Biggs v. betlach/macias, CV-17-0130-PR

Background

In 2013 Arizona enacted H.B. 2010 to expand Medicaid (AHCCCS) under the ACA; most costs funded by federal payments but the statute required an AHCCCS director-imposed hospital assessment to cover the state share (A.R.S. § 36-2901.08).
Opponents (legislators who voted against H.B. 2010 and private citizens) sued to enjoin the hospital assessment, arguing it violated Ariz. Const. art. 9, § 22 (which requires a two-thirds legislative vote to enact acts that provide a net increase in state revenue).
The superior court held the assessment was not a "tax" and fell within the art. 9 § 22(C)(2) exception for fees/assessments authorized by statute but set by an agency; the court of appeals affirmed; the Arizona Supreme Court granted review.
The central legal questions were (1) whether the hospital "assessment" is a "tax" under article 9, § 22, and (2) if not, whether it fits the § 22(C)(2) exception (i.e., is statutorily authorized and not prescribed by formula, amount, or limit and is set by an agency).
The Court applied the multi-factor test (entity imposing the charge; class of payors; whether proceeds serve general public purposes or benefit payors) and statutory interpretation of § 22(C)(2).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is the hospital "assessment" a "tax" under Ariz. Const. art. 9, § 22?	Biggs: The assessment functions as a tax because it raises general revenues and funds public programs; two-thirds approval required.	Betlach: Characterization unnecessary if the assessment fits the (C)(2) exception; it is administratively set.	Not a "tax." Applying the three-factor test, the Court found the director (agency) imposes it, it targets a narrow class (hospitals), and it benefits hospitals (via increased AHCCCS payments).
Does § 36-2901.08 fall within § 22(C)(2) (statutorily authorized, not prescribed by formula/amount/limit, set by an agency)?	Biggs: "Authorized by statute" should be limited to statutes predating § 22 or those enacted by two-thirds; statutory provisions here prescribe factors and require legislative review, so (C)(2) doesn't apply.	Betlach: (C)(2) covers statutes authorizing administratively-set fees adopted by normal legislative process; § 36-2901.08 delegates rate setting to the director without prescribing formula/amount/limit.	(C)(2) applies. The Court construed "authorized by statute" to mean statutes adopted by ordinary legislative process and held § 36-2901.08 does not prescribe a formula, amount, or limit, so the director-set assessment falls within the exception.
Do statutory safeguards (factors to consider, review by joint budget committee, federal-approval conditions) make the assessment a legislatively prescribed fee?	Biggs: Statutory factors, required presentation to legislature, and conditioning on federal law amount to meaningful legislative prescription.	Betlach: Those provisions are procedural/conditions, not statutory prescriptions of formula, amount, or limit; federal-approval conditions merely limit collection, not set amounts.	Safeguards do not render the assessment "prescribed by formula, amount or limit." They are constraints/conditions, not numeric prescription; the director retains discretion.
Is the assessment invalid because it effectively increases state revenue without two-thirds legislative approval?	Biggs: The substance is a revenue-increasing measure and thus must meet supermajority requirement.	Betlach: Because it is an administratively set assessment authorized by statute and exempt under § 22(C)(2), no supermajority is required.	The assessment is valid without two-thirds. The Court affirmed the trial court, vacated the court of appeals opinion, and denied attorneys' fees to Opponents.

Key Cases Cited

Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (context on Medicaid expansion under the ACA)
May v. McNally, 203 Ariz. 425 (2002) (used the three-factor test to distinguish taxes from fees/assessments)
Bidart Bros. v. Cal. Apple Comm’n, 73 F.3d 925 (9th Cir. 1996) (three-factor test distinguishing tax vs. fee/assessment)
San Juan Cellular Tel. Co. v. Pub. Serv. Comm’n, 967 F.2d 683 (1st Cir. 1992) (spectrum analysis: paradigmatic tax vs. regulatory fee)
Jachimek v. State, 205 Ariz. 632 (App. 2003) (applied May/Bidart factors to find a narrowly imposed fee rather than a tax)
Biggs v. Cooper ex rel. Cty. of Maricopa, 236 Ariz. 415 (2014) (procedural standing ruling related to this litigation)
Gallardo v. State, 236 Ariz. 84 (2014) (standard of review for constitutional questions)