Case Title: Bobo v. Kulongoski

Citation: 

Docket Number: S51565

State: oregon

Court: Oregon Supreme Court

Date: 2005-02-25T00:00:00Z

Document:
FILED:  February 25, 2005
IN THE SUPREME COURT OF THE STATE OF OREGON
CAROL BOBO,
PERRY ATKINSON, GARY GEORGE, ROBERT FULTON EKSTROM,
SOLOMON YUE, JR., JUNE HARTLEY, and JEFFREY GROSSMAN,
Respondents on Review,
v.
THEODORE R. KULONGOSKI,
LAURIE WARNER, and the STATE OF OREGON,
Petitioners on Review.
(CC 01C-15710; CA A120098; SC S51565)
En Banc
On review from the Court of Appeals.*
Argued and submitted January 11, 2005.
Mary Williams, Solicitor General, Salem, argued the cause
and filed the briefs for petitioners on review.  With her on the
briefs was Hardy Myers, Attorney General.
Gregory W. Byrne, Portland, argued the cause and filed the
brief for respondents on review.
KISTLER, J.
The decision of the Court of Appeals is reversed.  The
judgment of the circuit court is affirmed.
*Appeal from Marion County Circuit Court, Dennis J. Graves, Judge. 193 Or App 214, 89 P3d 1189 (2004).
KISTLER, J.
This case presents primarily two questions.  The first is
whether, by retroactively transferring Medicaid Upper Payment
Limit Funds (Medicaid funds) out of the General Fund, Senate Bill
(SB) 963 (2001) reduced the amount of money that the General Fund
received for the 1999-2001 biennium and also the amount of a
statutory tax refund, popularly known as the "kicker."  The
second is whether, if that were the effect of SB 963, the Oregon
Constitution required that that bill originate in the House of
Representatives and pass by a three-fifths vote.  We hold that
the legislature understood that SB 963 would result in reducing
the kicker refund and that the legislature complied with the
Oregon Constitution when it enacted SB 963.
Two statutes are relevant to resolving the questions that
this case presents.  The first is the kicker statute, ORS
291.349.  As pertinent to this case, that statute requires the
Department of Administrative Services (DAS) to make two
determinations. (1)  First, ORS 291.349(1) directs DAS to
estimate at the beginning of each biennium the amount of General
Fund revenues that the state will receive during that biennium. 
Second, ORS 291.349(2) directs DAS to determine at the end of the
biennium the amount of General Fund revenues that the state
actually received.  ORS 291.349(4) provides that, "[i]f the
revenues received from General Fund revenue sources * * * during
the biennium" exceed the estimated revenues by two percent, then
the state will refund "the total amount of that excess" to the
taxpayers.
The second statute involves Medicaid funds that the state
receives from the federal government.  In 1999, the legislature
directed the Department of Human Services to transfer any
Medicaid funds that it received during the 1999-2001 biennium to
the General Fund.  Or Laws 1999, ch 916, § 9.  Shortly before the
end of the 1999-2001 biennium, the 2001 Legislative Assembly
reconsidered and reversed that decision.  The legislature passed
a bill, SB 963, that established an account for Medicaid funds
"separate and distinct from the General Fund."  Or Laws 2001, ch
405, § 1(1). (2)  It directed the Department of Human Services
to transfer any Medicaid funds received in the future to that
account, Or Laws 2001, ch 405, § 1(2), and provided that the
transfer requirement also "applies to payments received by the
department before the effective date of this 2001 Act," Or Laws
2001, ch 405, § 3.  As explained below, the legislature
understood that, by retroactively taking the Medicaid funds out
of the General Fund and transferring them to a new account, it
would reduce both the amount of money that the General Fund
received during the 1999-2001 biennium and also the amount of the
kicker refund.
