Karen Fann v. State of Arizona ( 2021 )

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
KAREN FANN, ET AL.
Plaintiffs/Appellants,
v.
STATE OF ARIZONA, ET AL.
Defendants/Appellees.
INVEST IN ARIZONA, ET AL.
Intervenors/Appellees.
No. CV-21-0058-T/AP
Filed August 19, 2021
Appeal from the Superior Court in Maricopa County
The Honorable John R. Hannah, Judge
No. CV2020-015495
CV2020-015509
AFFIRMED AND REMANDED WITH INSTRUCTIONS
Appeal to the Court of Appeals, Division One
No. 1 CA-CV 21-0087
TRANSFERRED
COUNSEL:
Timothy Sandefur, Scharf-Norton Center for Constitutional Litigation at
the Goldwater Institute, Phoenix; Dominic E. Draye (argued), Greenberg
Traurig, L.L.P, Phoenix; and Brett W. Johnson, Colin P. Ahler, Tracy A.
Olson, Snell & Wilmer L.L.P., Phoenix, Attorneys for Karen Fann, Russell
“Rusty” Bowers, David Gowan, Venden Leach, Regina Cobb, John
Kavanagh, Montie Lee, Steve Pierce, Francis Surdakowski, M.D., NO ON
208, and Arizona Free Enterprise Club
Brian M. Bergin (argued), Kevin M. Kasarjian, Bergin, Frakes, Smalley &
Oberholtzer PLLC, Phoenix, Attorneys for State of Arizona and Arizona
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Department of Revenue
Daniel J. Adelman, Arizona Center for Law in the Public Interest, Phoenix;
and Roopali H. Desai, D. Andrew Gaona (argued), Kristen Yost,
Coppersmith Brockelman PLC, Phoenix, Attorneys for Invest in Arizona
(Sponsored by AEA and Stand for Children) and David Lujan
Joel W. Nomkin, Austin C. Yost, Kathryn E. Boughton, Perkins Coie LLP,
Phoenix, Attorneys for Amicus Curiae Arizona School Boards Association
Aaron T. Martin, Martin Law & Mediation PLLC, Phoenix, Attorneys for
Amici Curiae Arizona Business Leaders
James E. Barton, II, Jacqueline Mendez Soto, Barton Mendez Soto PLLC,
Tempe, Attorneys for Amici Curiae Potential Ballot Initiative Proponents
Mary R. O'Grady, Joshua D. Bendor, Osborn Maledon P.A., Phoenix,
Attorneys for Amicus Curiae Superintendent of Public Education Kathy
Hoffman
Timothy J. Berg, Emily Ward, Bradley J. Pew, Taylor Burgoon, Fennemore
Craig, P.C., Phoenix, Attorneys for Amicus Curiae Arizona Commerce
Authority
Gregory W. Falls, Craig A. Morgan, Sherman & Howard L.L.C., Phoenix,
Attorneys for Amici Curiae Americans for Tax Reform and Arizona Small
Business Association
Rhonda L. Barnes, Jane Ahern, Ben Bryce, Arizona House of
Representatives, Phoenix; and Lisette Flores, Arizona State Senate, Phoenix,
Attorneys for Amici Curiae Senate Minority Leader Rebecca Rios and
House Minority Leader Reginald Bolding
Giselle C. Alexander, The Cavanagh Law Firm, P.A., Phoenix, Attorneys for
Amicus Curiae Arizona Farm Bureau Federation
Gregory B. Iannelli, Bryan Cave Leighton Paisner LLP, Phoenix, Attorneys
for Amici Curiae Elliott Pollack and Alan Maguire
Susan M. Freeman, Gregory Y. Harris, Lewis Roca Rothgerber Christie LLP,
2
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Phoenix, Attorneys for Amici Curiae Save Our Schools Arizona, Education
Law Center, and the Southern Poverty Law Center
Otto S. Shill, III, Jimmie W. Pursell, Jr., Lauren R. Smith, Jennings, Strouss
& Salmon, P.L.C., Phoenix, Attorneys for Amici Curiae Arizona Tax
Research Association and Arizona Chamber of Commerce and Industry
Tyson C. Langhofer, Alliance Defending Freedom, Scottsdale, Attorneys for
Amici Curiae Alliance Defending Freedom and Center for Arizona Policy
Erin Adele Scharff, Phoenix, Attorney for Amicus Curiae Tax Professor Erin
Scharff
CHIEF JUSTICE BRUTINEL authored the opinion of the Court, in which
JUSTICES BOLICK, LOPEZ, BEENE, MONTGOMERY and JUDGE
MCMURDIE,* joined. VICE CHIEF JUSTICE TIMMER concurred in part
and dissented in part.
¶1 In 2020, Arizona voters passed Proposition 208 (“Prop. 208”),
a citizens’ initiative imposing an income tax surcharge on “high-income”
Arizona taxpayers to provide direct funding to schools. Petitioners sued to
challenge the constitutionality of that tax and the initiative’s
characterization of the direct funding as “grants,” exempt from the
expenditure limitations of article 9, section 21 of the Arizona Constitution
(“Education Expenditure Clause”). Petitioners also sought to enjoin the
collection of that tax pending the resolution of their challenge. We hold that
the direct funding provision does not fall within the constitutional
definition of grants in article 9, section 21 of the Arizona Constitution, and
Prop. 208 is therefore unconstitutional to the extent it mandates expending
tax revenues in violation of the Education Expenditure Clause. Likewise,
the remaining non-revenue related provisions of Prop. 208 are not
separately workable and thus not severable. However, because we cannot
 Before his retirement from the Court, Justice Andrew W. Gould recused
himself from this case. Pursuant to art. 6, § 3 of the Arizona constitution,
Judge Paul J. McMurdie, Division One, Arizona Court of Appeals, was
designated to sit in this matter.
3
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
determine at this preliminary stage of the case the extent to which, if any,
such funding will exceed the constitutional expenditure limitation, we
decline to enjoin the imposition of the tax pending further proceedings in
the trial court.
¶2 Additionally, we hold that Prop. 208 does not violate article
9, section 22 of the Arizona Constitution (“Tax Enactment Clause”), because
that clause does not apply to voter initiatives. Therefore, the bicameralism,
presentment, and supermajority requirements found therein are
inapplicable to Prop. 208.
I. BACKGROUND
¶3 On February 14, 2020, Invest in Education1 filed an initiative
application with the Secretary of State. That initiative, titled the “Invest in
Education Act,” was placed on the ballot as Prop. 208, and asked voters to
approve a statutory measure implementing a new income tax surcharge to
fund additional spending on education. A.R.S. § 43-1013. Prop. 208 has
three central provisions: (1) a taxing provision (“Taxing Provision”), (2) a
provision allocating revenues to various funds for various educational
purposes (“Allocating Provision”), and (3) a provision exempting itself
from the constitutional definition of local revenues (“Local Revenues
Provision”).
¶4 The Taxing Provision imposes a 3.5% income tax surcharge
on “taxable income in excess of $250,000” for anyone filing separately or on
“taxable income in excess of $500,000” for married couples. § 43-1013(A).
Prop. 208 requires the Arizona Department of Revenue (“ADOR”) to
“separately account for revenues collected pursuant to [this] income tax
surcharge” and to “deposit those revenues” into the newly established
“student support and safety fund.” § 43-1013(B). This requirement is
codified at A.R.S. § 15-1281.
1 On August 3, 2021, the Court granted Invest in Education’s motion to
change the caption of this case to reflect its new name of Invest in Arizona.
Because Invest in Education was the name of the organization at all times
relevant hereto, we use the original name in the opinion.
4
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
¶5 The Allocation Provision details how state officials must
distribute this revenue. § 15-1281(B), (D). First, the costs of administration
are paid from the account. § 15-1281(B). Next, Prop. 208 creates a “student
support and safety fund” (“Fund”) and mandates that the Fund distribute
nearly all the remaining revenue to school districts and charter schools
through “grants.” § 15-1281(D). The allocations are as follows:
• 50% “as grants” for “hiring teachers and classroom support
personnel and increasing [their] base compensation,” § 15-
1281(D)(1);
• 25% “as grants” for “hiring student support services personnel
and increasing [their] base compensation,” § 15-1281(D)(2);
• 10% “as grants” for “providing mentoring and retention
programming for new classroom teachers to increase retention,”
§ 15-1281(D)(3);
• 12% to “to the career training and workforce fund established by
[A.R.S.] § 15-1282,” § 15-1281(D)(4); which become “multi-year
grants . . . to school districts, charter schools and career technical
education districts,” § 15-1283(A)(1); and
• 3% to the “Arizona teachers academy fund,” § 15-1281(D)(5).
¶6 In the Local Revenues Provision, Prop. 208 states that “monies
received by school districts and career technical education districts
pursuant to this chapter . . . [a]re not considered local revenues for the
purposes of” the Education Expenditure Clause and “[a]re exempt from
any budgetary, expenditure or revenue control limit that would limit the
ability of school districts or career technical education districts to accept or
expend those monies.” § 15-1285.
