education funding

Judge: Governor can’t raid school trust fund

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PHOENIX — Gov. Doug Ducey, or whoever succeeds him, can’t conduct a future financial raid on a school trust fund account without first getting congressional approval, a judge has ruled.

In a decision published Tuesday, Maricopa County Superior Court Judge John Hannah acknowledged that Congress did approve — belatedly — the 2016 measure pushed by Ducey to tap the trust to provide more immediate cash to fund K-12 schools.

That resolved earlier litigation about the power of the state to change the funding formula without Congress first amending the Enabling Act that allowed Arizona to become a state and gave it lands it holds in trust for schools.

Gubernatorial press aide C.J. Karamargin expressed disappointment. However, he said the governor and his legal staff were still reviewing the ruling on Tuesday before deciding whether to appeal.

“Gov. Ducey does not want a future governor to be bound by judicial overreach,” he said. “And, in this case, that seems to be what's going on.”

Hannah said those extra dollars run out in 2025. And legislative budget staffers estimate that will cut state aid to schools at that point by more than $237 million a year.

What that means, the judge said, is that there “probably will be another attempt to change the distribution formula, relatively soon.”

“And that effort probably will be undertaken without congressional approval, unless there is a court order that says the Enabling Act requires consent,” Hannah said.

Now he is issuing such an order.

Proposition 123 was Ducey’s plan deal with a 2013 Arizona Supreme Court ruling that the state had ignored a 2000 voter-approved mandate to increase state aid to schools annually to keep pace with inflation.

Ducey, who took office in 2015, declined to increase taxes to comply with that ruling. Instead, he came up with a plan to tap into a special trust funds that consists of the money the state earns from the sale and lease of about 10 million acres of land Arizona was given by the federal government when it became a state.

About eight million acres remain.

Under normal circumstances, the beneficiaries of the trust — in this case, public schools — would get 2.5% of what is there.

Ducey’s proposal, approved by voters at a special election in 2016 by a 51-49% margin, boosted that to 6.9% in a move the governor said would funnel an extra $3.5 billion into schools over a 10-year period.

Michael Pierce sued, contending that any change in the distribution required Congress to first amend the Enabling Act. There also was the fact that, in boosting withdrawals through 2024, it would leave less in the trust at that point than if the formula were not changed.

Ducey disagreed.

But facing litigation, he eventually did get Congressional approval. And once that happened, the 9th Circuit Court of Appeals dismissed the case as moot.

That, however, still leaves the question of what happens when the extra money runs out.

Attorneys for the governor told Hannah there is no reason for him to consider that issue, at least not now. They said Pierce's claim “is premised on a long line of ‘what ifs,’ which might occur at some future date that could be decades from now — or might never happen.”

That argument actually worked in an earlier case where the 9th Circuit, citing that belated Congressional action, concluded there was nothing more to litigate about Proposition 123.

But Hannah agreed with Andrew Jacob, attorney for Pierce, that the governor's argument misses the larger point.

The judge said it is true that the original challenged conduct — Ducey proceeding with the fund transfers without Congressional approval — did cease when federal lawmakers acted. But he said a claim becomes moot “only if the relevant events make it absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.”

“The facts here do not clearly show that Arizona state officials are unlikely to try again to change the distribution formula without congressional consent,” the judge wrote.

In fact, Hannah said, the reverse may be a more realistic scenario.

He said the Arizona Constitution makes it “very difficult” to raise taxes to make up for the lost revenues, give that it would take a two-thirds vote of both the House and Senate as well as gubernatorial consent. That, said Hannah, leaves a future version of Proposition 123 — and its increase in taking more money from the school trust fund — as “the most obvious alternative.”

“Here the governor has demonstrated power to determine whether the state of Arizona seeks and obtains congressional approval for changes to the School Trust Fund distribution formula,” the judge wrote. More to the point, Hannah said, the evidence shows that the only reason Ducey eventually went and sought congressional approval was to undermine the original federal court lawsuit.

“The agreed-upon facts demonstrate a real possibility that the same thing will happen again,” Hannah wrote. “Under these circumstances, it would be unfair to the plaintiffs, and a substantial waste of judicial resources, to dismiss this case as moot and force the plaintiff to start over.”

Ducey’s reaction to the latest ruling pales in comparison to the blast the governor lobbed at a federal judge who had reached a similar conclusion two years ago about approving the financial maneuver without first getting congressional blessing.

“Judge (Neil) Wake puts on a robe in the morning, and thinks he’s God,” the governor said at the time. “But he's not.”

And it got even more personal.

“I want to tell you what everyone down at the courthouse needs to know,” Ducey said. “It's time for Judge Wake to retire. He’s an embarrassment to the legal community.”

As a sitting judge, Wake could not comment. But Patrick Ptak, Karamargin’s predecessor, said at the time that it was not unfair for Ducey to attack a judge who is legally precluded from responding to personal attacks.

Wake got to the federal bench in 2004 after being nominated by Republican President George W. Bush and with the recommendation of the state's two GOP senators, John McCain and Jon Kyl.

Hannah was tapped for the state bench in 2005 by Democratic Gov. Janet Napolitano.

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