Following the passage of SB 963, DAS excluded the Medicaid
funds in calculating the kicker; that is, DAS did not include the
Medicaid funds that the state had received in the 1999-2001
biennium in determining the amount of General Fund revenues
received during the biennium.  Excluding the Medicaid funds
reduced the amount of General Fund revenues received by
approximately $113,249,821 and resulted in a corresponding
reduction in the amount of General Fund money returned to the
taxpayers as part of the 2001 kicker refund. (3)
Plaintiffs filed this declaratory judgment action against
the Governor, the director of DAS, and the State of Oregon
(collectively "the state").  Plaintiffs asked the court to
declare that, because SB 963 was a "bill for raising revenue,"
Article IV, section 18, of the Oregon Constitution required that
the bill originate in the House of Representatives, and Article
IV, section 25(2), of the Oregon Constitution required that it
pass each house by a three-fifths vote.  Plaintiffs also sought a
declaration that SB 963 embraced more than one subject in
violation of Article IV, section 20, of the Oregon Constitution. 
Finally, plaintiffs sought a declaration that, notwithstanding
SB 963, ORS 291.349 required that Medicaid funds received before
the effective date of SB 963 be included in the kicker
refund. (4)
On cross-motions for summary judgment, the trial court ruled
in the state's favor and entered judgment accordingly.  The Court
of Appeals reversed.  Bobo v. Kitzhaber, 193 Or App 214, 225, 89
P3d 1189 (2004). (5)  The court observed that ORS 291.349(4)
provides that, in calculating the kicker, the state shall deduct
the estimated General Fund revenue from the "revenues received
from General Fund revenue sources * * * during the biennium." 
Id. at 221.  The court reasoned that the fact that SB 963
transferred the Medicaid funds from the General Fund to another
fund did not mean that the General Fund had not received those
funds within the meaning of ORS 291.349(4). (6)  Id. at 224. 
It followed, the Court of Appeals concluded, that ORS 291.349(4)
required DAS to include the Medicaid funds in calculating the
2001 kicker refund.
On review, the parties analyze the statutory question
differently.  The state focuses, as the Court of Appeals did, on
ORS 291.349.  It argues that the Court of Appeals erred in
holding that, if the Medicaid funds were General Fund revenues
when the state received them, then they were "received" for the
purposes of ORS 291.349(4).  In the state's view, ORS 291.349(2)
permits DAS, in calculating the amount of revenues that the
General Fund received during the biennium, to make appropriate
adjustments for funds that, as the legislature determined in
SB 963, the General Fund never should have received.
Plaintiffs respond that the Court of Appeals interpreted ORS
291.349 correctly.  They also argue, however, that the
legislature enacted SB 963 for the purpose of removing the
Medicaid funds from the 2001 kicker refund.  Plaintiffs' second
argument is at odds with their first.  If their interpretation of
SB 963 is correct, then the legislature's later more specific
intent -- to take the Medicaid funds out of the kicker refund --
controls over any contrary intent in ORS 291.349.  See ORS
174.020(2) (when statutes conflict, more specific statute
controls); State v. Dahl, 336 Or 481, 489, 87 P3d 650 (2004)
(same).  Perhaps for that reason, plaintiffs focus on review
primarily on their constitutional claims.  They contend that SB
963 violates the Oregon Constitution because it is a "bill for
raising revenue" that had to originate in the House and pass both
houses by a three-fifths vote. (7)
We begin with the parties' statutory arguments. 
Specifically, we consider whether the legislature intended that,
by retroactively transferring Medicaid funds out of the General
Fund, SB 963 would affect the operation of ORS 291.349. (8)  In
determining the legislature's intent, we look initially to the
text and context of SB 963.  See PGE v. Bureau of Labor and
Industries, 317 Or 606, 610-11, 859 P2d 1143 (1993) (stating
statutory construction methodology).  The text of SB 963
provides:
"SECTION 1. (1) The Medicaid Upper Payment Limit
Account is established in the State Treasury separate
and distinct from the General Fund.  Moneys in the
account are continuously appropriated to the Oregon
Department of Administrative Services for health-related programs.