¶7 Before the initiative was certified for the ballot, Invest in
Education requested a review of their initiative language from Arizona’s
Legislative Council, who opined that the provision defining Prop. 208
money as grants and not local revenues was “likely invalid” because it
conflicted with the Education Expenditure Clause. Despite receiving this
legislative feedback before the initiative was certified for the ballot, Invest
5
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
in Education declined to modify the text of its initiative or to pursue an
initiative to amend the constitution.
¶8 Subsequently, an action to enjoin Prop. 208’s placement on the
ballot was filed, challenging the sufficiency of its 100-word description
under § 19-102(A). Molera v. Hobbs, 250 Ariz. 13, 18 ¶ 3 (2020). The
challengers also claimed that the initiative lacked sufficient valid
signatures, alleging that many of the signatures should be disqualified
because they were gathered by petition circulators who were paid in
violation of § 19-118.01(A). Id. After a trial, the superior court enjoined
Prop. 208’s placement on the ballot. Id. ¶ 4. Affirming in part and reversing
in part, we ordered Prop. 208’s placement on the ballot. Id. at 27 ¶ 54.
¶9 Voters approved Prop. 208 with a 51.7% majority vote. On
November 30, 2020, the vote was certified, and the law became effective on
January 1, 2021. The same day of the vote certification, Appellants Karen
Fann, Russell Bowers, David Gowan, Venden Leach, Regina Cobb, John
Kavanagh, Monte Lee, Steven Pierce, Francis Surdakowski, “No on 208,”
and the Arizona Free Enterprise Club (collectively, “Fann”) sued to enjoin
Prop. 208 and requested a preliminary injunction pending trial. On
December 3, 2020, Invest in Education was granted leave to intervene.
¶10 After briefing and oral argument, the superior court denied
the Motion for Preliminary Injunction. Fann appealed, asking the court of
appeals to reverse the superior court’s denial of a preliminary injunction
and declare Prop. 208 unconstitutional. We subsequently granted Fann’s
petition to transfer the case to this Court. On appeal, Fann presents two
issues. First, does Prop. 208’s Local Revenues Provision violate the
Education Expenditure Clause by purporting to exempt Prop. 208 monies
from the expenditure limitation contained in the Arizona constitution?
Second, can Prop. 208 impose a new tax without a supermajority vote of
both houses of the legislature, as required by the Arizona constitution’s Tax
Enactment Clause?
II. DISCUSSION
Ripeness
¶11 Initially, Invest in Education asserts that the challenges to
Prop. 208 are not ripe for decision, arguing no Prop. 208 tax revenues have
6
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
been allocated or spent. “The ripeness doctrine prevents a court from
rendering a premature judgment or opinion on a situation that may never
occur.” Winkle v. City of Tucson, 190 Ariz. 413, 415 (1997). Whether to apply
the ripeness doctrine in Arizona is a matter of “prudential or judicial
restraint.” City of Surprise v. Ariz. Corp. Comm’n, 246 Ariz. 206, 209 ¶ 8 (2019)
(quoting Dobson v. State ex rel., Comm’n on App. Ct. Appointments, 233 Ariz.
119, 122 ¶ 9 (2013)). Our courts exercise restraint to ensure they “refrain
from issuing advisory opinions, that cases be ripe for decision and not
moot, and that issues be fully developed between true
adversaries.” Bennett v. Brownlow, 211 Ariz. 193, 196 ¶ 16 (2005).
¶12 Though federal justiciability jurisprudence is not binding on
Arizona courts, we find the factors federal courts use to determine whether
a case is justiciable instructive. Brush & Nib Studio, LC v. City of Phoenix, 247
Ariz. 269, 280 ¶ 36 (2019). “[I]f the plaintiff has incurred an injury, the case
is ripe.” Id. “A case is also ripe if there is an actual controversy between
the parties.” Id. And, “[w]here a statute clearly and immediately affects
the property rights of the citizen, he [or she] has an immediate and present
controversy with reference to the validity of such a statute.” Planned
Parenthood Ctr. of Tucson, Inc. v. Marks, 17 Ariz. App. 308, 312 (1972) (citation
omitted).
¶13 Invest in Education argues that because school districts have
not yet received or spent money generated from Prop. 208, the case “rests
upon contingent future events that may not occur as anticipated” and that
the case is not ripe for decision until revenues are allocated in excess of the
expenditure limit and the legislature refuses to authorize the excess
expenditures. While it is true that the factual record is not sufficiently
developed to determine definitively whether spending Prop. 208 revenues
will run afoul of the Education Expenditure Clause, Invest in Education’s
argument ignores the fact that Fann challenges the constitutionality of Prop.
208 in its entirety, both facially and as-applied.
¶14 As of Prop. 208’s effective date, the statute began clearly and
immediately affecting the petitioners’ property rights as they became
subject to the tax and so a present controversy regarding the validity of the
statute exists. The case is ripe for decision. See Winkle, 190 Ariz. at 415, 418;
Planned Parenthood, 17 Ariz. App. at 312.
7
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Standards of Review
¶15 We review the denial of a preliminary injunction for an abuse
of discretion. Clay v. Arizona Interscholastic Ass’n, Inc., 161 Ariz. 474, 476
(1989). An abuse of discretion exists where the trial court “clearly erred in
finding the facts or applying them to the legal criteria for granting an
injunction,” Shoen v. Shoen, 167 Ariz. 58, 62 (App. 1990), or “if the [trial]
court applied the incorrect substantive law,” TP Racing, L.L.L.P. v. Simms,
232 Ariz. 489, 492 ¶ 8 (App. 2013).
¶16 A party seeking a preliminary injunction must show (1) a
strong likelihood of success on the merits, (2) the possibility of irreparable
harm if the relief is not granted, (3) the balance of hardships favors the party
seeking injunctive relief, and (4) public policy favors granting the injunctive
relief. Smith v. Ariz. Citizens Clean Elections Comm’n, 212 Ariz. 407, 410 ¶ 10
(2006). To meet this burden, “the moving party may establish either 1)
probable success on the merits and the possibility of irreparable injury; or
2) the presence of serious questions and [that] the balance of hardships
tip[s] sharply in favor of the moving party.” Id. (quoting Shoen, 167 Ariz. at
63) (cleaned up). This is a sliding scale, not a strict balancing of factors. Id.“The greater and less reparable the harm, the less the showing of a strong
likelihood of success on the merits need be. Conversely, if the likelihood of
success on the merits is weak, the showing of irreparable harm must be
stronger.” Id.¶17 We therefore turn to the merits of Fann’s claims. We review
legal and constitutional questions de novo. State v. Harrod, 218 Ariz. 268,
279 ¶ 38 (2008).
A. Article 9, Section 21—The Education Expenditure Clause
Unconstitutionality
¶18 Fann argues that the Local Revenues Provision of Prop. 208 is
facially unconstitutional because the mandatory direct funding to school
districts violates the Education Expenditure Clause. A facial challenge to
the constitutionality of a statute requires a showing that no set of
circumstances exists under which the statute would be valid. State v. Wein,
244 Ariz. 22, 31 ¶ 34 (2018). We begin with the enactment of the Education
Expenditure Clause.
8
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Education Expenditure Clause
¶19 In 1980, the Arizona Legislature referred to voters several
propositions to curb the increasing taxes assessed on Arizonans. Describing
these propositions, the Legislative Council wrote:
School districts levy more property taxes than any other
taxing jurisdiction in this state . . . . School district and
community college spending must be limited to control
spending at the local level. This proposition would terminate
local government’s blank check drawn on people’s earnings.
. . . Under our present system there is very little incentive for
school district and community college district governing
boards to limit the amount of monies they levy by way of the
property tax. There is tremendous and continuous pressure
on the governing boards . . . to increase the burden on the
taxpayers of this state in order to fund new programs, expand
existing programs or increase salaries. Lack of adequate
limitation on total spending by school districts . . . is
responsible for the ever-increasing local tax burden.
Legis. Analyst, analysis of Prop. 109 (1980 Special Sess.) p.76.
¶20 In June of that year, Arizona voters amended the constitution
to, among other things, limit the amount of tax expenditures by school
districts. The resulting Education Expenditure Clause established an
Economic Estimates Commission (“EEC”), which sets an “aggregate
expenditure limitation” for each Arizona school district, i.e., a budget cap
established by reference to a 1979 benchmark. Expenditures of revenue
received by school districts from tax disbursements by the state and from
local or county taxes are subject to this cap. Districts may only spend “local
revenues” so long as their aggregate spending does not exceed this
commission-set cap, unless separately authorized by the legislature. Ariz.
Const. art. 9, § 21(2). Local revenues are defined as:
[A]ll monies, revenues, funds, property and receipts of any
kind whatsoever received by or for the account of a school
district or community college district or any of its agencies,
departments, offices, boards, commissions, authorities,
councils and institutions . . . .
