State v. Ketchikan Gateway Borough
366 P.3d 86
| Alaska | 2016Background
- Alaska's school funding statute defines each district's "basic need" and funds it with state aid, a required local contribution (RLC), and federal impact aid; the RLC is set by formula (minimum equivalent of a 2.65 mill levy, with caps on increases).
- Ketchikan Gateway Borough paid its RLC under protest (about $4.2M) and sued, seeking a declaration that the RLC is unconstitutional, an injunction, and a refund; both parties moved for summary judgment.
- The superior court held the RLC violates the Alaska Constitution's dedicated funds clause (Art. IX § 7) but rejected claims under the appropriations clause and governor's veto clause and denied a refund.
- The State appealed; the Borough cross-appealed. The Supreme Court reviews summary judgment de novo and presumes statutes constitutional.
- The lead opinion examines historical/constitutional drafting materials and post-statehood statutes, concluding the RLC is part of a longstanding state-local cooperative school funding program intended to continue and thus not a "state tax or license" dedicated in violation of Art. IX § 7.
- The Court reverses the superior court on the dedicated funds issue, affirms that the RLC does not violate the appropriations or veto clauses, and denies the refund claim.
Issues
| Issue | Borough's Argument | State's Argument | Held |
|---|---|---|---|
| Whether the RLC is a prohibited "proceeds of any state tax or license" (dedicated funds clause, Art. IX § 7) | RLC is a state-imposed, earmarked revenue requirement amounting to a dedicated state tax/license and thus unconstitutional | RLC is part of a longstanding state-local cooperative funding scheme (pre- and post-statehood) outside the clause's prohibition | RLC is constitutional; not a prohibited "state tax or license" because framers intended to allow state-local cooperative dedications existing or continued by statute |
| Whether RLC violates the appropriations clause (Art. IX § 18) | RLC bypasses the appropriations process and effectively commits state spending without appropriation | RLC is local money that never enters the state treasury; in any event appropriation/veto clauses apply to state treasury withdrawals and appropriation bills | RLC does not violate appropriations clause; it does not withdraw state treasury funds or constitute an appropriation |
| Whether RLC violates the governor's veto clause (Art. II § 15) | Governor lacks opportunity to veto the effectively dedicated state spending | Same as appropriations: veto applies to appropriation bills and state treasury funds, which RLC does not involve | RLC does not violate governor's veto clause |
| Whether equitable refund of protested payment is required | Borough seeks refund of the protested $4.2M since payment was allegedly unconstitutional | State argues no refund because payment was lawful; superior court found no unjust enrichment since funds did not benefit the State | No refund required because statute held constitutional; appeal moot on refund claim |
Key Cases Cited
- State v. Alex, 646 P.2d 203 (Alaska 1982) (broad interpretation of "tax"/"proceeds" under Art. IX § 7 and prohibition on dedicating revenue)
- Sonneman v. Hickel, 836 P.2d 936 (Alaska 1992) (statute creating special fund for Marine Highway System impermissibly restricted executive/appropriations authority and violated dedicated funds clause)
- Myers v. Alaska Hous. Fin. Corp., 68 P.3d 386 (Alaska 2003) (upholding sale/monetization of anticipated future state revenue where scheme differed from simple dedication of future revenues)
- Southeast Alaska Conservation Council v. State, 202 P.3d 1162 (Alaska 2009) (statute dedicating proceeds from transferred state land to university trust violated dedicated funds clause)
- Macauley v. Hildebrand, 491 P.2d 120 (Alaska 1971) (Article VII § 1: state has mandated duty to establish and maintain public schools; discussion of statewide control over education)
- Matanuska-Susitna Borough Sch. Dist. v. State, 931 P.2d 391 (Alaska 1997) (discusses delegation of education responsibilities and funding implications)