Case Information
*1 IN THE
A RIZONA C OURT OF A PPEALS
D IVISION O NE
ANDY BIGGS, et al., Plaintiffs/Appellants , v.
THOMAS J. BETLACH, Defendant/Appellee .
EDMUNDO MACIAS; GARY GORHAM; DANIEL MCCORMICK; and
TIM FERRELL, Intervenor–Defendants/Appellees.
No. 1 CA-CV 15-0743 Appeal from the Superior Court in Maricopa County No. CV2013-011699
The Honorable Douglas Gerlach, Judge
AFFIRMED
COUNSEL
Goldwater Institute, Phoenix
By Christina Sandefur and Aditya Dynar
Counsel for Plaintiffs/Appellants
Fennemore Craig, P.C., Phoenix
By Douglas Northup, Timothy Berg, Patrick Irvine, and Carrie Ryerson Counsel for Defendant/Appellee
Arizona Center for Law in the Public Interest, Phoenix By Timothy Hogan and Joy Herr-Cardillo
William E. Morris Institute for Justice, Phoenix By Ellen Sue Katz
Co-Counsel for Intervenor-Defendants/Appellees
Coppersmith Brockelman PLC, Phoenix
By Roopali Desai and D. Andrew Gaona
Arizona Hospital and Healthcare Association, Phoenix By Ann-Marie Alameddin
Co-Counsel for Amicus Curiae Arizona Hospital and Healthcare Association Statecraft PLLC, Phoenix
By Kory Langhofer
Counsel for Amicus Curiae Health System Alliance of Arizona
OPINION
Judge Paul J. McMurdie delivered the opinion of the Court, in which Presiding Judge Kenton D. Jones and Judge Patricia K. Norris joined.
M c M U R D I E , Judge:
¶1 We are asked to consider whether the hospital assessment under Arizona Revised Statutes (“A.R.S.”) section 36-2901.08 was enacted in violation of Article 9, Section 22, of the Arizona Constitution. [1] Appellants, a group of legislators who voted against Housе Bill (“HB”) 2010 during the 2013 legislative session, appeal the superior court’s order granting Defendant’s and Intervenor-Defendants’ motions for summary judgment. Appellants contend HB 2010 created a new tax on hospitals, and therefore required a super-majority vote under Article 9, Section 22. Because HB 2010 imposed an assessment that is excepted under Section 22(C)(2), we find it constitutional as enacted and affirm the superior court.
FACTS AND PROCEDURAL BACKGROUND In September 2013, during the Fifty-First Arizona State
Legislature, legislators introduced HB 2010 to expand Arizona’s indigent healthcare program. Included in that expansion was an assessment on hospitals to be set by the director of the Arizona Health Care Cost Containment System (“AHCCCS”). HB 2010 passed by a simple-majority vote, and Governor Janice K. Brewеr signed it into law as A.R.S. § 36-2901.08. Members of the Arizona Legislature who voted against
HB 2010 subsequently filed suit in September 2013 to enjoin enforcement of the expansion, arguing HB 2010 was passed in violation of Article 9, Section 22. [2] The parties filed cross-motions for summary judgment in May 2015 seeking a declaration regarding the constitutionality of § 36-2901.08. The superior court found the legislation came within a listed exception to Article 9, Section 22, and thus was not subject to the super-majority vote requirement. The legislators timely appealed and we have jurisdiction pursuant to A.R.S. § 12-2101(A)(1) (2016). [3]
DISCUSSION Questions of statutory interpretation and constitutional law
are reviewed
de novo
.
State ex rel. Thomas v. Klein
, 214 Ariz. 205, 207, ¶ 5
(App. 2007). We presume that a statute is constitutional and resolve any
doubts in favor of constitutionality.
Niehaus v. Huppenthal
,
A. A.R.S. § 36-2901.08 Was Constitutionally Enacted in Accordance
with Article 9, Section 22, of the Arizona Constitution. ¶6 AHCCCS provides health insurance benefits to qualified persons of low income. HB 2010 was intended to expand the program’s coverage, with joint funding from the fеderal and state governments. In order to provide the funding needed from the state government, HB 2010 created an assessment, paid by Arizona hospitals as set forth by the director of AHCCCS. HB 2010, 2013 Ariz. Sess. Laws, ch. 10, § 5 (1st Spec. Sess.). Article 9, Section 22 states, “[a]n act that provides for a net increase in state revenues . . . is effective on the affirmative vote of two- thirds of the members of each house of the legislature.” Subsection B provides that qualifying “acts” include, inter alia , “[t]he imposition of any new tax” and “[t]he imposition of any new state fee or assessment.” Ariz. Const. art. 9, § 22(B)(1), (5). However, Subsection C states that the two- thirds vote is not required on “[f]ees and assessments that are authorized by statute, but are not prescribed by formula, amount or limit, and are set by a state officеr or agency.” Ariz. Const. art. 9, § 22(C)(2).
