ANDY BIGGS, ET AL., Plаintiffs/Appellants, v. THOMAS J. BETLACH, Defendant/Appellee, EDMUNDO MACIAS; GARY GORHAM; DANIEL MCCORMICK; AND TIM FERRELL, Intervenor-Defendants/Appellees.
No. CV-17-0130-PR
SUPREME COURT OF THE STATE OF ARIZONA
Filed November 17, 2017
242 Ariz. 55
Appeal from the Superior Court in Maricopa County, The Honorable Douglas Gerlach, Judge, No. CV2013-011699, AFFIRMED. Opinion of the Court of Appeals, Division One, 242 Ariz. 55 (App. 2017), VACATED.
COUNSEL:
Christina Sandefur (argued), Aditya Dynar, Scharf-Norton Center for Constitutional Litigation at the Goldwater Institute, Phoenix, Attorneys for Andy Biggs, Andrew Tobin, Nancy Barto, Judy Burges, Chester Crandell, Gail Griffin, Al Melvin, Kelli Ward, Steve Yarbrough, Kimberly Yee, John Allen, Brenda Barton, Sonny Borrelli, Paul Boyer, Karen Fann, Eddie Farnsworth, Thomas Forese, David Gowan, Rick Gray, John Kavanagh, Adam Kwasman, Debbie Lesko, David Livingston, Phil Lovas, J. D. Mesnard, Darin Mitchell, Steve Montenegro, Justin Olson, Warren Petersen, Justin Pierce, Carl Seel, Steve Smith, David Stevens, Bob Thorpe, Kelly Townsend, Michelle Ugenti, Jeanette Dubreil, Katie Miller, and Tom Jenney
Douglas C. Northup, Timothy Berg (argued), Patrick Irvine, Carrie Pixler Ryerson, Fennemore Craig, P.C., Phoenix, Attorneys for Thomas J. Betlach
Timothy M. Hogan, Joy Herr-Cardillo, Arizona Center for Law in the Public Interest, Phoenix, and Ellen Sue Katz, William E. Morris Institute for Justice, Phoenix, Attorneys for Edmundo Macias, Gary Gorham, Daniel McCormick, and Tim Ferrell
Roopali H. Desai, D. Andrew Gaona, Coppersmith Brockelman PLC, Phoenix and Ann-Marie Alameddin, Arizona Hospital and Healthcare Association, Phoenix, Attorneys for Amicus Curiae Arizona Hospital and Healthcare Association and Amicus Curiae American Cancer Society Cancer Action Network
James S. Burling, Pacific Legal Foundation, Sacramento, CA, Attorneys for Amici Curiae Pacific Legal Foundation and Howard Jarvis Taxpayers Association
Brett W. Johnson, Andrew Sniegowski, Snell and Wilmer LLP, Phoenix, Attorneys for Amicus Curiae Health System Alliance of Arizona
CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE CHIEF JUSTICE PELANDER and JUSTICES BRUTINEL, TIMMER, GOULD, and LOPEZ and JUDGE STARING
CHIEF JUSTICE BALES, opinion of the Court:
¶1 In 2013, by a simple majority vote, the legislature enacted H.B. 2010 to expand coverage under Arizona’s indigent health care program, Arizona Health Care Cost Containment System (“AHCCCS“), with federal monies funding most of the costs. To fund the remaining costs, the lеgislature provided in
¶2 We hold that the hospital assessment is not subject to
I.
¶3 In 2010, Congress enacted the Patient Protection and Affordable Care Act (“ACA“), which provides federal funding to states that choose to expand eligibility under their state Medicaid program to all “individuals under the age of 65 with incomes below 133 percent of the federal poverty level.” See Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 576 (2012). Under the ACA, the federal government pays most of the costs for the expansion, but
¶4 After the governor signed H.B. 2010, then-state-senator Andy Biggs and thirty-five other legislators who had voted against the bill (the “Opponents“) and three citizеns filed this action against AHCCCS Director Thomas Betlach and others (collectively the “Director“). The lawsuit sought to enjoin implementation of the hospital assessment, alleging that it violates
¶5 On remand, the parties filed cross-motions for summary judgment. The superior court ruled that
¶6 We granted review because the application of
II.