"(2) The Department of Human Services shall
transfer to the Medicaid Upper Payment Limit Account
that portion of the payment received by the department
from health districts in this state [under the state
Medicaid Plan and under certain intergovernmental
agreements]."
"SECTION 2.  Section 9, chapter 916, Oregon Laws
1999, is repealed.
"SECTION 3.  The requirement established by
section 1(2) of this 2001 Act, that the Department of
Human Services transfer described payments to the
Medicaid Upper Limit Payment Account, applies to
payments received by the department before the
effective date of this 2001 Act, as well as to payments
received on or after the effective date of this 2001
Act.
"SECTION 4.  This 2001 Act being necessary for the
immediate preservation of the public peace, health and
safety, an emergency is declared to exist, and this
2001 Act takes effect on June 30, 2001."
Or Laws 2001, ch 405.
The text of SB 963 does not refer specifically to ORS
291.349.  However, section 3 of the bill retroactively transfers
the Medicaid funds from the General Fund to a separate account. 
That section reflects an explicit legislative intent to treat the
Medicaid funds as if the General Fund had not received those
funds during the 1999-2001 biennium.  By reducing the amount of
funds that the General Fund received during the 1999-2001
biennium, SB 963 also reduced the amount of money included in the
2001 kicker refund.  See ORS 291.349(4) (describing effect of
reducing General Fund revenues on kicker refund).  That much is
clear from the text of SB 963 and ORS 291.349.
We note that the effect of SB 963 was not lost on the
legislature.  The Joint Committee on Ways and Means introduced SB
963 at the end of the 2001 legislative session, and the Senate
President referred the bill back to Ways and Means for a hearing. 
House and Senate Journal S-170 (2001).  Senator Hannon, one of
the co-chairs of Ways and Means, explained both the reason for
the bill and its effect.  Tape Recording, Joint Committee on Ways
and Means, SB 963, May 31, 2001, Tape 524, Side A.  He told the
committee that, in his view, the 1999 legislature mistakenly had
directed the Department of Human Services to transfer Medicaid
funds, which the federal government had earmarked for health
related uses, into the General Fund.  Id.  Senator Hannon
explained that SB 963 corrected that error prospectively and also
retroactively by transferring the Medicaid funds that mistakenly
had been placed in the General Fund into a newly established,
separate fund.  Id.
Senator Hannon was clear about the effect of the
retroactive transfer:  It would reduce the kicker refund.  Id. 
He told the committee:
"By redirecting the [Medicaid] funds from the
general fund to a separate account, the bill allows
funds that would be part of the 2001-03 General Fund
kicker refund to be available for expenditure during
the 2001-03 biennium."
Id.  During the ensuing debate, no one questioned that
retroactively correcting the decision to commingle the Medicaid
funds with General Fund money would reduce the 2001 kicker
refund; rather, they debated the propriety of that result.  Id.
The members of the House also understood that
retroactively transferring the Medicaid funds out of the General
Fund would reduce the 2001 kicker refund.  Many of the House
members submitted contemporaneous explanations for their vote on
the bill.  See Joint Committee on Ways and Means, SB 963, Bill
File (compiling vote explanations).  Representative Backlund's
explanation is typical.  He stated:
"I justify my vote on SB 963 by pointing out to the
people that the kicker was not intended to include
federal Medicaid money.  The federal Medicaid money was
incorrectly placed in the General Fund at the very end
of the 1999 session and was never intended to be part
of the kicker fund."
Similarly, Representative Bates explained that "[o]ur revenues
were artificially inflated by federal funds being erroneously
placed in the General Fund which in turn artificially elevated
the kicker."  He reasoned that, as a result of SB 963, "the
kicker will be based on taxes collected in Oregon and not on
revenues falsely inflated with federal Medicaid dollars."