9
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Ariz. Const. art. 9, § 21(4)(c).
The Education Expenditure Clause’s Grant Exception
¶21 There is no dispute that the sweeping definition of local
revenues includes Prop. 208’s direct funding to school districts. However,
Invest in Education argues that Prop. 208 money is a “grant,” which the
Education Expenditure Clause exempts from the definition of local
revenues:
Any amounts or property received as grants, gifts, aid or
contributions of any type except amounts received directly or
indirectly in lieu of taxes received directly or indirectly from
any private agency or organization, or any individual.
Ariz. Const. art. 9, § 21(4)(c)(v) (“Grant Exception”) (emphasis added).
¶22 We, therefore, must determine whether direct funding to
schools under Prop. 208 is a grant pursuant to the Grant Exception, a
question of constitutional and statutory interpretation.
¶23 Laws enacted by initiative, like acts of the legislature, are
presumed constitutional. Ruiz v. Hull, 191 Ariz. 441, 448 ¶ 25 (1998). And
where there is a reasonable, even though debatable, basis for the statute, we
will uphold it unless it is clearly unconstitutional. State v. Arevalo, 249 Ariz.
370, 373 ¶ 9 (2020). But, while “[t]he presumption of constitutionality may
require us to interpret a statute to give it a constitutional construction if
possible, . . . we will not rewrite a statute to save it.” Id.¶24 Through its Local Revenues Provision, Prop. 208 attempts to
characterize the nature of the direct payments as grants to circumvent the
Education Expenditure Clause’s requirement that spending not exceed the
expenditure limit. The provision states that the funds Prop. 208 generates
“[a]re not considered local revenues” under the Arizona Constitution and
“[a]re exempt from any . . . expenditure . . . limit.” A.R.S. § 15-1285(1), (2).
But a statute cannot circumvent or modify constitutional requirements, and
language chosen by a statute’s proponents will not bind nor limit the
Court’s determination of its meaning. Fragoso v. Fell, 210 Ariz. 427, 431 ¶ 13
(App. 2005). The legislature, or in the case of an initiative, the people, usurp
10
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
the function of the judiciary when they declare a law’s meaning. State v.
Prentiss, 163 Ariz. 81, 85 (1989). Pursuant to separation of powers, it is the
judiciary’s exclusive power to state what the law is. Forty-Seventh
Legislature v. Napolitano, 213 Ariz. 482, 485 ¶ 8 (2006). Consequently, while
it is a guide to the drafters’ intent, we give Prop. 208’s constitutional self-
exemption language no weight in interpreting whether such funds are
grants or local revenues.
¶25 In interpreting constitutional and statutory provisions, we
give words “their ordinary meaning unless it appears from the context or
otherwise that a different meaning is intended.” Arizona ex rel. Brnovich v.
Maricopa Cnty. Cmty. Coll. Dist. Bd., 243 Ariz. 539, 541 ¶ 7 (2018) (quoting
State v. Miller, 100 Ariz. 288, 296 (1966)). Accordingly, “[w]e interpret
statutory language in view of the entire text, [and] consider[] the context.”
Nicaise v. Sundaram, 245 Ariz. 566, 568 ¶ 11 (2019); see also Adams v. Comm'n
on App. Ct. Appointments, 227 Ariz. 128, 135 ¶ 34 (2011) (“[I]t is a
‘fundamental principle of statutory construction (and, indeed, of language
itself) that the meaning of a word cannot be determined in isolation, but
must be drawn from the context in which it is used.’” (quoting Deal v. United
States, 508 U.S. 129, 132 (1993))). We also avoid interpreting a statute in a
way that renders portions superfluous. See City of Phoenix v. Yates, 69 Ariz.
68, 72 (1949) (“Each word, phrase, and sentence must be given meaning so
that no part will be [void], inert, redundant, or trivial.”).
¶26 The parties argue that the ordinary meaning of the term
“grant” supports their position, but they disagree substantially on that
meaning. Each party marshals a supportive dictionary definition. Invest
in Education defines “grant” as “an amount of money given especially by
the government to a person or organization for a special purpose,”2 or “an
amount of money that a government or other institution gives to an
individual or to an organization for a particular purpose such as education
2Grant, Cambridge Dictionary,
https://dictionary.cambridge.org/us/dictionary/english/grant (last
visited July 27, 2021).
11
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
or home improvements.”3 Fann defines “grant” as “something granted;
esp: a gift (as of land or a sum of money) usu. for a particular purpose.”4
Fann argues that, based on her cited definition, a “grant entails a
discretionary transfer that is not required by law” and “does not refer to
mandatory taxation and spending.”
¶27 We interpret the meaning of “grant” in context. But as the
parties assert, the meaning of the Grant Exception is subject to two
competing interpretations based on whether the clause “received directly
or indirectly from any private agency or organization, or any individual”
modifies the clause “[a]ny amounts or property received as grants, gifts, aid
or contributions of any type” or instead modifies only the words “except
amounts received directly or indirectly in lieu of taxes.”5 The former would
limit grants to anything given by non-public entities; the latter provides that
grants in lieu of taxes can be made by non-public entities. Because there are
two plausible interpretations of the term “grant” as used in the Grant
Exception, we consider secondary means of interpretation. See, e.g., State v.
Jurden, 239 Ariz. 526, 547 ¶ 15 (2016) (stating that if “the statute is subject to
more than one reasonable interpretation, we consider secondary principles
of statutory interpretation”).
¶28 Under Invest in Education’s interpretation of the Education
Expenditure Clause, several constitutional provisions preceding and
following the Grant Exception are rendered superfluous. Article 9,
section 21(4)(c)(iv) excepts from local revenues “grants and aid of any type
3Grant, Collins Dictionary,
https://www.collinsdictionary.com/us/dictionary/english/grant (last
visited July 27, 2021).
4 Grant, Webster’s Third New International Dictionary (unabridged 1981).
5The trial court suggested that construing art. 9, § 21 as limited to private
grants would require additional commas in the text. But lack of commas is
not dispositive, nor is it surprising. For instance, the 1980 Arizona
Legislative Bill Drafting Manual, which was the edition in place when the
constitutional language was proposed, advised legislators to “[u]se
commas sparingly.” See ACA-APP5, Arizona Legislative Bill Drafting
Manual (Jan. 1980) at 45, https://azmemory.azlibrary.gov/digital
/collection/statepubs/id/38016.
12
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
received from the federal government,” and article 9, section 21(4)(c)(vi)
exempts “amounts received from the state for the purpose of purchasing
land, buildings or improvements or constructing buildings or
improvements.” If the Grant Exception was meant to encompass private
and public grants, these exemptions would be unnecessary. Again, we do
not interpret the constitution so as to render portions of
it superfluous. State v. Deddens, 112 Ariz. 425, 429 (1975).
¶29 Likewise, applying the noscitur a sociis canon—the principle
that the meaning of an unclear word or phrase should be determined by the
words immediately surrounding it—we note that the word “grants”
appears alongside other words indicating voluntary contributions in the
Grant Exception: “gifts,” “aid,” and “contributions.” This suggests that the
word “grant” is meant to reflect donative intent and does not encompass
Prop. 208’s compulsory transfer of tax revenue from the State to school
districts. See Yates v. United States, 574 U.S. 528, 543–44 (2015) (applying
noscitur a sociis canon).
¶30 Considering the context of the Grant Exception, and in light
of canons of construction, we conclude the more plausible reading of the
Grant Exception is that the language “received directly or indirectly from
any private agency or organization, or any individual” modifies the entire
sentence and limits the word “grants” to private, non-governmental
voluntary contributions.
¶31 We hold that Prop. 208 revenues are not grants within the
meaning of the Grant Exception and thus are local revenues. Because A.R.S.
§ 15-1285 incorrectly characterizes the allocated monies in order to exempt
Prop. 208 from the Education Expenditure Clause, it is facially
unconstitutional. As a consequence, A.R.S. § 15-1281(D) is also
unconstitutional to the extent allocated revenues exceed the expenditure
limit set by the Education Expenditure Clause.
Severability
¶32 Having determined § 15-1281(D) to be unconstitutional if it
allocates revenues in violation of the Education Expenditure Clause, we
turn to whether A.R.S. § 15-1281(D)(1), (2), and (3) are severable from the
remainder of Prop. 208. In Randolph v. Groscost, we established a
severability test for voter initiatives. 195 Ariz. 423, 427 ¶ 15 (1999). Initially,
13
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Fann argues that the Voter Protection Act (“VPA”), Ariz. const. art 4, pt. 1,
§1(6), necessitates that we abandon the Randolph test and categorically bar
severance of provisions in voter initiatives.