¶7 Under
¶8 Opponents argue that
¶9 “Determining constitutionality is a question of law, which we review de novo.” Gallardo v. State, 236 Ariz. 84, 87 ¶ 8 (2014). “When the statute in question involves no fundamental constitutional rights or distinctions based on suspect classifications, we presume the statute is constitutional and will uphold it unless it clearly is not.” Cave Creek Unified Sch. Dist. v. Ducey, 233 Ariz. 1, 5 ¶ 11 (2013); see also Hall v. Elected Officials Ret. Plan, 241 Ariz. 33, 38 ¶ 14 (2016) (observing that the party challenging a statute bears the burden of overcoming a presumption of constitutionality).
¶10 “The Constitution should be construed so as to ascertain and give effect to the intent and purpose of the framers and the people who adopted it.” Brewer v. Burns, 222 Ariz. 234, 239 ¶ 26 (2009) (internal citation and quotation omitted). “We give effect to the purpose indicated, by a fair interpretation of the language used, and unless the context suggests otherwise words are to be given their natural, obvious and ordinary meaning.” Id. (internal citation and quotation omitted).
A.
¶11 We first consider whether the hospital assessment is a “tax” for purposes of
¶12 Opponents argue that if the hospital assessment constitutes a “tax” for purposes of
¶13 We agree with Opponents that we must determine whether the hospital “assessment” - however labeled - is truly a “tax” within the meaning of
¶14 Because the Constitution does not define the terms “tax,” “fee,” or “assessment” for purposes of
¶15 As the First Circuit has explained:
[The cases] have sketched a spectrum with a paradigmatic tax at one end and a paradigmatic fee at the other. The classic “tax” is imposed by a legislature upon many, or all, citizens. It raises money, contributed to a general fund, and spent for the benefit of the entire community. The classic “regulatory fee” is imposed by an agency upon those subject to its regulation.
San Juan Cellular Tel. Co. v. Pub. Serv. Comm’n, 967 F.2d 683, 685 (1st Cir. 1992); see also Jachimek v. State, 205 Ariz. 632, 636 ¶ 14 (App. 2003). The challenge, of course, is determining how to characterize a legislative act increasing state revenues that does not fall at either end of the spectrum.
¶16 In May, this Court used a three-factor test in determining whether an “assessment” should be categorized as a tax or instead a fee in the First Amendment context. See May, 203 Ariz. at 430-31 ¶ 24. This test evaluates “(1) the entity that imposes the assessment; (2) the parties upon whom the assessment is imposed; and (3) whether the assessment is expended for general public purposes, or used for the regulation or benefit of the parties upon whom the assessment is imposed.” Id. (quoting Bidart Bros. v. Cal. Apple Comm’n, 73 F.3d 925, 931 (9th Cir. 1996)).
¶17 Opponents argue that because the May test was adopted in a First Amendment context, it is not dispositive here. To be sure, “the definition of tax in one context . . . has no talismanic significance.” Bidart Bros., 73 F.3d at 930 (internal citation and quotation omitted). Nevertheless, the May test provides a useful analytical tool for distinguishing taxes from fees оr assessments. See Jachimek, 205 Ariz. at 636-37 ¶¶ 14-22 (employing the three-factor May test in determining whether a “fee” on pawnbroker transactions was a tax or a fee); see
¶18 Each of the May factors suggests that
¶19 The second May factor recognizes that “[a]n assessment imposed upon a broad class of parties is more likely to be a tax than an assessment imposed upon a narrow class.” Bidart Bros., 73 F.3d at 931. Opponents argue that this factor supports characterizing
¶20 Several aspects of the hospital assessment lead us to conclude it is imposed on a narrow class, which weighs against treating it as a tax. The assessment is imposed only on hospitals, which cannot pass on the сosts to patients or third-party payors.
¶21 As for the third May factor, Opponents argue that the hospital assessment is collected for a general public purpose - to fund the Medicaid expansion - and not to provide any specific benefit to hospitals. We reject this argument insofar as it presumes that a fee or assessment necessarily constitutes a tax if the revenues collected serve any public purpose rather than benefitting only those who pay it. Instead, an assessment or fee can be characterized as such rather than a tax if there is “‘some reasonable relation to the service to be performed’ on the payor’s behalf.” Jachimek, 205 Ariz. at 637 ¶ 21 (quoting Stewart v. Verde River Irrigation & Power Dist., 49 Ariz. 531, 548 (1937)); see also Kyrene Sch. Dist. No. 28 v. Chandler, 150 Ariz. 240, 244 (App. 1986) (finding that a school “receiv[ed] the overall benefit of [a city’s] water and wastewater systems in exchange for . . . system development charges“).
