515 P.3d 664
Ariz.2022Background
- SB 1828: legislature enacted a conditional flat 2.5% income tax tied to revenue triggers in response to Prop 208; its near-term effect likely reduced income-tax receipts for high earners.
- Invest in Arizona (IIA) circulated a referendum petition to block SB 1828; Arizona Free Enterprise Club moved to enjoin the Secretary of State from accepting the petition, challenging referability.
- Trial court held SB 1828 referable, reasoning §1(3)’s exemption applied only to appropriations that increase revenue and thus did not cover SB 1828.
- The Arizona Supreme Court granted direct review, reversed the trial court, and issued a published opinion explaining that section 1(3) exempts revenue measures "for the support and maintenance" of existing state departments and institutions from referendum.
- The Court held the exemption extends to revenue-raising (or -reducing) measures so long as they fund existing state departments/institutions, but non-appropriation revenue measures remain subject to the 90-day referendum period (i.e., they are not immediately effective unless emergency/appropriation mechanics are satisfied).
- IIA’s request for attorney fees and costs was denied because it did not prevail on the constitutional issue; the Court remanded for entry of judgment consistent with its opinion.
Issues
| Issue | Plaintiff's Argument (Free Enterprise) | Defendant's Argument (IIA/Hobbs) | Held |
|---|---|---|---|
| Whether revenue laws are exempt from referendum under Ariz. Const. art. 4, pt.1, §1(3) | §1(3) exempts laws "for the support and maintenance" of state departments, which includes revenue laws like SB 1828 | Referendum power applies; tax measures are referable | Revenue laws that fund existing state departments/institutions are exempt from referendum under §1(3) |
| Whether the exemption is limited to appropriations (disbursements) | Exemption covers revenue laws generally, not just appropriations | Exemption should be limited to appropriations disbursing funds (Garvey line) | "Support and maintenance" is broader than "appropriations"; appropriation is a subset of support/maintenance |
| Whether exempt tax measures must increase revenue | Exemption does not require a revenue increase; measures that generate funds (even if decreasing net revenue year-to-year) can qualify | Exemption should be limited to revenue-increasing measures | Text contains no revenue-increase requirement; exemption applies regardless of short-term revenue decrease if measure supports existing departments |
| Whether SB 1828 was effectively exempt without emergency/appropriation mechanics (immediate effect) | SB 1828 is exempt from referendum, so petition should be barred | SB 1828 is referable because it did not meet emergency/appropriation procedural requirements for immediate effect | SB 1828 is exempt from referendum but, as a non-appropriation revenue measure, remains subject to the 90-day referendum period; it was referable because it lacked the emergency/2/3 roll-call/separate-section mechanics for immediate effect |
Key Cases Cited
- Forty-Seventh Legislature v. Napolitano, 213 Ariz. 482 (2006) (courts have ultimate responsibility to interpret the constitution)
- Fann v. State, 251 Ariz. 425 (2021) (text-first approach to constitutional interpretation)
- Garvey v. Trew, 64 Ariz. 342 (1946) (historically held appropriations for existing departments exempt from referendum)
- Warner v. White, 39 Ariz. 203 (1931) (early interpretation of §1(3) and emergency/appropriation interplay)
- Wade v. Greenlee County, 173 Ariz. 462 (App. 1992) (support includes acquisition and allocation of funds; broader reading of "support")
- Clark v. Boyce, 20 Ariz. 544 (1919) (early construction emphasizing emergency-measure requirements)
- Orme v. Salt River Valley Water Users' Ass'n, 25 Ariz. 324 (1923) (interpreting emergency clause mechanics)
- League of Ariz. Cities & Towns v. Martin, 219 Ariz. 556 (2009) (definition of "appropriation")