¶33 Fann quotes Randolph in support of her position, arguing that
“hypothesizing as to which provisions would have been sufficiently
important to a majority of the electorate is ‘nearly impossible.’” Randolph,
195 Ariz. at 427 ¶ 15. She also cites Molera v. Reagan (Molera I) for the
proposition that “with the enactment through initiative of the VPA,
legislation enacted by the voters is even more consequential, such that the
legislature cannot repeal an initiative-enacted law.” 245 Ariz. 291, 294 ¶ 9
(2018). Fann calls on this Court to “combine the insights from Randolph and
Molera I and decline to sever where a post-VPA initiative is involved.” We
decline to do so.
¶34 Fann’s premise would require courts to strike initiatives if any
part is flawed, no matter how inconsequential. It is true that in Randolph
this Court acknowledged that applying the severability test designed for
traditional legislation was “nearly impossible.” Randolph, 195 Ariz. at 427
¶ 15. But that is why this Court, in the same paragraph, developed a special
severability test for initiatives. Id. (severing an invalid initiative provision);
see also Citizens Clean Elections Comm’n v. Myers, 196 Ariz. 516, 522 ¶ 23
(2000) (applying the test to sever an invalid initiative provision).
Additionally, although Fann argues the VPA changed the severability
landscape when passed in 1998, this Court created its severability test post-
VPA in Randolph (1999) and subsequently applied it in Myers (2000).
¶35 Molera I stands for the proposition that “the courts must not
intrude upon the people’s power to legislate . . . . This Court has observed
that the citizens’ legislative authority is as great as the power of the
Legislature to legislate.” 245 Ariz. at 294 ¶ 9 (internal quotation marks
omitted) (quoting State ex rel. Bullard v. Osborn, 16 Ariz. 247, 250 (1914)).
Precluding severance of laws enacted by initiative while allowing
severance to save laws enacted by the legislature would improperly limit
the people’s power to legislate. Thus, we affirm that Randolph’s test remains
correct for determining the severability of unconstitutional provisions
contained within voter initiatives. See Myers, 196 Ariz. at 522–23 ¶¶ 23–25
(applying Randolph’s severance test to a voter initiative after the enactment
of the VPA).
14
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
¶36 Pursuant to Randolph, an unconstitutional provision in a voter
initiative may be severed if “the valid portion, considered separately, can
operate independently and is enforceable and workable.” Randolph, 195
Ariz. at 427 ¶ 15. If the initiative is workable, “we will uphold it unless
doing so would produce a result so irrational or absurd as to compel the
conclusion that an informed electorate would not have adopted one portion
without the other.” Id. Accordingly, we ask whether Prop. 208—without
the Local Revenues Provision—is workable and, if so, whether rational
voters would have adopted Prop. 208 in its severed form.
¶37 Fann contends that workability refers “to the law’s ability to
accomplish its stated purpose without remedial action.” This framing is as
concise as it is correct. In Randolph, we rejected discerning voter intent
regarding adoption of the non-severed statute. Id. Rather, when
considering the severability of legislative acts, we have concluded that the
unoffending part of a statute will be upheld “where the valid and invalid
parts are so separate and distinct that it is clear” that the valid portion will
stand on its own. Millett v. Frohmiller, 66 Ariz. 339, 342–43 (1948) (citation
omitted). On the other hand, “where the constitutional and
unconstitutional provisions are so connected and interdependent in subject
matter, meaning, and purpose,” the entire proposition will be invalid. Id.
at 343; see also McComish v. Brewer, No. CV-08-1550-PHX-ROS, 2010 WL
2292213, at *11 (D. Ariz. Jan. 20, 2010) (“Inherent in [Randolph’s workability]
test is the requirement that severance can occur only when the remaining
portion is workable without further action by the State.”), rev’d on other
grounds by McComish v. Bennett, 611 F.3d 510 (9th Cir. 2010); State Comp.
Fund v. Symington, 174 Ariz. 188, 195 (1993) (“[T]he problem is twofold: the
legislature must have intended that the act be separable, and the act must
be capable of separation in fact.” (quoting 2 Sutherland, Statutory
Construction § 44.03 (4th ed. 1986))); McCune v. City of Phoenix, 83 Ariz. 98,
106 (1957) (“Generally, we have said that if the valid parts are
independently effective and enforceable as law . . . the court will not
disturb the constitutional portion of the act.”); Frohmiller, 66 Ariz. at 343(“To be capable of separate enforcement, the valid portion of an enactment
must be independent of the invalid portion and must form a complete act
within itself.” (quoting 2 Sutherland, Statutory Construction § 2404 (3rd ed.
1943))).
¶38 In Citizens Clean Elections Commission v. Myers, this Court
considered whether it could sever a portion of an act dealing with the
15
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Citizens Clean Elections Commission (“CCEC”). 196 Ariz. at 522 ¶ 23. In
Myers, the offending portion of the act required the Commission on
Appellate Court Appointments to nominate candidates for the CCEC,
which we found provided the Commission with “functions wholly alien to
its constitutional charter” and thus in violation of our constitution. Id. ¶ 22.
We then analyzed whether the remainder of the Act could function without
the offending provision. We found that after severing the offending
provision, the statewide officers could still make appointments of judges.
Id. ¶ 24. Thus, we concluded that “the valid portions of the Act considered
separately can operate independently and are workable” as it presently
existed. Id.
¶39 That is not the case for Prop. 208. Here, severance of the
unconstitutional provisions strikes A.R.S. § 15-1281(D)(1), (2), and (3) from
the statute. This leaves Prop. 208 with no statutory authority to spend
approximately 85% of the funds raised by the tax and placed in the Student
Support and Safety Fund (“Fund”). Fund monies remain perennially
sequestered—they may not be transferred to any other fund, do not revert
to the state general fund, and do not lapse. A.R.S. § 15-1281(A). The Joint
Legislative Budget Committee projects that Prop. 208 will generate “$827
million in revenue . . . in the first full year of implementation,” and Prop.
208’s ballot materials included this projection as an inducement for enacting
its new tax.6 Thus, unlike in Myers, severing the allocation provisions in
A.R.S. § 15-1281(D)(1), (2), and (3) materially impacts the initiative’s
operation such that the remainder of Prop. 208 cannot stand on its own.
¶40 Applying the first prong of the Randolph test, under the
remaining statutory provisions of Prop. 208, hundreds of millions of tax
dollars will be sequestered in a designated state fund, unable to be spent,
to the extent they exceed the expenditure limit. This result makes the
remaining portion of Prop. 208 unworkable and thus not severable from its
unconstitutional provisions.
¶41 Under Randolph’s second prong, Prop. 208 likewise does not
survive because the result of the residual provisions is irrational or absurd.
A statutory provision resulting in tax revenues being impounded with no
6Arizona’s General Election Guide, “Proposition 208, Joint Legislative Budget
Committee Fiscal Analysis,” 136.
16
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
prospect of being spent or refunded is such a result. The stated purpose of
Prop. 208 was to tax high income individuals to raise revenue that would
be directly provided to school districts based on “years of underfunding by
the Legislature.” Given that the tax increase was not itself the measure’s
objective, but rather how its objectives would be achieved, leaving the
Taxing Provision in place without the Allocation Provision is simply not
rational. Collecting taxes that cannot be spent does little or nothing to
provide increased support for school districts. Indeed, that eventuality
would be “so irrational or absurd as to compel the conclusion that an
informed electorate would not have adopted” the taxing provision without
the provision requiring that the money be allocated to schools. Randolph,
195 Ariz. at 427 ¶ 15; see also Ruiz, 191 Ariz. at 459 ¶ 67 (“A statute or
provision is severable . . . if the invalid portion was not the inducement for
the passage of the entire act.” (emphasis added) (quoting Campana v. Ariz. State
Land Dep’t, 176 Ariz. 288, 294 (App. 1993))).
¶42 The Court in its entirety agrees that Prop. 208 cannot
constitutionally authorize spending in violation of the Education
Expenditure Clause. The dissent argues, however, that we cannot consider
severability on the basis of an as-applied constitutional challenge and that
“[t]his paradigm eliminates the distinction between as-applied and facial
challenges that our courts have regularly recognized,” asserting that
“[d]eciding whether to sever a statutory provision only comes into play if
the provision is facially unconstitutional and thus void in all applications.
If the provision is unconstitutional as applied under particular
circumstances, that application is severed from the statute, but the
provision itself otherwise remains part of the statute and operable.” Infra
at ¶¶ 75, 69 (internal citation and emphasis omitted).
¶43 To the contrary, while A.R.S. § 15-1281(D)(1), (2), and (3), and
§ 15-1285(2) for that matter, might be operable in other circumstances, they
are unconstitutional to the extent the expenditures thereunder exceed the
Education Expenditure Clause. Infra at ¶ 71. That unconstitutionality is
what requires us to analyze severability, even in an as-applied challenge.
See, e.g., Empress Adult Video & Bookstore v. City of Tucson, 204 Ariz. 50, 65
¶ 41 (App. 2002) (applying severability analysis to an unconstitutional
statute as applied), disapproved on other grounds, State v. Stummer, 219 Ariz.
