The Legislature is acting within its constitutional authority to require that the state Compensation Fund transfer $50 million to the state general fund in exchange for state-owned real estate, Attorney General Terry Goddard says in answer to a lawsuit over the matter.

Mr. Goddard on Aug. 11 submitted his formal response to the lawsuit filed by the Compensation Fund and several business interests against the state on June 20 in Maricopa County Superior Court. The response also includes a request that the court compel the Arizona Compensation Fund to complete the transfer of funds.

“[House Bill] 2002 transferred $50 million from the [State Compensation] Fund to the State General Fund on April 27, 2003, 30 days after the March 28, 2003, effective date of HB 2002,” the counterclaim from the Attorney General’s Office states. “As of the date of this counterclaim, the [Compensation] Fund has not taken the procedural steps necessary to physically transfer $50 million into the State General Fund as required by [subsection] 21(A) of HB 2002.”

The Legislature earlier this year created the asset swap as a means to help the state deal with a nearly $1 billion shortfall in revenue. In exchange for the $50 million in cash, the Compensation Fund would receive the State Hospital.

Governor Napolitano and the leadership for the Republican majority in the Legislature attempted to forge a compromise that would have made the $50 million transfer but protected the Compensation Fund from any further tapping for general fund revenue. The compromise measure passed the Senate but was tabled by leadership in the House.

That prompted the filing of the lawsuit, with the plaintiffs arguing that the Legislature has no constitutional authority to tap into workers compensation funds. Businesses pay assessments into the Compensation Fund, which in turn pays claims to workers injured on the job.

Besides the Compensation Fund, plaintiffs in the case are the Arizona Farm Bureau Federation, the National Federation of Independent Business, the Phoenix Chamber of Commerce and the Tucson Chamber of Commerce. Defendants are Governor Napolitano, state Treasurer David Petersen, Department of Administration Director Betsey Bayless, and Mr. Goddard.

The case has been assigned to Superior Court Judge Rebecca Albrecht, although no hearing date had been set as of Aug. 14. Assistant Attorney General Joseph Kanefield and William R. Jones Jr., attorney for the plaintiffs, acknowledged that the two sides are negotiating a settlement that would end the suit before it goes to trial. —