Title: McCormick v. Kroger/Devlin

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED: November 13, 2009
IN THE SUPREME COURT OF THE STATE OF OREGON
PAT McCORMICK
and SHARON LIVINGSTON,
Petitioners,
v.
JOHN KROGER,
Attorney General of the State of Oregon,
Respondent.
SC S057931 (Control)
PAT McCORMICK
and SHARON LIVINGSTON,
Petitioners,
v.
SENATOR RICHARD DEVLIN,
SENATOR CHRIS TELFER,
SENATOR DIANE ROSENBAUM,
REPRESENTATIVE ARNIE ROBLAN,
REPRESENTATIVE VICKI BERGER,
REPRESENTATIVE CHRIS GARRETT,
and KATE BROWN,
Secretary of State of the State of Oregon,
Respondents.
S057932
(Consolidated for Opinion)
En Banc
On petitions to review ballot title and
explanatory statement filed October 28, 2009; considered and under advisement
on November 5, 2009.
Gregory A. Chaimov and John A. DiLorenzo, Jr.,
Davis Wright Tremaine LLP, Portland, filed the petitions and reply memoranda
for petitioners.
Paul S. Cosgrove, Lindsay, Hart, Neil &
Weigler LLP, Portland, filed the brief for respondents Senator Chris Telfer and
Representative Vicki Berger.
Erin C. Lagesen, Assistant Attorney General,
Salem, filed the answering memoranda for respondents John R. Kroger, Kate
Brown, Senator Richard Devlin, Senator Diane Rosenbaum, Representative Arnie
Roblan, and Representative Chris Garrett.  With her on the answering memoranda
were John R. Kroger, Attorney General, and Jerome Lidz, Solicitor General.
Steven C. Berman, Portland, filed the memorandum
for amici curiae Steve Novick and Defend Oregon -- Yes for Tax Fairness.
DURHAM, J.
The ballot title is referred to the Attorney
General for modification. The explanatory statement is certified to the
Secretary of State.
DURHAM, J.
Petitioners have filed separate petitions
in this court seeking review of the ballot title and of the explanatory
statement for Referendum No. 301 (2010), which the Secretary of State has
denominated as Ballot Measure 66.(1) 
We consolidate the petitions for purposes of this opinion.
Ballot Measure 66 results from a
referendum of House Bill (HB) 2649 (2009), which increased certain personal
income taxes effective for the 2009 tax year to raise revenue that the
legislature budgeted for education, human services, public safety, and other
public services.  Or Laws 2009, ch 714.  Because of the referendum, as we
explain below, HB 2649 (2009) did not take effect.  Ballot Measure 66, if
approved by the voters, would enact the increased personal income taxes that
the Legislative Assembly adopted in HB 2649 (2009).
I.  BALLOT TITLE
REVIEW
We begin with petitioners' challenges
to the ballot title.  We review the ballot title for "substantial
compliance with the requirements of ORS 250.035."  Or Law 2009, ch 714, §
12(4).  During the 2009 session, the legislature modified the procedures that govern
preparation of the ballot title and this court's review of ballot title
challenges for Ballot Measure 66.  Or Laws 2009, ch 714, §§ 9, 12.  Among other
changes, the legislature provided that the ballot title for Ballot Measure 66
shall be prepared by a joint legislative committee and that "[t]he word
limits described in ORS 250.035(2) do not apply to a ballot title prepared by
the joint legislative committee under this subsection."  Id. §
9(1).  Additionally, if this court determines, after review, that the ballot
title prepared by the joint legislative committee does not substantially comply
with the requirements of ORS 250.035, this court "shall refer the ballot
title to the Attorney General for modification."  Id. § 12(6).
In response to those requirements, a
joint legislative committee prepared and filed with the Secretary of State the
following ballot title for Ballot Measure 66:
"RAISES TAX ON HOUSEHOLD INCOME AT AND ABOVE
$250,000 (AND $125,000 FOR INDIVIDUAL FILERS).  REDUCES INCOME TAXES ON UNEMPLOYMENT
BENEFITS IN 2009.  MAINTAINS FUNDS CURRENTLY BUDGETED FOR EDUCATION, HEALTH
CARE, PUBLIC SAFETY, OTHER SERVICES.