137, 144 ¶ 22 & n.6 (2008); State v. Snyder, 25 Ariz. App. 406, 408–09 (1976)
(same). The partial dissent urges that even though the Act may be
unconstitutional in some years, it could be constitutional in others, allowing
17
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
it to lurch along even though it contains no provision to account for
hundreds of millions of dollars in unspent revenues in years in which it is
not operational. With respect, once the measure requires expenditures that
we all agree would be unconstitutional, it renders the entire Act incoherent
and unworkable and thus unseverable.
¶44 The partial dissent cites no authority for her argument that a
severability analysis applies only to a facial challenge. Instead, the dissent
cites three cases in which the court decided that statutory provisions in
question were unconstitutional as applied and in which, as the dissent
acknowledges, severability was not considered. See infra ¶ 79. The dissent
concludes from those cases that a severability analysis does not pertain to
an as-applied challenge and that in so doing, we have created a “new
analytical paradigm.” Not so. Unlike the cases cited by the dissent, here
the question of severance was raised and briefed by the parties. Fann was
successful, at least partially, on her facial challenge and we address the
potential as-applied unconstitutionality and the question of severance to
guide the trial court on remand.
¶45 Invest in Education and the dissent argue that Prop. 208 is
nonetheless both rational and workable because an existing legislative
process controls how any expenditures in excess of the budget limitation
would be handled. Article 9, section 21(3) of the Arizona Constitution
provides:
Expenditures in excess of the limitation determined pursuant
to subsection (2) of this section may be authorized by the
legislature for a single fiscal year, by concurrent resolution,
upon affirmative vote of two-thirds of the membership of
each house of the legislature.
¶46 Similarly, A.R.S. § 15-911(E) requires that if the expenditure
of local revenues exceeds the expenditure limitation, each school district is
required to reduce its expenditures to meet the limitation. However, the
legislature, “on approval of two-thirds of the membership of each house of
the legislature, may authorize the expenditures of local revenues in excess
of the expenditure limitation for the current fiscal year.” A.R.S.
§ 15-911(C)(2).
18
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
¶47 But this does not aid Prop. 208 in determining severability.
First, such a process was nowhere contemplated as the mechanism for
allocating the Fund. This statutory process is not mentioned in Prop. 208,
nor is it mentioned in § 15-1281 (the Allocation Provision); it is not
mentioned as an alternative to § 15-1285 (the Grant Exception); nor was it
mentioned in any other part of the ballot materials distributed to the voters
in anticipation of the election. It is untenable, then, to assert that Prop. 208
was drafted intending that § 15-911 could supplant the unconstitutional
spending provision when no such contingency was presented to the
electorate. See Randolph, 195 Ariz. at 427 ¶ 15 (holding that the valid portion
of the statute will be upheld only if an informed electorate would have
adopted one portion without the other).
¶48 To be sure, on at least two occasions, the legislature has
authorized expenditures in excess of the budget limitation, in 2001–02 and
2007–08. Even so, although the legislature may have been willing to
authorize excess expenditures on occasion, there are far more instances
where the legislature has declined to authorize excesses. In the past four
years alone, at least five attempts to grant a budget override have failed to
pass. See, e.g., H.C.R. 2043, 54th Leg., 2nd Reg. Sess. (Ariz. 2020); S.C.R.
1035, 54th Leg., 2nd Reg. Sess. (Ariz. 2020); H.B. 2304, 54th Leg., 1st Reg.
Sess. (Ariz. 2019); H.B. 2171, 53rd Leg., 2nd Reg. Sess. (Ariz. 2018); H.B.
2480, 53rd Leg., 1st Reg. Sess., (Ariz. 2017 ).
¶49 More importantly, Invest in Education advertised Prop. 208
to the voters as “[a]dditional permanent funding” for schools. See Arizona’s
General Election Guide, “Proposition 208, Joint Legislative Budget Committee
Fiscal Analysis,” at 127. But if Prop. 208 were to function only at the whim
of an annual legislative override, the initiative can hardly be considered
“permanent” funding.7 Thus, Invest in Education’s assertion that
7 Context gleaned from neighboring provisions confirms this. Article 9, § 21
includes two expenditure limitations—one at issue here, applicable to
school districts, and a second applicable to community college districts.
Compare Ariz. Const. art. 9, § 21(2) (school districts) with id. § 21(1)
(community colleges). The community college district expenditure
limitation allows for the creation of statutory exceptions, while the school
district expenditure limitation does not. Specifically, § 21(1), applicable to
19
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
legislative authorization—by a supermajority vote of both houses—makes
the remainder of Prop. 208 workable and thus severable is unpersuasive.
Finally, we find it unlikely to the point of absurdity that an electorate who
voted for an initiative to spend money directly on schools because the
legislature had declined to do so, would have voted for an initiative that
required annual legislative action for the money to be spent.
¶50 Indeed, in every severability case it is true that the legislature
could pass legislation in the future to remedy an otherwise unconstitutional
initiative provision. Thus, we would always find severability if we
analyzed severance in light of what could happen in the future or what the
legislature could do to make an otherwise unworkable provision workable.
For instance, even without article 9, section 21(3), under the VPA, each
house of the legislature by a two-thirds vote could modify Prop. 208, if done
in furtherance of the initiative. The legislature could refer to the voters an
initiative to amend the constitution to expand or remove the expenditure
limit entirely. Or, as Invest in Education argued in this case, a subsequent
legislature might be elected that is more inclined to vote to waive the
expenditure limit in a given year. Any of the foregoing might provide a
mechanism for spending the money in the Fund. But none is certain to do
so nor guaranteed to prevent millions of taxpayer dollars from being raised
yet going unspent. Thus, in determining workability or rationality, we do
not consider the salutary effect of subsequent legislative action. Instead, we
analyze the legal landscape as it exists, not as the legislature might see fit to
change it in the future. See Prentis v. Atl. Coast Line Co., 211 U.S. 210, 226
(1908).
community colleges, allows for exceptions to the expenditure limitation as
“provided by law.” Section 21(2), governing school districts contains no
such allowance, providing for only a one-time legislative authorization
requiring a two-thirds vote of each house of the legislature. In Arizona,
when the constitution authorizes taking an action “by law,” it refers to
statutory law. Shute v. Frohmiller, 53 Ariz. 483, 488 (1939), overruled on other
grounds by Hudson v. Kelly, 76 Ariz. 255 (1953). Had the drafters of § 21(1)
intended to allow the expenditure limit to be modified by statute it is likely
they would have added similar language to article 9, section 21(2).
20
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Severability Clause
¶51 Prop. 208’s severability clause also does not alter our
conclusion about the purpose of Prop. 208 or whether particular provisions
are, in fact, severable. See Myers, 196 Ariz. at 523 ¶ 25 (when there exists an
express severability clause, “all doubts are to be resolved in favor of
severability”); Norton v. Superior Court, 171 Ariz. 155, 158 (App. 1992) (“A
severability clause is merely useful, not essential, evidence of legislative
intent.”). Prop. 208 provides, in relevant part, that “[i]f any provision of
this act . . . is declared invalid . . . such invalidity does not affect other
provisions or applications of this act that can be given effect without the
invalid provision or application.” As discussed above, without the
offending provision, Prop. 208’s remaining portions cannot be given effect
to the extent they exceed the expenditure limitation. The severability clause
further provides that the invalidated provision “shall be deemed reformed
to the extent necessary to conform to applicable law and to give the
maximum effect to the intent of this act.” However, the act intended to
drastically increase education spending, which cannot be done without the
invalid provision. Consequently, the severability clause does not save
Prop. 208. See Hudson v. Kelly, 76 Ariz. 255, 274 (1953) (“The severability
clause contained in the Act is of no avail where the valid and invalid parts
of a statute are inextricably entwined and so connected and interdependent
in subject matter, meaning and purpose as to preclude the presumption that
the legislature would have passed the one without the other, but, on the
contrary, justify the conclusion that the legislature intended them as a
whole and would not have enacted a part only.”); Norton, 171 Ariz. at 158.
Remand for Determination of Expenditure Limit Amount
¶52 To the extent they exceed the constitutional expenditure
limitations, Prop. 208’s direct payments to school districts under A.R.S.
§ 15-1281(D)(1), (2), and (3) are unconstitutional, and these provisions are
not severable from the remainder of Prop. 208. However, the record before
this Court is insufficient to establish whether such payments will in fact
exceed the constitutional expenditure limitation.
¶53 In a letter to certain legislator-plaintiffs, Superintendent of
Public Instruction Hoffman explained that current “aggregate expenditures
of local monies for all school districts is $6,165,430,899 for fiscal year 2020–
21,” but the “aggregate expenditure limitation for all school districts [is]
21
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
$6,309,587,438,” leaving just a $144,156,539 gap between school
expenditures and their expenditure limit. Thus, if the expenditure limit
remains at current levels, Prop. 208’s projected $827 million in revenues will
far outpace its permissible spending, even accounting for Prop. 208
expenditures that are not subject to the expenditure limit.8 Furthermore,
the EEC projects that the expenditure limit amount will decrease by 4.6%,
or approximately $300,000,000. See EEC, Feb. 24, 2021 Letter to Governor
Ducey, https://azdor.gov/sites/default/files/media/REPORTS
_ESTIMATES _2022_SchoolDist-Feb21.pdf. These facts strongly suggest
that Prop. 208 will produce far more revenue than it can constitutionally
spend. Invest in Education takes a contrary position.
