PHOENIX — There is nothing wrong with state lawmakers balancing their budget by shifting costs to Pima and Pinal counties, even if it forces residents to pay even higher taxes, attorneys for the state argued Thursday.
John Lopez IV, the state’s solicitor general, did not dispute that legislators balanced the budget for the new fiscal year that began Wednesday by eliminating a requirement that the state make up what schools would be shorted if local taxes were too high. Challengers say the move will cost Pima County $18.4 million and more than $7.6 million for Pinal County.
Lopez was unimpressed.
Pima County could impose a limited excise (sales) tax to generate any revenues required, he said. Alternately, Lopez said, the county could take advantage of a provision in the law which allows it to escape the extra obligation if it reduces its tax rate.
“In essence, Pima County has initiated this lawsuit because it does not want to reduce the taxes it already levies or change the way it raises revenue,” Lopez told the Supreme Court in his filings. “Pima County, alone, is responsible for those choices.”
But Joe Kanefield, the county’s attorney, said those are not realistic options.
He said it would take a unanimous vote by county supervisors to levy a sales tax. And County Administrator Chuck Huckelberry said the county cannot afford to lose $18.4 million, saying that comes out to a 5 percent budget cut on top of prior cuts which already have reduced spending by at least 15 percent.
Lopez also brushed aside as legally irrelevant that if Pima County raises taxes for all county residents to subsidize Tucson Unified School District — really what is at issue here — it is unfair to people who do not live in the district and have no say in the TUSD budget.
That addresses the arguments of Clarence Klinefelter, an Ajo resident, who also filed suit to have the state budget provision voided.
Kanefield said Klinefelter already pays taxes to Ajo schools. He said forcing all Pima County residents — including those outside TUSD — to pay more to help TUSD is an unconstitutional taking of his property.
Lopez called that claim “overstated.”
“Klinefelter receives value from his tax payment due to the general benefits bestowed on society … including, in particular, the benefit of a well-educated society,” Lopez said. “The fact that the tax will not be expended for the purposes which are peculiarly beneficial to him provide no basis for striking down” the budget provision.
Beyond that, Lopez said there is no right to equal benefit for equal taxation.
“In other words, he does not suffer a constitutional injury simply because he does not receive benefits of tax monies to the same extent as other citizens similarly taxed,” the attorney said.
What the high court ultimately decides may affect not only Pima and Pinal counties. Kanefield said other counties could face a similar cost shift in future years.
The fight traces its roots to 1978 when California voters adopted Proposition 13, which caps property taxes. Anxious to avoid a repeat here, lawmakers put a measure to voters in 1980 which sets some limits.
Most significant, it limits primary property taxes on homeowners to no more than 1 percent of a property’s limited cash value. Put simply, all primary taxes — things other than bonds, overrides and special districts — can total no more than $10 per $100 of assessed value.
In some areas, though, high taxes by some districts have put the total above that. That occurred in Pima County where the levy for the Tucson Unified School District, combined with city, county and community college rates, topped the limit.
Until this year, the state made up the difference. But all that changed when Gov. Doug Ducey introduced his plan to balance the budget, in part by eliminating that obligation.
The final measure approved by lawmakers and signed by Ducey ensures that TUSD gets the money it needs. But it comes from the county, a move Kanefield said effectively means those who don’t live in the school district are underwriting TUSD’s taxes even though they do not live in the district, send their children to TUSD schools or get to vote on board members.
Kanefield took the unusual step last month of filing the complaint at the Supreme Court. He said that time is crucial with counties due to set their budgets later this month.
But Lopez, in his arguments Thursday, told the justices there is no reason to rush the case by having it decided directly by the state’s high court instead of going through the normal — and lengthy — process of starting before a trial judge.
He conceded that Pima — and by extension, Pinal — might have to raise taxes this coming budget year to meet the obligation. But Lopez said if the counties ultimately win the lawsuit they can get that money back from the state and reduce taxes the following year.
Kanefield sniffed at that suggestion. “That’s not how government should operate,” he said.
Lopez also disagreed with the county’s contention that the legislation is an unconstitutional delegation of the state’s power to tax.
That is based on a provision which says the Property Tax Oversight Committee decides how the needed extra funds for the schools should be divided among the various taxing districts. Kanefield said that panel can conclude it all belongs to county government or could even force cities and the community college district to pony up some cash.
Lopez, however, said the committee is not levying a tax itself. Instead, he said lawmakers told the committee to “fill in the details of legislation already enacted.”