"RESULT OF 'YES' VOTE:  'Yes' vote raises tax on
income at and above $250,000 for households, $125,000 for individual filers. 
Tax rate increases 1.8 percentage points on amount of taxable income between
$250,000 and $500,000, 2 percentage points on amount above $500,000 for
households.  For individual filers, the rate increases begin at $125,000 and
$250,000 respectively.  Eliminates income taxes on the first $2,400 of
unemployment benefits received in 2009.  Raises estimated $472 million to
maintain funds currently budgeted for education, health care, public safety,
other services.
"RESULT OF 'NO' VOTE:  'No' vote rejects tax changes
on income at and above $250,000 for households, $125,000 for individual
filers.  Rejects tax exemption for first $2,400 of unemployment benefits
received in 2009.  Reduces funding currently budgeted for education, health
care, public safety, other services by estimated $472 million.
"SUMMARY:  Under current law, a marginal tax
rate of 9% applies to taxable household income over $15,200 (or $7,600 for
individual filers), taxpayers may deduct federal income taxes paid, and
unemployment compensation is taxable.  Measure eliminates income taxes on first
$2,400 of unemployment benefits received in 2009.  For tax years 2009-2011, the
measure increases tax rate 1.8 percentage points on amount of household income
between $250,000 and $500,000, by 2 percentage points on amount above $500,000
(for individual filers, rate increases begin at $125,000 and $250,000,
respectively).  For the tax year beginning 2012, the tax rate for households
with income above $250,000 (above $125,000 for single filers) will drop to
9.9%.  Measure does not increase tax rate on household income below $250,000
(below $125,000 for individual filers).  For households with adjusted gross
income at or above $250,000 (or $125,000 for individual filers), reduces
federal income tax deduction.  Raises $472 million to maintain funds currently
budgeted for education, health care, public safety, other services.  Because
some state money brings in federal matching funds, Oregon will likely receive
more federal money if measure passes than if it fails.  Other provisions."
Petitioners are electors who are
dissatisfied with the ballot title prepared by the joint legislative committee
for Ballot Measure 66 and, therefore, are entitled to petition this court
seeking a different ballot title.  Id. § 12(1).  Petitioners contend
that, for several reasons, each segment of the ballot title fails to comply
substantially with statutory requirements.  In response, the Attorney General
argues that the ballot title complies in all respects with statutory requirements. 
We discuss four of petitioners' challenges.
The caption of a ballot title must
reasonably identify the "subject matter" of a state measure.  ORS
250.035(2)(a).  Petitioners focus on the following phrase in the caption: 
"MAINTAINS FUNDS CURRENTLY BUDGETED FOR EDUCATION HEALTH CARE, PUBLIC
SAFETY, OTHER SERVICES."  They argue that Ballot Measure 66 does not
purport to "maintain[] funds currently budgeted" for the listed
public services because the legislation authorizing increased taxation is
subject to a referendum and, as a consequence of Article IV, section 1(4)(d), of
the Oregon Constitution,(2)
the legislation did not take effect.  According to petitioners, the referendum,
if approved, would authorize the collection of additional or new revenue, but
it does not "maintain[]" any currently budgeted revenue.  They assert
that, in suggesting that the measure would "maintain[]" funds, the
caption inaccurately states the subject matter of the measure.
The Attorney General responds that
the phrase, "maintains funds currently budgeted," is both accurate
and properly included in the caption.  The Attorney General emphasizes that the
legislature approved its current budget with the additional tax revenue in mind
and passed HB 2649, providing for the tax increases that would generate the new
revenue needed to balance the budget.  Additionally, amici curiae argue
that petitioners read the phrase "maintains funds" out of context,
stressing the significance of the phrase "currently budgeted for * *
*."  According to amici curiae, the phrase "maintains funds
currently budgeted for" does not assume that the described tax funds have
been received or that the tax provisions have taken effect.
We agree with petitioners.  The terms
of a ballot title that state or imply the law that the proposal would enact
must describe that law accurately.  Novick/Bosak v. Myers, 333 Or 18,
24, 36 P3d 464 (2001).  The term "maintains" in the phrase
"maintains funds currently budgeted for * * *," incorrectly describes
the operative effect of Ballot Measure 66 in the context of existing law. 
