State Supreme Court hears arguments on Proposition 208

Challengers to Arizona’s new schoolfunding tax asked the state Supreme Court Monday for a swift decision on whether the voter-approved measure is constitutional.

A quick resolution, attorney Dominic Draye told the justices, would help the Legislature understand the funding available for schools as it works on next year’s state budget.

Chief Justice Robert Brutinel made no comment on that request, other than to say an opinion would be issued in “due course.”

The court’s 44-minute hearing Monday primarily revolved around the argument that Proposition 208 is unconstitutional because it exempts the money it raises from Arizona’s school spending limit. The spending cap is expected to be around $6 billion next year.

The Invest in Education Foundation, which backs Proposition 208, argues that while the spending limit applies to local revenues, the ballot measure classified its revenues as grants, not local dollars. Proposition 208 is projected to raise between $827 million to $1 billion next year. Invest in Education is backed by the state teachers’ union, the Arizona Education Association, as well as Stand for Children, a nonprofit focused on education issues.

Voters approved Proposition 208 in November. It raises the rate on taxable income earned above $150,000 by single filers to 8%, up from the previous limit of 4.5%. For couples filing jointly, the higher rate kicks in for taxable income earned above $300,000.

After a lower court rejected arguments from Republican legislators and the Arizona Free Enterprise for an injunction to stop Proposition 208, the foundation appealed directly to the Supreme Court.

Arguing for the Republican lawmakers, Draye said that because of the spending cap, Proposition 208 would not be able to deliver on its promises of boosting education funding, effectively selling the public on a false deal.

Ann Timmer, the court’s vice chief justice, questioned whether the money raised by the higher tax would be bottled up, as Draye suggested.

She noted lawmakers have the ability to override the school expenditure limit, and did so after another education-funding measure, Proposition 301, passed decades ago. No one complained about that action being unconstitutional, she said.

Draye said it’s difficult to predict if the Legislature would do so again, given it requires a two-thirds vote in both the House and the Senate and the spending limit can only be overridden once a year.

Besides, he said, even if the Legislature were to raise the spending cap, it does not provide the quick relief Proposition 208 promised for schools.

“Voters were sold on immediate expenditure of nearly $1 billion a year and it eked by,” Draye said, referring to the 51.7 percent support voters gave the ballot measure.

But the attorney representing the backers of Proposition 208 said the debate over how much money the measure would raise, and whether lawmakers would consider overriding the expenditure cap, is premature.

The tax won’t show up in state coffers until 2021 taxes are filed next year, attorney Andy Gaona argued. And the earliest a legislature could even consider an expenditure override would be in March 2023, he said, when a different legislature, representing different districts due to redistricting, is seated.

“So trying to ascribe the motives of the current Legislature to the Legislature that will be sitting 2023 is, I think, a problem,” Gaona said.

The plaintiffs are asking the Supreme Court to return the case to the Maricopa County Superior Court with a directive to grant an injunction and to declare the law unconstitutional.