approval requirement of the TPA,⁷ and WSFB's challenge to the legislative and executive privileges asserted by the State⁸ during discovery.

I. FACTUAL AND PROCEDURAL HISTORY

A. Background

¶ 6 In 1993, Washington voters approved Initiative Measure 601. Laws of 1994, ch. 2. Initiative 601's stated intent included imposing a limit on the rate of growth in state expenditures and requiring voter approval of any tax increases that exceeded that limit. Former RCW 43.135.010(4)(a), (f) (1994). Initiative 601 was codified primarily at chapter 43.135 RCW, which the initiative named the TPA. RCW 43.135.902. The TPA has been revised, amended, and reenacted many times since its original approval by the voters.

¶ 7 The TPA limits spending from the state general fund during a fiscal year⁹ to that fiscal year's expenditure limit and provides that taxes raising general fund revenues in excess of that expenditure limit must be approved by the voters.¹⁰ Former RCW 43.135.025(1) (2005) provides that "[t]he state shall not expend from the general fund during any fiscal year state moneys in excess of the state expenditure limit established under [chapter 43.135 RCW]."¹¹ Former RCW 43.135.035(2)(a) (2005) further provides, in relevant part, that if legislative action raising state revenues "will result in expenditures in excess of the state expenditure limit, then the action ... shall not take effect until approved by a vote of the people at a November general election."

¶ 8 The TPA establishes the state expenditure limit committee (ELC) to calculate state expenditure limits.¹² The ELC "determin[es] and adjust[s] the state expenditure limit as provided in this chapter."¹³ Former RCW 43.135.025(5). The ELC meets every November to "adjust the expenditure limit for the preceding fiscal year based on actual expenditures and known changes in the fiscal growth factor and then project an expenditure limit for the next two fiscal years [the then current and the subsequent fiscal years]." Former RCW 43.135.025(6). The TPA also directs the ELC to adjust the expenditure limit based on other factors. By statute, the ELC must lower the expenditure limit if program costs or moneys are transferred out of the general fund to another fund or account.¹⁴ Former RCW 43.135.035(4). Correspondingly, the ELC must increase the expenditure limit if costs or moneys are transferred into the general fund from another fund or account.¹⁵ Former RCW 43.135.035(5).

¶ 9 WSFB asserts that the TPA "sought to apply to the government the same age-tested financial advice given to our citizens—create a budget, stick to that budget, and save for a rainy day." Resp'ts' Opening Br. on Cross-Appeal and Resp. to State's Opening Br. at 6-7. However, close examination reveals that the home economics model is a poor fit for the complexities of the state budgeting process. The governor must submit a budget to the legislature no later than December 20 of the calendar year preceding the legislative session during which that budget will be considered. RCW 43.88.060. The legislature must adopt a budget "not later than thirty calendar days prior" to the start of the next fiscal year. RCW 43.88.080. But as the TPA defines the state expenditure limit, the budget target governing these efforts, it cannot be calculated until considerably after the start of the fiscal year to which the limit applies.

¶ 10 The TPA defines the state expenditure limit for a given fiscal year as "the previous fiscal year's state expenditure limit increased by a percentage rate that equals the fiscal growth factor."¹⁶ Former RCW 43.135.025(3). But a fiscal year expenditure limit is subject to change over the course of the fiscal year and is not finally determinable for any fiscal year until after that fiscal year is closed. Recall that the ELC, acting pursuant to statutory directive, adjusts the expenditure limit to reflect transfers of program costs and moneys into and out of the general fund during the course of that fiscal year, up through its close on June 30. Former RCW 43.135.035(4), (5). The ELC cannot definitively complete this set of adjustments until after the June 30 close of the fiscal year.

¶ 11 Additionally, at its November meeting, the ELC adjusts the preceding fiscal year's expenditure limit to reflect the "actual expenditures" made during that fiscal year. Former RCW 43.135.025(6). The adjustment to reflect actual expenditures, referred to as "rebasing" the spending limit, imposes a "spend it or lose it" rule on the legislature. If the legislature does not spend general fund moneys up to the fiscal year's expenditure limit, the limit is reduced by the unspent capacity for purposes of projecting the expenditure limits of future fiscal years. As with the adjustments reflecting transfers into and out of the general fund, the ELC cannot definitively identify actual expenditures made during a fiscal year until after the June 30 close of that fiscal year.

¶ 12 Notwithstanding the lag in availability of the previous fiscal year's state expenditure limit, the ELC is charged with producing expenditure limits for future fiscal years. Thus, each November the ELC calculates three expenditure limits: (1) a final adjusted expenditure limit for the fiscal year that concluded the previous June 30, plus projected limits, subject to future adjustment, for (2) the...