Because the referendum measure, by operation of Article IV, section 1(4)(d), of
the Oregon Constitution, will become effective only if the voters enact it, the
measure will not "maintain" the revenue that the proposed tax
increases will produce.  Rather, an approval of the measure will provide
the additional revenue.
The issue that the voters must
address is whether to approve, and thereby provide, the funds currently
budgeted for education, health care, public safety, and other services.  The
term "maintains," in context, implies inaccurately that funds
necessary for the described services already are legally available and that
disapproval of the measure will nullify currently available revenue.
To remove the inaccuracy that we have
noted, and to insure substantial compliance with statutory requirements, the
term "maintains" should be stricken from the caption, and it should
be replaced by the term "provides."  The Attorney General must effect
those changes on referral.
Petitioners point out that the word
"maintain" also appears in the "yes" vote result statement
and the summary, and that it creates the same misleading inference in those
parts of the ballot title.  The "yes" vote result statement must be a
"simple and understandable statement * * * that describes the result if
the state measure is approved."  ORS 250.035(2)(b).  The summary is a
"concise and impartial statement * * * summarizing the state measure and
its major effect."  ORS 250.035(2)(d).
The "yes" vote result
statement states, in part:  "Raises estimated $472 million to maintain
funds currently budgeted for education, health care, public safety, other
services."  (Emphasis added.)  The summary states, in part:  "Raises
$472 million to maintain funds currently budgeted for education, health
care, public safety, other services."  (Emphasis added.)
We agree with petitioners'
objection.  Although those passages in the "yes" vote result
statement and summary are not identical to the challenged phrase in the caption
that we have discussed and, in context, are somewhat more accurate in
describing the measure, the term "maintain" still creates the same
erroneous inference in those parts as well.
To cure that problem and to bring the
"yes" vote result statement and summary into substantial compliance
with statutory requirements, the term "maintain" must be stricken and
replaced by the word "provide."  The Attorney General must effect
those changes on referral.
Petitioners also contend that the
following clause in the "no" vote result statement is inaccurate:
"Reduces funding currently budgeted for
education, health care, public safety, other services by estimated $472
million."
(Emphasis added.)  The "no" vote result statement
is a "simple and understandable statement * * * that describes the result
if the state measure is rejected."  ORS 250.035(2)(c).  According to
petitioners, the term "reduces" in that clause incorrectly describes
the result of a rejection of the measure for reasons that mirror their
challenges to the terms "maintains" and "maintain" in the
other parts of the ballot title that we have discussed above.  Consistent with
those arguments, petitioners contend that a rejection of the proposed measure
will not "reduce" funding currently budgeted because, as a result of
the referendum, the additional funding for the listed services has not been
approved or enacted in the legal sense.  For that reason, they argue, a
rejection of the measure, correctly understood, will leave the legislature's
approved budget for the affected public services out of fiscal balance by the
estimated sum of $472 million.
The Attorney General responds that
the phrase "reduces funding currently budgeted" is accurate. 
According to the Attorney General, the legislature's revenue measure, HB 2649,
is the predicate for the legislature's current budget.  Consequently, a
rejection by the voters of Ballot Measure 66 will nullify the new revenue
provisions in HB 2649 (2009) and, thereby, "reduce" funding that the
legislature currently has budgeted.
We agree with petitioners.  The term
"reduces" in the phrase "reduces funding currently
budgeted," creates an inference that a rejection of the measure by the
voters will nullify an available source of revenue.  But, as our discussion of
the term "maintain" indicated, one consequence of the referendum on
HB 2649 is that the new revenue provisions do not take effect unless the voters
approve them.  Thus, a rejection of the measure by the voters will not reduce
funding.  Rather, a rejection of the measure will leave the legislature's
budget with insufficient funding to pay for the affected public services.  We
do not agree with the Attorney General's premise that the words "currently
budgeted" will adequately convey that important distinction to most
voters.
When the legislature provides
insufficient revenue to pay for the public services that its budget describes,
the legislature's approved budget is underfunded.  See Merriam-Webster's
Collegiate Dictionary 1363 (11th ed 2004), defining "underfund"
as "to provide insufficient funds for."  A rejection of Ballot
Measure 66 by the voters will leave the legislature's budgeted services
underfunded, but will not "reduce" funding for those services.
