Court: Arizona professionals can't block lawmakers' 'sweep' of regulatory funds - East Valley Tribune: Arizona

Court: Arizona professionals can't block lawmakers' 'sweep' of regulatory funds

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Posted: Monday, September 12, 2011 9:30 am

Arizona professionals cannot block state lawmakers from taking money they paid to run their regulatory agencies and instead using it to balance the budget, the state Court of Appeals has ruled.

The three-judge panel unanimously rejected legal arguments from groups representing everyone from doctors and chiropractors to pharmacists and veterinarians that a 2008 “sweep” of funds was an unconstitutional special tax on them. The courts also brushed aside claims that lawmakers were, in effect, increasing the money going into the state budget, something that normally would require a two-thirds vote.

Attorney Christine Cassetta, who represents the professionals, said she believes the court got it wrong. But she said no decision has been made whether to seek review by the Arizona Supreme Court.

Under state law, most regulatory boards are financed with fees on the people they monitor. By law, 90 percent of the licensing dollars go to the agency, with the state siphoning off the balance.

Anything the agency does not need remains in special funds.

The problem arose when the economy began to tank and state revenues shrank. That left then Gov. Janet Napolitano and lawmakers looking for sources of cash.

They found $13.9 million by taking money that was in those special accounts. But they did that without changing the law setting up that 90-10 split, leading to the lawsuit.

Cassetta argued that lawmakers cannot take what was levied as a fee for a specific purpose — one that the professionals have to pay to do their jobs — and simply divert it to running government. She said that made it a tax.

At the very least, Cassetta said, the Arizona Constitution requires any increases in taxes and anything that results in a net increase in state revenues be approved by a two-thirds vote. That was not the case.

But Judge Patrick Irvine, writing for the appellate court, said that argument neglects the fact that the money, no matter how it was collected, was already in the state treasury.

“Under Arizona law, the transfer of monies from special funds to the general fund does not increase tax revenue if, as here, those monies were merely transferred from funds already within the government’s possession,” he wrote. So there was no net increase in state revenues.

And Irvine said the fact the money may have been collected for one purpose and was held in a particular account within the treasurer’s office is irrelevant. He said the statutes that set up the funds “do not guarantee any licensee a particular benefit.”

Irvine also said that the professionals were not being singled out for special taxes to run the government. He said they were not subject to any new levies, with the fund sweep merely moving around money they had already paid.

The court also rejected arguments that while the cash was in the possession of the state treasurer, he was merely holding it “in trust” for the regulatory boards and that lawmakers had no legal right to take it.

Irvine said there are dollars within the treasurer’s office that are trust funds and off limits to legislative raids. But he said that, in each case, those funds were specifically designated as trusts, a status that was not given to any of the funds for the regulatory boards.

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