Court to hear cities' fund dispute with state

Howard Fischer, Capitol Media Services

January 6, 2009 - 5:52PM

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The Arizona Supreme Court agreed Tuesday to consider the claim by cities that the state - and Gov. Janet Napolitano in particular - illegally took some of their funds.

In a brief order, the justices said they want to hear arguments about whether the provision ordering cities to surrender $29,748,400 is effectively a tax. That's the argument being made by attorney Paul Eckstein who represents the League of Arizona Cities and Towns.

If the court sides with Eckstein, then what lawmakers and the governor did is illegal for two reasons.

First, the order to the cities was put into the bill enacting the new $9.9 billion state budget. And the state constitution requires that budget bills deal only with spending matters.

Potentially more significant, another constitutional provision approved by voters requires a two-thirds vote for any measure that results in a "net increase in state revenues." But the budget bill - with the section at issue - passed with barely a simple majority.

Tuesday's decision is a setback for Napolitano, who hired outside counsel to ask the high court to dismiss the lawsuit by the cities. But gubernatorial press aide Jeanine L'Ecuyer said the governor still believes the move is legal and the lawyers are prepared to argue that in court at a Jan. 20 hearing.

Faced with declining tax revenues, the governor and lawmakers made some spending cuts in the new budget. But they also used various methods of generating more dollars, including the hit to cities and counties.

The assessment for each city is directly related to the amount of money each gets from the state in revenues collected in gasoline taxes and vehicle registration fees. Of that total, about $18.3 million is divided up among the cities, with the balance allocated among the 15 counties, none of whom sued.

Chandler Mayor Boyd Dunn said when the lawsuit was filed that cities are willing to help the state deal with its deficit. But he said it is a bad precedent to allow the Legislature to unilaterally raid funds earmarked for local communities.

The cities have picked up a potentially powerful ally in their legal fight: state Treasurer Dean Martin.

Martin actually was sued, along with Napolitano, because of his role as the custodian of the state funds. But Martin instructed the Arizona Attorney General's Office not to fight the cities but instead to side with them.

Selected assessments

Counties:

Cochise - $410,291

Coconino - $468.033

Maricopa - $4,681,991

Mohave - $560,928

Pima - $1,996,905

Yavapai - $535,585

Yuma - $544,966

Cities:

Apache Junction - $152,979

Bisbee - $25,174