To correct the shortcoming that
petitioners have identified, and to bring the "no" vote result
statement into substantial compliance with statutory requirements, the clause
in question in the "no" vote result statement must be modified to
state:
"Leaves amount currently budgeted for education, health
care, public safety, other services underfunded by estimated $472
million."
The Attorney General must effect that modification on
referral.
Petitioners assert a number of
additional challenges to the ballot title.  We have considered each challenge,
but, in applying the substantial compliance standard of review, we conclude
that no further changes to the ballot title are necessary.  We will refer the
ballot title to the Attorney General for modification for the reasons discussed
above.
II.  EXPLANATORY
STATEMENT REVIEW
ORS 251.215(1) requires a committee
appointed under ORS 251.205 to "prepare and file with the Secretary of
State, an impartial, simple and understandable statement explaining" any
state measure to be submitted to the people.  The legislature enacted certain modifications
to the procedures that generally govern the preparation of the explanatory
statement for Ballot Measure 66.  For example, in lieu of the procedure
described in ORS 251.205(2), providing for appointment of a committee of
citizens to prepare the explanatory statement, Oregon Laws 2009, chapter 714,
section 9(2), provides that the explanatory statement in this circumstance
shall be drafted by a joint legislative committee.
A joint legislative committee
prepared and filed with the Secretary of State an explanatory statement for
Ballot Measure 66.  Petitioners seek review of that explanatory statement,
asserting that it is "insufficient or unclear" under Oregon Laws
2009, chapter 714, section 13(1).  Subsection (2) of that section provides
that, if a petition challenging the joint legislative committee's explanatory
statement is properly filed and served, this court "shall review the
statement and certify an explanatory statement to the Secretary of State * *
*."
The legislature, in providing for
explanatory statement review in this court, did not modify the statutory
standard under which this court has reviewed explanatory statements in other
cases.  See ORS 251.235(1) (authorizing any dissatisfied person to
petition this court "seeking a different statement and stating the reasons
the statement filed with the court is insufficient or unclear").  Thus, in
reviewing the explanatory statement for Ballot Measure 66,
"[o]ur task is to determine whether the explanatory
statement contains a sufficient and clear statement explaining the
measure."
Sizemore v. Myers, 327 Or 456, 459, 964 P2d 255
(1998).  We turn to that issue.
A joint legislative committee
prepared the following explanatory statement for Ballot Measure 66:
"EXPLANATORY STATEMENT:  Measure 66 establishes
new marginal state income tax rates for households with income over $250,000 a
year, and individual filers with income over $125,000 a year beginning in tax
year 2009.  The Measure would not increase taxes on household income under
$250,000 (or $125,000 for individual filers).  The Measure would exempt from
income taxes the first $2,400 in unemployment compensation received in 2009. 
The Measure would raise approximately $472 million, which would maintain funds
currently budgeted for education, health care, public safety and other
services.  Approximately 90% of the state general fund budget goes to
education, health care and public safety.
"Under current law, unemployment compensation benefits
are taxable income.  The Measure eliminates income taxes on the first $2,400 of
unemployment benefits received in 2009, so that individuals who received
unemployment compensation in 2009 will have not to pay state income taxes on
those benefits.
"Under current law, a marginal tax rate of 9% applies
to taxable household income over $250,000 a year, and individual filers with
income over $125,000 a year.  Measure 66 increases the marginal tax rate by 1.8
percentage points on household income between $250,000 and $500,000 and by 2
percentage points on household income above $500,000.  For individual filers,
the marginal tax rate increase of 1.8 percentage points begins for income over
$125,000 and the 2 percentage points increase begins for income above
$250,000.  For the tax year beginning 2012, the tax rate for households with
income above $250,000 and $125,000 for individual filers will drop to 9.9%. 
The Measure also phases out the federal income tax deduction for households
with adjusted gross income at or above $250,000 and individuals with income at
or above $125,000.  Income tax rates will not increase on household income
under $250,000 and individual income under $125,000.
"Because some state money brings in federal matching
funds, the state is likely to receive more federal money if the Measure passes
than if the Measure fails."