1. The Hospital Assessment Is Not a Tax.
Because the exception under Section 22(C)(2) applies only to
“fees and assessments,” appellants first argue that the hospital assessment
enacted by HB 2010 was a new “tax” under Section 22(B), and therefore
required a two-thirds affirmative vote from both houses of the Arizona
Legislature. When deciding whether to categorize a government lеvy as an
assessment or a tax, the analysis is context-driven and examines three
factors: (1) the entity imposing the levy; (2) the parties upon whom the levy
is imposed; and (3) whether the levy is expended for general public
purposes or used for the regulation or benefit of the parties upon whom the
assessment is imposed.
May v. McNally
,
legislature because the levy was created by the legislature through statute.
This argument misses the mark. While the legislature may have authorized
the levy through statute, we look to the entity with regulatory authority
over the levy for purposes of categorizing it as a tax or assessment.
See
Jachimek v. State
,
imposed upon a broad class of hospitals, making it more like a tax than an assеssment. Appellants misconstrue the language of the statute on its face. Section 36-2901.08(C) allows the director to “establish modifications or exemptions to the assessment.” In doing so, the director is allowed to consider factors including the size, services offered, and location of the hospital. A.R.S. § 36-2901.08(C). Therefore, the levy at issue is not necessarily charged to every hospital in the state. Even if it were, the assessment is narrowly applied only to hospitals, and not a broad class of citizens as is typical of a tax. This court has previously held that levies that are specific to a class of business are appropriately treated as an assessment. See, e.g., Jachimek , 205 Ariz. at 636, ¶ 16 (an assessment charged to all licensed pawnbrokers when rеporting transactions under state law was not a tax). Therefore, because the levy is restricted to hospitals within the discretion of the director, this factor weighs in favor of treating the levy as an assessment. Finally, appellants argue the levy is expended for general
public purposes, not for the regulation or benefit of the levied parties, and therefоre, should be considered a tax. Appellants focus in particular on the “broad public purpose” of the statute, and healthcare expansion as a whole. But while the entire expansion’s purpose was to provide healthcare to more of Arizona’s indigent population, the purpose of the assessment , as evidenced by the language of HB 2010, was to “be used for the benefit of hospitals for the purpose of providing health care for persons eligible for coverage funded by the hospital assessment.” HB 2010, 2013 Ariz. Sess. Laws, ch. 10, § 44(3) (1st Spec. Sess.) (emphasis added). Appellants also contend hospitals only benefit “incidentally”
from the assessment. But, under Arizona law, a levy can be treated as an
assessment and not a tax as long as there is “some reasоnable relation to the
service to be performed on the payer’s behalf.”
See Jachimek
,
2. The Hospital Assessment Fits Within the (C)(2) Exception. ¶14 Because the hospital assessment is not a tax, we next address whether it fits within the specific exception under Section 22 (C)(2). Here, the exception requires the assеssment to be: (1) authorized by statute; (2) not prescribed by formula, amount, or limit; and (3) set by a state officer or agency. Ariz. Const. art. 9, § 22(C)(2). Because neither party challenges that the assessment is set by a state officer or agency, we only address the first two prongs of the exception.
i) The plain language of the exception does not require a super majority before it can apply to a fee or assessment. Appellants argue that the language under the exception
requiring it to be “authorized by statute” requires that an assessment be authorized by a two-thirds affirmative vote from both houses of the legislature, after which, a state officer or agency may then change the fee or assessment without invoking Section 22, so long as it is not prescribed by formula, amount, or limit. We disagree. Article 9, Section 22(C)(2) simply states the exception applies
to “assessments that are authorized by statute, but are not prescribed by formula, amount or limit, and are set by a state officer or agency.” Ariz. Const. art. 9, § 22(C)(2). Nowhere in the plain language of the exception do we find a requirement that the initial statute authorizing the fee must be passed by a super majority before the (C)(2) exception applies to fees and assessments set by a state officer or agency. See Simpson v. Simpson , 224 Ariz. 224, 225, ¶ 6 (App. 2010) (“The best indicator of legislative intent is the plain language of the statute.”). Furthermore, appellants’ reading ignores the initial language of subsection (C), which states, “[t]his section does not apply to . . . .” Ariz. Const. art. 9, § 22(C) (emphasis added). In other words, all of the listed exceptions in subsection (C) are exempt from the entirety of Section 22 of the Arizona Constitution, including subsections (A) and (B). Accordingly, it would require a contorted reading of the exception under (C)(2) to require a statute to pass the super-majority requirement of subsection (A), in order to then exempt fees and assessments falling within subsection (C) frоm the application of Section 22 entirely. Appellants argue this construction of the statute would
produce “absurd results” and render the intent of Article 9, Section 22 “ineffectual.” We disagree. A fee or assessment authorized by statute does not qualify for exemption unless it is “not prescribed by formula, amount or limit” and is “set by a state officer or agency.” Ariz. Const. art. 9, § 22(C)(2). Under оur reading, and contrary to appellants’ contention, not every fee or assessment passed by a simple majority is exempt from Section 22. Appellants characterize this interpretation “absurd” because it would allow the legislature to enact an unspecified levy by a simple majority. However, the voter information pamphlet regarding Proposition 108 explained to voters that other types of fees would not be affected by the measure, and cited university tuition as an example of one of these assessments.