¶54 In any event, there is no record before the Court upon which
we can make such a determination. Citing a lack of “expertise on school
finance,” and the need for an evidentiary hearing, the trial court had no
opportunity to determine whether Prop. 208 funds might exceed the
expenditure limit. Based on the limited record before us, it appears that
Prop. 208 funds could likely exceed the constitutional spending limitation
placed on school districts. However, we cannot with certainty decide
whether Prop. 208 revenues will exceed the expenditure limit. Therefore,
we remand to the trial court for a determination of this issue. If the trial
court finds that the tax revenues allocated will not exceed the expenditure
limit, then there is no present constitutional violation and Prop. 208 stands.
However, if the trial court finds that A.R.S. § 15-1281(D) will result in the
accumulation of money that cannot be spent without violating the
expenditure limit, it must declare Prop. 208 unconstitutional and enjoin its
operation. Moreover, to further clarify this inquiry for the trial court, if any
8 Twelve percent of Prop. 208 monies qualify for the Grant Exception and
roughly 17% goes to charter schools. See § 15-1281(D)(1)–(5) (listing the
percentage allocation of Prop. 208 revenue, and allowing charter schools to
participate in 85% of Prop. 208 spending according to the weighted student
population in A.R.S. § 15-943); Arizona Department of Education,
Accountability & Research Data, available at https://www.azed.gov
/accountability-research/data (calculating charter school’s enrollment to
be approximately 20%). Thus, a little over 29% of Prop. 208 monies are not
local revenues, leaving roughly 70% that are local revenues. If Prop. 208
generates the $827 million that JLBC projects, this would leave roughly $600
million in local revenues subject to the expenditure limit.
22
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
material amount of the Prop. 208 revenue is sequestered in a designated
state fund because it cannot be spent due to the expenditure limit, then
Prop. 208, in its entirety, is unconstitutional. See Material, Black's Law
Dictionary (11th ed. 2019) (defining “material” as “[o]f such a nature that
knowledge of the item would affect a person's decision-making; significant;
essential”).
B. Article 9, Section 22—The Tax Enactment Clause
¶55 The people’s right to pass laws and constitutional
amendments is found in article 4, part 1, section 1 of the Arizona
Constitution. The people may, through the initiative process, place
measures on the ballot and approve them by majority vote. Ariz. Const.
art. 4, Pt. 1 § 1(1)–(2), (5). Although the people retain their legislative power,
it is not without limit. The constitution also provides that “[a]ny law which
may be enacted by the Legislature under this Constitution may be enacted
by the people under the Initiative. Any law which may not be enacted by
the Legislature under this Constitution shall not be enacted by the people.”
Ariz. Const. art. 22, § 14.
¶56 Acting through this initiative power, the people proposed
and ratified the Arizona Constitution’s Tax Enactment Clause in 1992. Ariz.
Const. art. 9, § 22. That clause requires that
An act that provides for a net increase in state revenues . . . is
effective on the affirmative vote of two-thirds of the members
of each house of the legislature. If the act receives such an
affirmative vote, it becomes effective immediately on the
signature of the governor as provided by article IV, part 1, §
1. If the governor vetoes the measure, it shall not become
effective unless it is approved by an affirmative vote of three-
fourths of the members of each house of the legislature.
Ariz. Const. art. 9, § 22(A). The bicameralism, presentment, and
supermajority requirements found in this clause apply to “any act that
provides for a net increase in state revenues in the form of . . . [t]he
imposition of any new tax.” Ariz. Const. art. 9, § 22(B)(1).
¶57 Because Prop. 208 imposed a new tax, the issue is whether
such an initiative is an “act” subject to the requirements of the Tax
23
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
Enactment Clause. Fann contends that Prop. 208 is invalid because the Tax
Enactment Clause either (1) removes the people’s ability to raise taxes
through statutory initiative; or (2) requires that a tax increase via statutory
initiative receive a two-thirds supermajority vote of the people to pass. We
disagree.
¶58 At the outset, we note that the Court has not always been clear
on the difference between acts of the legislature and measures passed by
popular initiative. At times we have suggested a bifurcation between acts,
which the legislature passes, and measures, which the people pass through
initiative; but we have not been consistent in our usage. Compare Barth v.
White, 40 Ariz. 548, 556 (1932) (“If it be true that the Legislature, which must
submit an amendment either by an act or joint resolution, is not subject to
such limitations, much less would it seem to be that an initiative petition by
the people, which is neither an act nor joint resolution, should be subject
thereto.”); and Ariz. Chamber of Com. & Indus. v. Kiley, 242 Ariz. 533, 541 ¶ 33
(2017) (“The Rule applies to ‘act[s],’ which are enacted by the legislature,
and does not address initiative or referendum petitions.”) (quoting Barth,
40 Ariz. at 556); with Saggio v. Connelly, 147 Ariz. 240, 241 (1985)
(“Legislation, whether by the people or the legislature, is a definite, specific
act or resolution.”); and Kerby v. Griffin, 48 Ariz. 434, 446 (1936) (“[A]n act
approved by the people in a manner contrary to that provided by the
Constitution is just as invalid as an act passed by the Legislature in a
manner prohibited by constitutional mandates.” (emphasis removed)).
Today we clarify that the term “act” applies to legislative acts only, and
does not apply to voter initiatives.
¶59 When interpreting a constitutional provision, “we begin with
the text” because it is “the best and most reliable index of a [provision’s]
meaning.” State v. Christian, 205 Ariz. 64, 66 ¶ 6 (2003). We will not depart
from the provision’s language if it is clear and unambiguous. Id. By its
plain language, the Tax Enactment Clause applies to “acts” that require a
vote of the “legislature.” It reflects the electorate’s intent to make it more
difficult for the legislature to increase taxes. But § 22 is silent on the topic
of voter initiatives, even though it could have easily been written broadly
enough to foreclose tax increases by statutory initiatives.
¶60 Moreover, the meaning of words in our constitution must be
drawn from the context in which they are used and considered in light of
the document as a whole. Kilpatrick v. Superior Court, 105 Ariz. 413, 419
24
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
(1970). And we presume a word or phrase bears the same meaning
throughout a text. See Obregon v. Indus. Comm’n of Ariz., 217 Ariz. 612, 616
¶ 21 (App. 2008).
¶61 The Arizona Constitution repeatedly labels the legislature’s
enactments differently than enactments by initiative. The constitution uses
both “measure” and “act” to describe the actions of the state legislature.
See, e.g., Ariz. Const. art. 4, pt. 2, § 25(2) (giving the legislature the power to
“[a]dopt such other measures as may be necessary and proper (emphasis
added)); id. art. 9, § 17(3) (permitting the legislature to override certain rules
by supermajority vote “on each measure” subject to that rule (emphasis
added)); id. art. 4, pt. 1 § 1(3) (“[N]o act passed by the legislature shall be
operative for ninety days after the close of the session of the legislature
enacting such measure.” (emphasis added)). Yet, the converse is not true: In
provisions that apply to enactments by initiatives, the Constitution uses
only the term “measures.” See, e.g., id. art. 4, pt. 1, § 1(2) (reserving the
power to “propose any measure”); id. § 1(4) (describing “the measures so
proposed to be voted on”); id. § 1(5) (stating the effective date for “[a]ny
measure or amendment to the constitution proposed under the initiative”);
id. § 1(6)(A) (Governor’s veto power “shall not extend to an initiative
measure”); id., id. § 1(6)(B) (limiting Legislature’s authority over “an
initiative measure”). This compels the conclusion that the word “act” does
not apply to voter initiatives.
¶62 By using the word “act” in section 22, then, the provision’s
drafters indicated their intent that the provision would apply to the
legislative process, not to the initiative process. See Biggs v. Betlach, 243 Ariz.
256, 262 ¶ 30 (2017) (“In approving [the Tax Enactment Clause], the voters
limited the legislature’s ability to itself increase state revenues through taxes,
fees, or assessments.” (emphasis added)).
¶63 Furthermore, it would be inappropriate to construe the Tax
Enactment Clause to repeal voters’ rights to raise taxes by initiative, which
they certainly possessed before adding that clause to the Constitution.