The legislature understood that retroactively
transferring the Medicaid funds from the General Fund to a
separate account would reduce both the amount of the General Fund
revenues received during the 1999-2001 biennium and also the
amount of the 2001 kicker refund.  Given that legislative intent,
we need not decide whether the Court of Appeals or the state's
interpretation of ORS 291.349 is correct.  Even if the Court of
Appeals correctly concluded that ORS 291.349 otherwise would
require that, in calculating the kicker refund, DAS include all
monies that the General Fund had received, SB 963 reflects a
different intent regarding one specific source of funds -- viz.,
the Medicaid funds.  That later, more specific legislative intent
controls.  See ORS 174.020(2) (when statutes conflict, more
specific statute controls); Dahl, 336 Or at 489 (same).  As a
matter of statute, DAS correctly excluded the Medicaid funds in
calculating the kicker refund. (9)
Having concluded that SB 963 excluded the Medicaid
funds from the calculation of the 2001 kicker refund, we turn to
plaintiffs' constitutional arguments.  They argue that SB 963
violates the Oregon Constitution because it is a "bil[l] for
raising revenue" that either had to originate in the House or
pass both houses by a three-fifths vote.  See Or Const, Art IV,
§ 18 (requiring that bills for raising revenue originate in
House); Or Const, Art IV, § 25(2) (requiring that bills for
raising revenue pass each house by three-fifths vote).  Although
plaintiffs' Article IV, section 18, and Article IV, section 25,
arguments raise similar issues, we consider them separately.
Article IV, section 18, provides that "bills for
raising revenue shall originate in the House of Representatives."
Because SB 963 did not originate in the House, plaintiff's first
constitutional challenge reduces to the question whether SB 963
is a "bil[l] for raising revenue."  In determining what that
phrase means, we consider its "specific wording, the case law
surrounding it, and the historical circumstances that led to its
creation."  Priest v. Pearce, 314 Or 411, 415-16, 840 P2d 65
(1992).
We begin with the terms "raise" and "revenue."  Article
I, section 18, was part of the original Oregon Constitution.  To
the framers of the constitution, the word "raise" would have
meant, in this context:
"[t]o collect; to obtain; to bring into a sum or fund. 
Government raises money by taxes, excise and imposts."
Noah Webster, An American Dictionary of the English Language
(1828) (emphasis in original); see Vannatta v. Keisling, 324 Or
514, 530, 931 P2d 770 (1997) (referring to dictionary relevant to
time constitutional provision adopted to determine word's
meaning).  Similarly, the word "revenue" would have meant, in
this context:
"[t]he annual produce of taxes, excise, customs,
duties, rents, &c. which a nation or state collects and
receives into the treasury for public use."
Id.
We draw two tentative conclusions from those terms. 
First, a bill will "raise" revenue only if it "collects" or
"brings in" money to the treasury.  Second, not every bill that
collects or brings in money to the treasury is a "bil[l] for
raising revenue."  Rather, the definition of "revenue" suggests
that the framers had a specific type of bill in mind -- bills to
levy taxes and similar exactions.
The constitutional requirement that bills for raising
revenue originate in the House of Representatives has a long
history.  See Dale v. Kulongoski, 322 Or 240, 242-43, 905 P2d 844
(1995) (tracing history).  The requirement finds its roots in the
practices of the British Parliament, and comparable provisions
appeared in both the federal constitution and various state
constitutions before Oregon adopted its constitution.  Id. at
242-43 and n 1; see Joseph Story, Commentaries on the
Constitution of the United States 338-39 (1833) (tracing sources
of federal constitutional provision).  The requirement
consistently has reflected a belief that the branch of government
closest to the people "will be more watchful and cautious in the
imposition of taxes" and thus should be the source of those
bills.  Story, Commentaries on the Constitution at 341. (10)
By the time that Oregon adopted its constitution, the
phrase "bills for raising revenue" had acquired an accepted
meaning.  In his commentaries on the constitution, Story observed
that, although every bill that directly or indirectly raises
revenue theoretically could be called a bill for raising revenue,
"the practical construction of the constitution has been against
[t]his opinion."  Id. at 343.  He explained:
"[T]he history of the origin of the power, already
suggested, abundantly proves, that it has been confined
to bills to levy taxes in the strict sense of the
words, and has not been understood to extend to bills
for other purposes, which may incidentally create
revenue.  No one supposes, that a bill to sell any of
the public lands, or sell public stock, is a bill to
raise revenue, in the sense of the constitution.  Much
less would a bill be so deemed, which merely regulated
the value of foreign or domestic coins, or authorized a
discharge of insolvent debtors upon assignments of
their estates to the United States, giving a priority
of payment to the United States in case of insolvency,
although all of them might incidently bring revenue
into the treasury."
