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Health boards sue legislature over funds

Arizona’s state budget is turning into a full-employment act for attorneys.

To date, at least eight lawsuits have been filed against state officials for actions authorized by the current-year budget.

The latest to join the legal melee comes from a collection of health-related state professionals and associations, which claim that the state’s sweep of the funds that finance regulatory boards was unconstitutional and amounted to illegal taxation.

The suit asks the Maricopa County Superior Court to return all funds taken from the boards in actions approved last year, when the Legislature was setting the fiscal 2008-09 budget. The swept funds amount to $13.2 million.

Boards such as the Arizona Pharmacy Board, the Arizona Board of Examiners and the Arizona Medical Board collect fees from the professionals they regulate, sending 10 percent to the state’s general fund and retaining 90 percent for their operations. But lawmakers last year decided that 100 percent of the fees be taken, one of a series of moves lawmakers authorized in an attempt to balance the budget.

The action leaves those boards, as well as five others, scraping for money to continue operations this year, said attorney Roger Morris, who is representing the plaintiffs.

The mandate to turn over their fees to the state’s general fund was wrong and amounted to illegal taxation, he said.

“We don’t think the proper procedures were followed,” Morris said. “We think a two-thirds vote is needed because this is an additional tax.”

State law requires that any legislative action that increases state revenue must either be counterbalanced by a comparable cut in other revenue sources or be enacted with a two-thirds vote.

The boards argue that because the Legislature took the 90 percent of their fees that is earmarked for regulatory fees and instead used it for general purposes, the action amounts to a tax hike.

One key lawmaker wasn’t so sure.

“They’re not going to win those lawsuits,” said state Sen. Russell Pearce, R-Mesa. “They’re just piling on.”

Pearce, chairman of the Senate Appropriations Committee, said lawmakers have tried to go light on the state’s boards and commissions, but that once the groups ask the state to collect the dollars for them, their fees essentially become taxes, which are controlled by the Legislature.

Senate Majority Leader Chuck Gray was quick to place blame on former Gov. Janet Napolitano, who hammered out last year’s budget deal with Democrats and a handful of Republicans.

“Regardless of whether it’s got validity or not, it’s going to cost us money,” said Gray, R-Mesa.

In fact, the litigation piling up is taxing the state Attorney General’s Office, which has lost staff, as well as the state’s Risk Management Fund, said Anne Hilby, a spokeswoman for Attorney General Terry Goddard. The fund, which covers attorney fees and the settlements that the state has to pay if it loses a suit, is tentatively marked for cuts in the upcoming budget plan.

The lawsuit comes on the heels of complaints from the state Industrial Commission, which earlier this week filed a suit before the state Supreme Court arguing that a sweep of its $4.7 million fund, paid for by private insurance carriers, was illegal.

The Supreme Court earlier this year ruled in favor of Arizona cities, which sued over a provision of the current-year budget that called for a collective $30 million payment from cities and counties.

Lawsuits also are pending from:

• Advocates for the developmentally disabled, who say state budget cuts deny basic rights to the disabled.

• Early-childhood-development supporters, who claim the state was wrong to sweep money in their First Things First account.

• The Service Employees International Union, which is suing over the dismissal of numerous state employees, claiming they were not given proper notice of their termination.

• Unemployed workers, who have gone to U.S. District Court with a complaint about the state’s unemployment benefits.

A lawsuit from the Arizona Power Authority was dropped earlier this year when lawmakers reversed the cut they made to that operation’s budget.

Also awaiting a May 18 court hearing is a collection of agriculture agencies, which sued over the sweep of their funds from the 2007-08 budget.

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