HELENA — A state District Court judge Wednesday dismissed a key argument in a challenge to a November 2012 ballot measure on tax refunds, but he hasn’t ruled on the remaining issues.
In an order Wednesday, District Judge Jeffrey Sherlock of Helena concluded that Legislative Referendum 123 does not constitute an illegal appropriation of money by ballot issue.
Some unions and a group representing agencies serving the elderly had argued in their court challenge that the ballot measure amounted to an illegal appropriation of state money.
Challenging the lawsuit were the MEA-MFT, Montana AFL-CIO, Montana Public Employees Association, Montana Council 9 of the American Federation of State, County and Municipal Employees and Montana Association of Area Agencies on Aging.
The judge left for a later date to decide whether the LR-123 amounts to an illegal delegation of power, as the groups challenging the measure argued.
Sherlock said it’s impossible for him to decide yet on whether the measure gave proper guidelines to administrative agencies. He called it “a more murky question” whether LR-123 is an improper delegation of legislative authority to the legislative fiscal analyst or the departments of Administration and Revenue.
His order came in response to the state’s motion to dismiss the challenge.
Sherlock has yet to hear the arguments on the unions and aging association’s motion for a summary judgment in their favor.
At issue is Senate Bill 426, by Sen. Joe Balyeat, R-Bozeman. The Republican-controlled 2011 Legislature passed and placed it on the November 2012 ballot as a legislative referendum to avoid a veto by Democratic Gov. Brian Schweitzer.
If approved by voters, LR-123 requires the state to issue income-tax credits to individuals if the actual state general fund budget surplus exceeds what the Legislature had projected by a certain percentage. Tax credits are dollar-for-dollar reductions in people’s income tax liabilities.
In response, Balyeat said he was pleased by Sherlock’s finding that LR-123 is not an unconstitutional appropriation, as the unions argued. Balyeat called that argument “the backbone of their case.”
As a result, Balyeat said he believes that Sherlock ultimately will dismiss the challenge.
“That’s good news to Montana taxpayers,” he said. “They deserve the right to vote. We shouldn’t be allowing government union bosses to make the decision.”
Eric Feaver, president of MEA-MFT, called the order “a mixed bag, perhaps,” but added, “He didn’t dismiss it.”
He said the plaintiffs “will make a very strong argument when he has his next hearing date on our motion on our motion for a summary judgment.”
In his order, Sherlock said that LR-123 doesn’t constitute an appropriation of money for a number
“First, the money, whether it is in the form of a tax credit or tax refund, is not set aside for a public purpose,” he said. “Further, it is not set aside for specified objects or demands against the state. Rather, the money is a tax refund or credit that a taxpayer may or may not claim. In the case of the credit, it is money that was never in the general fund, and in the case of a refund, it would be money that the state is not entitled to keep.
Sherlock went on to say, “In Montana, it has never been held that an income tax refund to which a taxpayer is entitled is an appropriation requiring an act of the Legislature.”