Id. (footnotes omitted). (11)
This court has interpreted Article IV, section 18,
consistently with its text and history.  For example, in Northern
Counties Trust v. Sears, 30 Or 388, 401-03, 41 P 931 (1895), the
question was whether a law that imposed a fee for a service was a
"bill for raising revenue."  After tracing the history of the
constitutional provision and examining the cases interpreting its
federal counterpart, the court concluded that not every statute
that brought money into the treasury was a "bill for raising
revenue" within the meaning of Article IV, section 18.  Id. at
403.  Rather, as the court explained,
"[a] law which requires a fee to be paid to an officer,
and finally covered [sic] into the treasury of a
county, for which the party paying the fee receives
some equivalent in return, other than the benefit of
good government, which is enjoyed by the whole
community, and which the party may pay and obtain the
benefits under the law, or let it alone, as he [or she]
chooses, does not come within the category of an act
for raising revenue[.]"
Id.
Considering the wording of Article IV, section 18, its
history, and the case law surrounding it, we conclude that the
question whether a bill is a "bill for raising revenue" entails
two issues.  The first is whether the bill collects or brings
money into the treasury.  If it does not, that is the end of the
inquiry.  If a bill does bring money into the treasury, the
remaining question is whether the bill possesses the essential
features of a bill levying a tax.  See Northern Counties Trust,
30 Or at 402 (stating test).  As Northern Counties Trust makes
clear, bills that assess a fee for a specific purpose are not
"bills raising revenue" even though they collect or bring money
into the treasury.
In this case, plaintiffs' claim fails the initial
inquiry.  Section 3 of SB 963 does not collect or bring any money
into the treasury; it does not impose a new tax, increase an
existing one, or even impose a fee for a service.  Rather,
section 3 transfers funds already in hand from one program (a tax
refund) to another set of programs (expenditures for health
related purposes).  A bill that allocates existing monies among
different programs does not "raise" revenue within the meaning of
Article IV, section 18, and did not have to originate in the
House of Representatives.
Our conclusion that SB 963 does not violate Article IV,
section 18, also answers plaintiffs' claim that SB 963 violates
Article IV, section 25(2).  That subsection provides that
"[t]hree-fifths of all members elected to each House shall be
necessary to pass bills for raising revenue."  The people added
subsection (2) to Article IV, section 25, in 1996, following a
legislative referral, and nothing in the text or context of that
subsection suggests that the phrase "bills for raising revenue"
in Article I, section 25(2) has a different meaning than it has
in Article IV, section 18.  See Stranahan v. Fred Meyer, Inc.,
331 Or 38, 57, 11 P3d 228 (2000) (looking initially to text and
context when interpreting legislatively referred constitutional
amendments).  Indeed, the court has recognized that the phrase
has the same meaning in both sections.  See Dale, 322 Or at 242-43 (looking to cases interpreting Article IV, section 18, to
determine meaning of phrase in Article IV, section 25(2)).  It
follows that SB 963 did not need to receive three-fifths of the
vote in each house.  A majority sufficed. (12)
Having considered plaintiffs' statutory and
constitutional arguments, we hold that the legislature understood
that, by enacting SB 963, it would transfer Medicaid funds from
the General Fund and also reduce the 2001 kicker refund.  It
follows that, as a matter of statute, DAS correctly excluded
those funds from General Fund revenues in calculating the kicker. 
We also hold that, in enacting SB 963, the legislature complied
with Article IV, sections 18, 20, and 25, of the Oregon
Constitution.