¶22 Although H.B. 2010 serves a public purpose by expanding AHCCCS eligibility, the assessment was expressly intended and in fact serves to benefit the hospitals. Hospital assessments are 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.”
¶23 The assessments also enable hospitals to be compensated for treating patients who are unable to pay. Hospitals are required by federal law to provide emergency room treatment for patients regardless of their ability to pay.
¶24 Weighing the three May factors, we conclude that the hospital assessment is not a “tax” for purposes of
B.
¶25 Because the hospital assessment is not a tax, we must consider whether it falls within the exception under subsection (C)(2). Subsection (A) states that “[a]n act that provides for a net increase in state revenues” must be approved by a two-thirds vote, and subsection (B)(5) specifically applies this requirement to “any act” that increases state revenue by “[t]he imposition of any new state fеe or assessment or the authorization of any new administratively set fee.”
¶26 There is no dispute that the hospital assessment is set by the director, so whether (C)(2) applies turns on whether the assessment is “authorized by statute” and, if so, whether it is “not prescribed by formula, amount or limit.” (For reasons notеd supra ¶ 18, we conclude that by enacting H.B. 2010, the legislature did not impose the assessment, and thus this case does not implicate a statutory “imposition of a[] new state fee or assessment” for purposes of (B)(5)).
¶27 Opponents argue that “authorized by statute” for purposes of the (C)(2) exception means that a fee or assessment is authorized by a statute that either preexisted the 1992 adoption of
¶28 By its terms, (C)(2) does not state that it applies only to statutory authorizations that either preexisted the adoption of the constitutional provision or that are later approved by a two-thirds vote. Interpreting (C)(2) as stating that
¶29 The phrase “authorized by statute” in (C)(2) is most reasonably construed as referring to fees and assessments that are statutorily authorized under the usual legislative process, that is, by a simple majority vote. This interpretation, unlike the one urged by Opponents, gives force to the language of both subsections (C)(2) and (B)(5). Under (B)(5), the supermajority requirement applies to “any act” authorizing “any new administratively set fee,” except that requirement, by the terms of (C)(2), does not apply to statutes authorizing fees and assessments “that are not prescribed by formula, amount or limit, and are set by a state officer or
¶30 Interpreting subsection (C)(2) as allowing the legislature, by a simple majority vote, to authorize the imposition of certain new fees or assessments by state officers or agencies does not contradict the voters’ intent or lead to absurd results. In approving
¶31 The legislative council analysis in the 1992 voter pamphlet explained that:
Proposition 108 would amend the State Constitution to require a two-thirds vote in each House of the Legislature to enact a net increase in state revenue through (1) enacting any new or increased tax or statutory fee, (2) reducing or eliminating any exemption or credit on a tax or fee or (3) mаking any change in the allocation of tax revenues among the state, counties and cities.
Ariz. Sec’y of State, 1992 Publicity Pamphlet 45 (1992), https://www.azsos.gov/sites/azsos.gov/files/pubpam92.pdf. The voter pamphlet further observed that Proposition 108 would not affect “authorized fees and assessments that are not set or limited by law, such as university tuition.” Id. at 46. The voter pamphlet, notably, is consistent with
¶32 Our interpretation of (C)(2) is consistent with the expressed intent of the voters in approving
¶33 Because we conclude that the hospital assessmеnt is “statutorily authorized,” we next consider whether it falls outside the (C)(2) exception because it is “prescribed by formula, amount or limit.” Opponents argue that
¶34 In assessing Opponents’ arguments, we note initially that the phrase “prescribed by formula, amount or limit” refers to prescriptions conferred by state statutes, because this phrase follows “authorized by statute,” and
¶35 With these points in mind, we turn to the statutory provisions for the assessment.
¶36 Nor do the statutory terms incorporate formulas, amounts, or limits by referencing federal law.
¶37 To summarize, we hold that the hospital assessment authorized in
III.
¶38 We affirm the judgment of the trial court, vacate the opinion of the court of appeals, and deny Opponents’ application for attorney fees.