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Arizona court overturns local government budget payment

High court orders state to give up claim to $30 million

PHOENIX – The Arizona Supreme Court put red ink back into the state budget on Tuesday by overturning a provision requiring local governments to pay nearly $30 million to help balance the current state budget.

The ruling on the provision, enacted last year, came on a special-action lawsuit filed directly with the state high court by the League of Arizona Cities and Towns.

The ruling has the effect of worsening the state’s budget trouble for the current fiscal year but relieving some pressure on local governments.

For Tucson, the ruling meant $2.1 million more in city coffers, though the money will not offset any planned cuts.

“Because of the lawsuit, we were expecting not to have to pay it,” finance specialist Wendy Gomez said Monday.

Legislators last weekend approved spending cuts and other changes to close a projected $1.6 billion shortfall in the $9.9 billion state budget, but officials have warned that the state probably will face another shortfall before the end of the fiscal year June 30.

The $29.7 million payment provision was included in the budget that was approved by the Legislature last June at the behest of former Gov. Janet Napolitano.

A lawyer for the state argued that the provision merely reclaimed some of the money that the state regularly distributes to local governments.

However, the court’s unanimous opinion agreed with the cities that the provision was unconstitutional on grounds that it was not an appropriation that could be included in the budget legislation.

“The Legislature did not expressly attach the assessed amount to any public revenue that it had previously set aside for the cities and towns,” Vice Chief Justice Rebecca White Berch wrote. “Because (the provision) fails to identify any prior appropriation, it fails to meet the definition of an appropriation.”

Justice W. Scott Bales and another Napolitano appointee wrote separately to say that the budget would have been written to legally deduct the $29.7 million from money paid to local governments.

The ruling, Bales wrote, not only honors the Arizona Constitution’s provisions on appropriations “but also promotes accountability and transparency in the state’s budgeting process.”

The judge’s statement, however, doesn’t altogether clarify the process by which the state can decrease its contribution to local governments.

“The court did not decide some of the other legal issues that were raised,” Tucson City Attorney Mike Rankin said Tuesday.

Local officials still worry that chunks of highway-user fund money, urban revenue-sharing money or the tax-increment financing funds that support downtown development could be withdrawn.

The ruling did not specify whether the Legislature would need a super-majority to pass such measures.

Gov. Jan Brewer, a Republican who replaced her Democratic predecessor on Jan. 20, issued a statement saying she agreed with the Supreme Court’s ruling and would review options with legislative leaders.

The payment requirement “appears to be the latest example of unsound and improper budget management decisions that have contributed significantly to state budget impacts being felt throughout Arizona,” Brewer said.

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