“[R]epeals by implication are not favored, and will not be indulged, if there
is any other reasonable construction.” S. Pac. Co. v. Gila Cnty., 56 Ariz. 499,
502 (1941) (citation omitted). Here, there is a reasonable construction:
section 22 restricts the legislature’s power, not the people’s. This
construction is particularly appropriate in the context of the right to public
democracy, a right understood by both this Court and the legislature to be
25
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
Opinion of the Court
fundamental. Direct Sellers Ass’n v. McBrayer, 109 Ariz. 3, 6 (1972). The
Revenue Source Rule9 (passed by initiative in 2004) and Arizona Chamber of
Commerce & Industry v. Kiley support our conclusion that citizens retain the
right to raise taxes through the initiative process. 242 Ariz. at 542 (we noted
that the Single Subject Rule “applies to ‘acts[s],’ which are enacted by the
legislature, and does not address initiative or referendum petitions”
(quoting Barth, 40 Ariz.at 556)); see also Hoffman v. Reagan, 245 Ariz. 313, 316
¶ 12 (2018) (holding that the single subject rule applies to legislative acts
but not initiatives or referendum petitions).
¶64 In short, “acts” encompass only legislative enactments, and
not voter measures. And the application of the presumption against
implied repeal prevents us from removing the people’s power to pass taxes
via statutory initiative. Thus, Prop. 208 does not run afoul of the Tax
Enactment Clause because that clause has no application here.
III. CONCLUSION
¶65 For the reasons set forth above, we affirm the trial court’s
denial of a preliminary injunction enjoining Prop. 208 and remand to the
trial court for further proceedings, consistent herewith, to determine
whether Prop. 208 revenues will exceed the expenditure limitation on local
revenues in article 9, section 21 of the Arizona Constitution.
9 The Revenue Source Rule provides that if an intitative or referendum
measure proposes some new or increased state spending, it must also
include a source of those funds sufficient to cover the entire immediate and
future costs of such proposed spending. See Ariz. const. art. 9, § 23.
26
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
VICE CHIEF JUSTICE TIMMER, concurring in part, dissenting in part
TIMMER, VCJ., concurring in part, dissenting in part.
¶66 The issue here is whether the trial court abused its discretion
by refusing to temporarily enjoin Prop. 208. I agree with my colleagues that
the court did not err, and I therefore join them in affirming that ruling. Fann
has not shown that Prop. 208 is facially unconstitutional. But because I
disagree with the majority’s severability analysis and the framework
imposed on the trial court for deciding whether Prop. 208 is
unconstitutional, almost certainly dooming the measure, I dissent from that
part of the opinion.
¶67 A.R.S. § 15-1285(1) provides that Prop. 208 monies “[a]re not
considered local revenues” for purposes of the Education Expenditure
Clause, Ariz. Const. art. 9, § 21. More broadly, § 15-1285(2) exempts Prop.
208 monies “from any budgetary, expenditure or revenue control limit”
that would impede accepting and spending those monies. I agree with the
majority that the Education Expenditure Clause applies to Prop. 208
monies, and the voters could not avoid this application by redefining “local
revenues.” See Kunes v. Samaritan Health Serv., 121 Ariz. 413, 415 (1979)
(concluding the legislature could not expand its constitutional authority to
exempt “[p]roperty of” charitable associations by “redefining the term
‘property of’ to include leased property”); Tillotson v. Frohmiller, 34 Ariz.
394, 401–02 (1928) (“[T]he people are bound by the Constitution, the same
as the Legislature.”). Notably, Invest in Education does not argue
otherwise. Section 15-1285(1) is facially unconstitutional and thus entirely
void because there are no circumstances in which it could validly operate;
the provision could never exempt Prop. 208 monies from the Education
Expenditure Clause. See State v. Wein, 244 Ariz. 22, 31 ¶ 34 (2018) (“To
succeed on a facial challenge . . . ‘the challenger must establish that no set
of circumstances exists under which the Act would be valid.’” (quoting
United States v. Salerno, 481 U.S. 739, 745 (1987))). Because § 15-1285(2)
could apply to statutory limits without violating the constitution, it is not
facially unconstitutional and is therefore operable, see id., although it could
not apply to prevent the Education Expenditure Clause’s application, see
State v. Havatone, 241 Ariz. 506, 509 ¶ 13 (2017) (finding a statute
unconstitutional only “as applied” in particular circumstances); see also
Ayotte v. Planned Parenthood of N. New England, 546 U.S. 320, 329 (2006) (“It
is axiomatic that a ‘statute may be invalid as applied to one state of facts
and yet valid as applied to another.’” (quoting Dahnke-Walker Milling Co. v.
Bondurant, 257 U.S. 282, 289 (1921))).
27
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
VICE CHIEF JUSTICE TIMMER, concurring in part, dissenting in part
¶68 Can § 15-1285(1) be severed from the remaining Prop. 208
provisions, thereby leaving them intact? In my view, yes. The severability
inquiry focuses on the interconnectedness of the unconstitutional provision
with the remaining provisions. See Randolph v. Groscost, 195 Ariz. 423, 427
¶ 15 (1999) (asking whether the remaining provision “can operate
independently and is enforceable and workable” without “produc[ing] a
result so irrational or absurd as to compel the conclusion that an informed
electorate would not have adopted one portion without the other”). It does
not ask whether other, unrelated challenges exist that would affect the
validity of the remaining provisions. Here, eliminating § 15-1285(1) does
not itself affect the independent operation, enforceability, or workability of
Prop. 208’s remaining provisions, even if separate challenges remain to the
efficacy of the transfer and allocation provisions. This lack of impact also
means that leaving Prop. 208 intact without § 15-1285(1) is neither absurd
nor irrational. Thus, I disagree with the majority’s severability analysis
concerning § 15-1285(1), which depends entirely on the success of the
separate legal challenge to Prop. 208’s transfer and allocation provisions,
A.R.S. § 15-1281(D)(1)–(3). See supra ¶ 39 (concluding that “severance of the
unconstitutional provisions strikes A.R.S. § 15-1281(D)(1), (2), and (3) from
the statute,” leaving Prop. 208 without authority to spend most of the tax
revenues and therefore rendering it unworkable).
¶69 After § 15-1285(1) falls away, the next issue is whether Prop.
208’s transfer and allocation provisions are facially unconstitutional by
violating the Education Expenditure Clause and, if so, whether they can be
severed from the remaining provisions. Deciding whether to sever a
statutory provision only comes into play if the provision is facially
unconstitutional and thus void in all applications. Cf. Havatone, 241 Ariz.
at 509–10 ¶¶ 13, 18 (holding that a provision in a DUI statute was
unconstitutional as applied to the facts there but stating, “[o]ur decision
does not vitiate” that provision because it could be validly applied in other
circumstances). If the provision is unconstitutional as applied under
particular circumstances, that application is severed from the statute, but the
provision itself otherwise remains part of the statute and operable. See id.;
see also Jackson v. State, 883 N.W.2d 272, 281 (Minn. 2016) (“Under as-applied
severance, a statutory provision is severed only as applied to a certain class
of person to prevent unconstitutional applications.”).
28
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
VICE CHIEF JUSTICE TIMMER, concurring in part, dissenting in part
¶70 I agree with the trial court that Fann has not shown a
likelihood she will prevail on her argument that the transfer and allocation
provisions are facially unconstitutional. See Wein, 244 Ariz. at 26 ¶ 10
(stating that the challenging party bears the burden of demonstrating that
a provision is facially unconstitutional). First, although the provisions
direct the state treasurer to transfer Prop. 208 monies to school districts and
charter schools, the provisions themselves do not require districts and
schools to spend those monies, much less require them to exceed the
expenditure limitations. See § 15-1281(D)(1)–(3). Thus, per their plain
language, the provisions do not conflict with the Education Expenditure
Clause, which does not address pre-expenditure allocations by the
treasurer. See Wash. State Grange v. Wash. State Republican Party, 552 U.S.
442, 449–50 (2008) (cautioning courts to “be careful not to go beyond the
statute’s facial requirements” when determining whether a statute is
facially unconstitutional).
¶71 Second, even assuming the transfer and allocation provisions
implicitly direct expenditures that could exceed constitutional limitations,
Fann has not shown there are no circumstances in which expenditures
could be made in compliance with the Education Expenditure Clause. See
Wein, 244 Ariz. at 31 ¶ 34. Expenditures of Prop. 208 monies could be made
in compliance with the Education Expenditure Clause until aggregate and
local school district limitations are met; the constitution would not be
offended by permitting expenditures of Prop. 208 monies falling under the
limitations cap. See supra ¶ 53 (citing evidence that school expenditures fell
$144,156,539 short of the limitations cap in fiscal year 2020–21); cf. United
States v. Arthrex, Inc., 141 S. Ct. 1970, 1986 (2021) (“In general, ‘when
confronting a constitutional flaw in a statute, we try to limit the solution to
the problem’ by disregarding the ‘problematic portions while leaving the
remainder intact.’” (quoting Ayotte, 546 U.S. at 328–29)); Ayotte, 546 U.S.
at 329 (“[T]he ‘normal rule’ is that ‘partial, rather than facial, invalidation is
the required course,’ such that a ‘statute may . . . be declared invalid to the
extent that it reaches too far, but otherwise left intact.’” (quoting Brockett v.