The decision of the Court of Appeals is reversed.  The
judgment of the circuit court is affirmed.
1. ORS 291.349 is more complex than our description of it
suggests.  Those complexities, however, are not relevant to the
issues that this case presents.
2. Legislative counsel did not publish in the Oregon
Revised Statutes the section of SB 963 that bears on this case. 
See ORS 440.420 (codifying only first section of SB 963).  For
ease of reference, we refer to this law by its bill title rather
than by the part of the law that legislative counsel codified.
3. After DAS excluded the Medicaid funds, the General Fund
revenues still exceeded the estimated revenues by two percent. 
Accordingly, the taxpayers received a kicker refund although it
was smaller than the refund they otherwise would have received.
4. Plaintiffs do not dispute that the legislature could
put the Medicaid funds in a separate account prospectively.  All
their arguments focus instead on the retroactive transfer of
Medicaid funds from the General Fund and the effect of that
transfer on the 2001 kicker refund.
5. John Kitzhaber was Governor of Oregon when this action
commenced.  Theodore Kulongoski now holds the office and was
automatically substituted pursuant to ORCP 34 F(1) (providing for
automatic substitution of public officer’s successor) and ORAP
8.05(1) (adopting ORCP 34).
6. The court noted the possibility that SB 963 might
modify the operation of ORS 291.349, but explained that the state
had not made that argument.  Bobo, 193 Or App at 221 n 5.
7. Although the voters added the "kicker" to the Oregon
Constitution in 2000, plaintiffs do not contend that that
constitutional provision applies here.  See Or Const, Art IX,
§ 14(7)(c) (stating that Article IX, section 14, does not apply
"[t]o biennia beginning before July 1, 2001").
8. As the Court of Appeals noted, the state did not
advance this argument in the Court of Appeals.  The state,
however, has relied on SB 963 throughout this litigation, and
plaintiffs have argued that the legislature enacted SB 963 to
remove the Medicaid funds from the kicker.  In these
circumstances, the meaning of SB 963 and its effect on ORS
291.349 are properly before us.  See Miller v. Water Wonderland
Improvement District, 326 Or 306, 309 n 3, 951 P2d 720 (1998)
(basing decision on statute that respondent invoked even though
petitioners had brought their claim under related but different
statute).
9. Plaintiffs argue that DAS should have deducted the
Medicaid funds from the estimated as well as the actual revenues
that the General Fund received for the 1999-2001 biennium. 
Whatever the merits of that argument as an accounting matter, the
legislature was not required to adopt it, and the legislative
history reveals that the legislature understood that, in
calculating the kicker, DAS would exclude the Medicaid funds only
from the revenues that the General Fund received.
10. In Britain, the requirement that bills imposing taxes
originate in the House of Commons reflected a concern that the
House of Lords would be more responsive to the King than the
people.  Story, Commentaries on the Constitution at 339. 
Although that concern was absent in the United States, the
framers of the federal constitution viewed the House of
Representatives as more responsive to the people and thus the
body in which tax bills should originate.  Id. at 340.  That view
presumably derived from the fact that, at least initially, each
state's legislature chose that state's senators while the people
elected their representatives directly.  US Const, Art I, §§ 2
and 3.
11. Although Story was describing the history of the
federal constitutional provision, the court has recognized that
that history also informs the meaning of Article IV, section 18. 
Dale, 322 Or at 242-43 and n 1; accord Northern Counties Trust v.
Sears, 30 Or 388, 403, 41 P 931 (1895).
12. Plaintiffs also argue that SB 963 contains more than
one subject in violation of Article IV, section 20, of the Oregon
Constitution.  However, all of the provisions in SB 963 focus on
a single subject -- the proper accounting for past and future
Medicaid funds.  The fact that the legislature understood that
SB 963 would affect the kicker refund does not mean that the bill
embraces more than one subject.  See State v. Fugate, 332 Or 195,
205, 26 P3d 802 (2001) (reasoning that fact that act has more
than one purpose does not mean that it embraces more than one
subject).