Court teaches school district a lesson — do what you promised

Imagine hiring a builder to add a kitchen on to your house. You agree to a price, sign a contract, and take out a loan. But without consulting you, the builder decides instead to build a garage. You would sue him for violating the contract and you would win.

This is exactly what Cave Creek School District did when it broke its contract with the voters. In November 2000, Cave Creek School District voters approved a $41.6 million bond program for new school construction. But after building two elementary schools, district officials decided to spend the remaining $13 million on projects they preferred, rather than those the voters approved.

Besides defying the voters’ wishes, spending bond money on unauthorized purposes violates state law. So to give the school district legal cover, in 2010, the Legislature passed a special law that allowed a select few school districts to ignore their bond agreements.

But both the Arizona and U.S. constitutions prohibit governments from impairing contracts. Legislative favoritism cannot circumvent those protections. Simply put, the state cannot make a rule that authorizes a school district to break another rule.

To enforce this important principle, the Goldwater Institute took the Cave Creek School District to court on behalf of taxpayers to challenge the illegal expenditures. In September, a Superior Court judge ruled that the district violated its contract with the voters when it diverted bond money to unapproved projects, conduct the court said “strikes a blow to the election process.”

While the decision specifically affects school districts, the principle applies to all government bodies that seek voter approval to issue bonds. Therefore, this victory is important to all taxpayers and serves as an important reminder that governments must play by the same rules as everyone else and are not above the law when it comes to contracts.

Why is this decision so important? Because contracts are the building blocks of a free society — they are the vehicles through which people voluntarily exchange goods and services. A society without reliable and enforceable contracts cannot prosper. To safeguard this important freedom, the state and federal constitutions prohibit governments from interfering with agreements.

The Cave Creek lawsuit marked the first time a “contract with the voters issue” reached an Arizona court, and other school districts are paying attention. Until just recently, the Peoria Unified School District board was considering spending more than $10 million in bond proceeds on projects voters did not authorize. But upon hearing of the Cave Creek decision, the district reversed course and honored the voters’ wishes.

In striking down the special law and invalidating Cave Creek’s decision, this ruling joins others across the country in protecting voters’ constitutionally guaranteed contract rights — remarkably, holding politicians to their promises. Governmental entities in Arizona should take heed that they will be held to their agreements, and they cannot use taxpayer money to foot a bill for unapproved projects.

— Christina Kohn is an attorney with the Goldwater Institute.