Petitioners are dissatisfied with
that explanatory statement for numerous reasons.  The Attorney General argues
that the joint legislative committee's explanatory statement is "an
impartial, simple and understandable statement explaining the measure[,]"
within the meaning of ORS 251.215(1), and urges the court to certify the
explanatory state to the Secretary of State without modification.
Petitioners focus one of their
objections on the following sentence in the explanatory statement:
"The Measure would raise approximately $472 million,
which would maintain funds currently budgeted for education,
health care, public safety and other services."
(Emphasis added.)  As petitioners argued with respect to the
ballot title, they contend that the term "maintain" in the emphasized
passage of the explanatory statement will mislead voters because the new
revenue provisions in HB 2649 have not taken effect due to the referendum and,
therefore, the proposed measure does not "maintain" those new sources
of revenue.
The Attorney General argues that the
legislature did pass HB 2649, which contains the new revenue provisions, and
"designed the current budget around it."
We agree with petitioners for reasons
that we explained in requiring modification of several parts of the ballot
title that exhibited the same problem.  The use of the term
"maintain" in the emphasized passage quoted above renders the
explanatory statement insufficient and unclear.  To resolve that deficiency, we
will replace the word "maintain" with the correct word,
"provide," in the explanatory statement.
We have examined petitioners' other
challenges to the explanatory statement and the Attorney General's responses. 
We do not discuss the details of the parties' contentions concerning those
additional challenges.  We conclude that none of petitioners' other challenges
is well-taken.  Pursuant to Oregon Laws 2009, chapter 714, section 13(2), we
certify the following explanatory statement to the Secretary of State:
"EXPLANATORY STATEMENT:  Measure 66 establishes
new marginal state income tax rates for household with income over $250,000 a
year, and individual filers with income over $125,000 a year beginning in tax
year 2009.  The Measure would not increase taxes on household income under
$250,000 (or $125,000 for individual filers).  The Measure would exempt from
income taxes the first $2,400 in unemployment compensation received in 2009. 
The Measure would raise approximately $472 million, which would provide funds
currently budgeted for education, health care, public safety and other
services.  Approximately 90% of the state general fund budget goes to
education, health care and public safety.
"Under current law, unemployment compensation benefits
are taxable income.  The Measure eliminates income taxes on the first $2,400 of
unemployment benefits received in 2009, so that individuals who received
unemployment compensation in 2009 will have not to pay state income taxes on
those benefits.
"Under current law, a marginal tax rate of 9% applies
to taxable household income over $250,000 a year, and individual filers with
income over $125,000 a year.  Measure 66 increases the marginal tax rate by 1.8
percentage points on household income between $250,000 and $500,000 and by 2
percentage points on household income above $500,000.  For individual filers,
the marginal tax rate increase of 1.8 percentage points begins for income over
$125,000 and the 2 percentage points increase begins for income above
$250,000.  For the tax year beginning 2012, the tax rate for households with
income above $250,000 and $125,000 for individual filers will drop to 9.9%. 
The Measure also phases out the federal income tax deduction for households
with adjusted gross income at or above $250,000 and individuals with income at
or above $125,000.  Income tax rates will not increase on household income
under $250,000 and individual income under $125,000.
"Because some state money brings in federal matching
funds, the state is likely to receive more federal money if the Measure passes
than if the Measure fails."
The ballot title is referred to the
Attorney General for modification.
The explanatory statement is certified
to the Secretary of State.(3)
1. Article
IV, section 3(a), of the Oregon Constitution,  provides:
"The people reserve to themselves the
referendum power, which is to approve or reject at an election any Act, or part
thereof, of the Legislative Assembly that does not become effective earlier
than 90 days after the end of the session at which the Act is passed."
2. Article
IV, section 1(4)(d), of the Oregon Constitution, provides:
"Notwithstanding section 1, Article XVII of
this Constitution, an initiative or referendum measure becomes effective 30
days after the day on which it is enacted or approved by a majority of the
votes cast thereon.  A referendum ordered by petition on a part of an Act does
not delay the remainder of the Act from becoming effective."
3. Chief
Justice Order No. 09-061 (Oct. 29, 2009) provides as follows in regard to these
proceedings:
"Notwithstanding ORAP 11.30(12), any
petitions for reconsideration must be filed and physically received by the
Office of the Appellate Court Administrator no later than 12:00 noon on the day
following issuance of the Court's decision."