Spokane Arcades, Inc., 472 U.S. 491, 504 (1985))).
¶72 Most significantly, the Education Expenditure Clause permits
expenditures in excess of limitations if authorized by a supermajority of the
legislature (aggregate expenditure limitation) or a majority of school
district electors voting on the excess expenditures (local school district
29
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
VICE CHIEF JUSTICE TIMMER, concurring in part, dissenting in part
expenditure limitation). See Ariz. Const. art. 9, § 20 (3) & (7). Thus, the
Education Expenditure Clause is only violated if excess expenditures are
unauthorized. See id. Such authorizations are not as far-fetched as the
majority suggests, as evidenced by the fact the legislature has authorized
excess expenditures twice in the last twenty years. See supra ¶ 48.
¶73 Fann has not shown that expenditures of Prop. 208 monies
can never be made under the limitation cap or that the legislature/electors
will never authorize excess expenditures, and it is unlikely she will be able
to do so. Although expenditures in excess of limitations would be
unconstitutional absent authorization, the result would be to render the
transfer and allocation provisions (assuming they are spending provisions)
unconstitutional as applied to the excess expenditures. See Havatone, 241
Ariz. at 509 ¶ 13. The provisions themselves would remain operable and
determining whether they could be severed in their entirety would be
inappropriate. See id. at 510 ¶ 18; see also Ayotte, 546 U.S. at 328–29
(acknowledging that “[a] ruling of unconstitutionality frustrates the intent
of the elected representatives of the people,” and stating preference to
“enjoin only the unconstitutional applications of a statute while leaving
other applications in force” (quoting Regan v. Time, Inc., 468 U.S. 641, 652
(1984) (plurality opinion))).
¶74 The majority concludes that if a “material” amount of Prop.
208 monies are allocated in excess of the expenditure limitations, the
transfer and allocation provisions are unconstitutional in all their
applications and cannot be severed to leave the remainder of Prop. 208
intact. They make no allowances for under-the-cap expenditures or
constitutionally authorized exceptions. And because the remainder of
Prop. 208 would be rendered unworkable and absurd, it concludes the
entire statutory scheme is unconstitutional. See supra ¶¶ 52–54. The
majority therefore directs the trial court to determine whether Prop. 208 will
generate tax revenues that exceed the expenditure limitations and result in
an accumulation of monies that cannot be spent. If so, the court must
declare the entirety of Prop. 208 unconstitutional and enjoin its operation.
See supra ¶ 54.
¶75 The flaw in the majority’s analysis, in my view, is directing
the trial court to employ an as-applied inquiry that examines currently
existing financial projections (simultaneously ignoring whether the
30
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
VICE CHIEF JUSTICE TIMMER, concurring in part, dissenting in part
legislature/school district electors could exercise their constitutionally
authorized ability to permit excess expenditures) to determine whether the
transfer and allocation provisions are facially unconstitutional. This
paradigm eliminates the distinction between as-applied and facial
challenges that our courts have regularly recognized. As explained, even if
Prop. 208 monies are eventually allocated in excess of the expenditure
limitations, the transfer and allocation provisions are not facially
unconstitutional because Fann has not shown that the provisions would be
unconstitutional in all their applications. See Wein, 244 Ariz. at 31 ¶ 34.
¶76 In response, the majority acknowledges that the transfer and
allocation provisions “might be operable in other circumstances” even
though they may be unconstitutional as applied to violate the expenditure
limitation. See supra ¶ 43. They attempt to rebut my concerns by stating
that the latter situation nevertheless “requires us to analyze severability,
even in an as-applied challenge.” Id. I disagree.
¶77 First, Fann has never made an as-applied challenge, and this
Court should not effectively create one and then resolve it. See State ex rel.
Brnovich v. City of Tucson, 242 Ariz. 588, 599–600 ¶ 45 (2017) (explaining that
the Court generally abstains from deciding issues not raised or argued by
the parties). From the start, she has argued only that § 15-1285 and the
transfer and allocation provisions are facially unconstitutional and cannot
be severed to save the rest of Prop. 208. See Verified Special Action
Complaint, ¶¶ 3, 35–40, 56–61; Motion for Temporary Restraining Order
(With Notice) and Preliminary Injunctive Relief at pp. 1, 3–7; see also Minute
Entry Ruling, February 5, 2021 at 14 (characterizing Fann’s challenge as a
facial one and analyzing whether she had shown that “Proposition 208 will
cause the spending caps to be breached under every conceivable scenario”).
Similarly, Fann did not cast her arguments before this Court as an as-
applied challenge.
¶78 Second, the majority announces a new principle without
explanation or analysis by stating it must determine whether the entirety of
the transfer and spending provisions can be severed from Prop. 208 even
though the provisions can be constitutionally applied in some
circumstances. See supra ¶ 43. It cites two court of appeals’ opinions to
support this principle, but neither is helpful. See id. After deciding that the
statutes at issue could not constitutionally apply in certain circumstances,
31
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
VICE CHIEF JUSTICE TIMMER, concurring in part, dissenting in part
these courts severed statutory provisions relating only to those
circumstances; they left intact all provisions that could be constitutionally
applied. See Empress Adult Video & Bookstore v. City of Tucson, 204 Ariz. 50,
65–66 ¶ 43 (App. 2002) (declaring a statute governing business operating
hours unconstitutional as applied to adult speech but not nude dancing and
then severing “adult arcade, adult bookstore or video store, and adult
motion picture theater from § 13-1422, the invalid portions pertaining to
adult speech, [and] leav[ing] adult theater, the valid portion pertaining to
nude dancing”), disapproved on other grounds, State v. Stummer, 219 Ariz. 137,
144 ¶ 22 & n.6 (2008); State v. Snyder, 25 Ariz. App. 406, 408-09 (1976)
(concluding that even assuming a statute criminalizing lewd and lascivious
acts is constitutionally overbroad as to acts between adults, the language
addressing adults could be severed, leaving the constitutional part
involving child victims intact). Neither case involved the situation here
where the challenged provisions could be both constitutional and
unconstitutional, depending on the circumstances. Declaring all of Prop.
208 unconstitutional throws out the constitutional baby with the
unconstitutional bathwater. See Ayotte, 546 U.S. at 328–29.
¶79 Today’s decision marks a departure from our previous
decisions, which have held that although a statutory provision is
unconstitutional as applied in particular circumstances, it remains in place
for constitutional application in others. See, e.g., State ex rel. Brnovich v. City
of Tucson, 251 Ariz. 45, 53 ¶ 33 (2021) (holding that statute requiring
“political subdivisions” to consolidate local, state, and national elections
after low voter turnout in a local election was unconstitutional as applied
to charter cities whose charters require separate local elections but
otherwise constitutionally applies to non-charter cities and charter cities
without conflicting charters); Ansley v. Banner Health Network, 248 Ariz. 143,
152 ¶ 36 (2020) (holding that hospital lien statutes are unconstitutional as
applied to secure payment from third-party tortfeasors for bills generated
by Medicaid patients but not as applied to those generated by non-
Medicaid patients); Havatone, 241 Ariz. at 509–10 ¶¶ 13, 18 (holding that the
unconscious clause of the implied consent DUI statute was unconstitutional
except when applied when exigent circumstances prevented officers from
getting a warrant). Of course, severability was not at issue in these cases
because the challenged provisions remained viable. By invalidating the
transfer and allocation provisions entirely because they could be
unconstitutional as applied in some circumstances, the majority abruptly
32
KAREN FANN ET AL. V. STATE OF ARIZONA ET AL.
VICE CHIEF JUSTICE TIMMER, concurring in part, dissenting in part
shifts from this well-accepted principle. It compounds the conflict by
applying the Randolph test to find that the remainder of Prop. 208 cannot
operate without the transfer and allocation provisions and doing so would
be absurd, making all of Prop. 208 unconstitutional. See supra ¶¶ 40–41.
Before the Court invalidates an initiative that has constitutional application,
some explanation for the new analytical paradigm is in order.
¶80 Would voters have enacted Prop. 208 had they known that a
material amount of generated tax funds could languish in state accounts
unless excess expenditures were authorized? Maybe, maybe not. Perhaps
they were willing to risk having Prop. 208 “lurch along,” counting on the
legislature to authorize exceeding the expenditure cap and avoid needlessly
accumulating “hundreds of millions of dollars in unspent revenues.” See
supra ¶ 43. Perhaps not. But there is no vehicle for making such inquiries
because Fann has not shown that the transfer and allocation provisions are
facially unconstitutional, which would prompt a severability analysis
under Randolph. The likelihood of successful as-applied challenges should
not be used as a backdoor pathway for declaring an entire initiative
unconstitutional and void.
¶81 Although I agree that the trial court’s denial of a temporary
injunction should be affirmed, I respectfully disagree with the majority’s
severance and constitutionality analysis and dissent as to those parts of the
opinion.
33