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AZ Supreme Court hears arguments in challenge of First Things First sweep

Whether the Legislature can legally sweep millions of dollars from a program that pays for children’s health care may hinge on the fine print of a ballot initiative passed by voters in 2006.

Arizona Supreme Court justices tackled the contested money grab on June 30.

In January, lawmakers demanded payment to the state’s general fund of $7 million in interest accrued from a fund created to accumulate revenue from an 80-cents-per-pack tax on cigarettes as a result of Proposition 203, also known as the First Things First initiative.

But the takeaway was challenged by the Arizona Early Childhood Development and Health Board, a government agency also created by the initiative, which has argued that the Republican-dominated Legislature lacks Constitutional authority to claim the money.

Paul Eckstein, an attorney who represents the board, argued in front of the court’s justices that the Legislature’s 2009 sweep of interest earnings violated the 1998 Voter Protection Alliance Act, or Proposition 105, a constitutional amendment that limited the Legislature’s power to amend voter-approved initiatives.

The state Constitution allows lawmakers to change voter-approved policies only in ways that advance the original purpose of the policy and only if approved by a three-fourths vote of the Legislature.

But, early into Eckstein’s arguments, justices seemed far more interested in a fine print detail of the initiative’s language that allows for interest and “other income from investments” in board accounts to “be credited to that account except as otherwise provided by law.”

Justices Michael Ryan and Andrew Hurwitz questioned whether the inclusion of the phrase “except as otherwise provided by law” allows lawmakers the authority to appropriate the tobacco-tax interest without triggering Prop. 105 restrictions, because such a move could be construed as a “diversion,” and not an amendment.

Eckstein told the justices the money cannot be pulled into the state’s general fund, arguing any legislative appropriation of the money would be limited to moving funds within the structure and duties of the Arizona Early Childhood Development and Health Board.

A sweep of the fund, such as the one called for by lawmakers, would violate the intended “scope and effect” of the initiative, he said.

Solicitor General Mary O’Grady, acting on behalf of Gov. Jan Brewer, Treasurer Dean Martin and State Comptroller D. Clark Partridge, said the initiative’s statutory wording allowed the board to move funds within its accounts, but at the same time reserved the Legislature’s power to appropriate money.

Initiatives are required to have their own funding stream but can have negative impacts on the state’s general fund. The inclusion of the “except as otherwise provided by law” language merely “changes the default” by allowing the Legislature to appropriate money that would otherwise be directed into investments by the state treasurer, she said.

The court gave no indication on when it would issue a ruling in the case, Arizona Early Childhood Development and Health Board v. Brewer.

After the hearing, Nadine Basha, the board’s chairwoman who played a key role in the initiative’s passing, said the tobacco tax revenue was supposed to be used for children’s health care and never was intended to create a funding source for the Legislature.

To date, the tax has raised more than $330 million, but Basha said the board did not consider the total to be overwhelming. At the current pace, the board can afford to spend about $200 per young student in the state, she said.

“This is all we have for helping kids come to school healthy and ready to be successful,” Basha said. “It is not a lot of money. Every dime counts.”

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