ii) The federal approval and federal medical assistance requirements do not place a formula or limit on the assessment under the exception. Finally, appellants cоntend the federal approval and federal
medical assistance requirements in A.R.S. § 36-2901.08(B) and (E), respectively, act as limits on the assessment, taking it outside the Section 22(C)(2) exception. The appellants raise a facial challenge, and therefore we must consider the text of the law itself and not its current application. See Hernandez v. Lynch , 216 Ariz. 469, 472, ¶ 8 (App. 2007). The party challenging thе provision must demonstrate that no circumstances exist under which the regulation would be valid. Id.
¶19
Appellants argue, citing 42 U.S.C. § 1396b(w) and 42 C.F.R.
§ 433.68, that federal law contains regulations on how the hospital
assessment can be imposed while maintaining federal funding for the
expansion program, which creates a formula or limit for the assessment. We
do not interpret a clause of this naturе to be a limit on the hospital
assessment under Article 9, Section 22(C)(2). The language of subsection
(C)(2) plainly applies to state law and does not look beyond the statute
authorizing the fee or assessment, in this case A.R.S. § 36-2901.08. This is
evident when reading the entirety of subsection (C)(2), which states the
exception applies to “[f]ees and assessments that are authorized by statute,
but are not prescribed by formula, amount or limit, and are set by a state
officer or agency.” The first clause refers to state statutes only, and the final
clause specifically mentions
state
officers or agencies. Thus, the middle
clause applies to formulas, amounts, or limits prescribed within the
state
statute.
See Estate of Braden ex rel. Gabaldon v. State
,
Rule of Civil Appellate Procedure Rule 21(a), citing A.R.S. §§ 12-341, -348, 35-213, and the private attorney general doctrine. Because Appellants have not prevailеd on appeal, we decline to award fees.
CONCLUSION A.R.S. § 36-2901.08 creates an assessment that falls within the
exception of Article 9, Section 22(C)(2) of the Arizona Constitution. Accordingly, it was constitutionally enacted by a majority, rather than a super-majority, of the legislature.
Notes
[1] We cite to the current version of applicable statutes or rules when no revision material to this сase has occurred.
[2] The superior court originally dismissed the legislators’ claim for lack
of standing; however, this court subsequently reversed that decision.
Biggs
v. Cooper
,
[3] The Health System Alliance of Arizona, in its amicus brief, raises the
“enrolled bill rule” as a jurisdictional ground to preclude our review. “[I]t
is the rule that
amici curiae
are not permitted to creаte, extend, or enlarge
issues beyond those raised and argued by the parties.”
Town of Chino Valley
v. City of Prescott
,
[4] Appellants’ opening brief argues against this presumption, citing
cases where statutes were found to be unconstitutional.
E.g., Dobson v. State
ex rel. Comm’n on Appellate Court Appointments
, 233 Ariz. 119 (2013)
(legislature’s amendment of the judicial nomination system violated the
state constitution). We take notice that this presumption is rebuttable, but
the party challenging the validity of a statute bears the burden of proving
that the legislation is unconstitutional.
E.g., State v. Casey
,
[5] Appellees contend that an assessment can be defined broadly to
include a tax, and therefore the distinction between “taxes” and
“assessments” under Article 9, Section 22 is inapplicable. However, such an
interpretation would render the specific omission of the word “tax” under
Section 22(C)(2) meaningless when the language of the provision, under
subsection (B), specifically listed categories of “tax” as a separate class from
“fee[s] and assessment[s]”.
See
Ariz. Const. art. 9, § 22(B)(1)-(2), (5). Because
we presume a statute does not enact “superfluous or reiterative” language,
we dеcline to interpret assessment to include
any
tax under Section 22.
See
Phoenix Newspapers, Inc. v. Dep’t of Corrections
, 188 Ariz. 237, 244 (App.
1997);
see also Herman v. City of Tucson
,
[6] The current rules set forth by the director exclude several categories of hospitals, including those operated by the state or designated as a short- term, рsychiatric, rehabilitation, children’s, or special hospital. Arizona Administrative Code (“A.A.C.”) § R9-22-730(I).
[7] In their motion for summary judgment filed on May 14, 2015, Appellants conceded the levy benefited hospitals.
[8] Section 36-2901.09 creates a special fund entitled the “hospital assessment fund” where the revenues collected from the assessment set forth in § 36-2901.08 are deposited. A.R.S. § 36-2901.08(F). Notably, the monies сollected therein cannot revert to the state general fund to be used for another public purpose. A.R.S. § 36-2901.09(C)(1).
[9] Appellants also claim the exemption factors and joint legislative budget committee (“JLBC”) review requirements under § 36-2901.08(C) and (D) act as a formula or limit, but conceded in their original complaint that the director is not required to consider these factors or gain approval from the JLBC.
[10] The appellants admitted the director “has full discretion” in their complaint.