The Kansas Court of Appeals today reinstated a Shawnee County District Court lawsuit challenging the constitutionality of a 2009 legislative enactment that transferred $29 million in fee funds from state agencies to bolster the state general fund.
Writing for the three-member hearing panel, Judge Stephen D. Hill said the case must go back to determine the constitutionality of the 2009 Legislature’s “sweep” of money from special revenue funds into the state general fund.
The transfer had the effect of causing state agencies to raise the fees of several trade associations that their members have to pay, but something the District Court said that under the Kansas Judicial Review Act they had no standing to challenge.
The Court of Appeals held that the district court incorrectly determined that the trade agencies lacked standing to challenge the law that caused the sweep, HB 2373. The trade associations have a stake in the controversy and have standing to challenge the constitutionality of HB 2373, because as a result of the sweep they are uniquely damaged, as a result of the increase of their fees they are required to pay in order to do business, according to the Court of Appeals.
The Court of Appeals held that the plaintiffs could pursue a declaratory judgment action to seek a court determination of the constitutionality of the sweep because a state agency has no authority to determine the constitutionality of any law it is required to administer.
Plaintiffs and the amount of the sweeps include:
• the insurers who provide workers compensation insurance and are required to pay assessments into the Workers Compensation Fund ($2.355 million);
• the Kansas Association of Realtors, comprised of real estate agents and brokers who must pay licensure fees every 2 years to the Real Estate Fee Fund ($195,671); and,
• the Kansas Bankers Association, a trade association made up of lenders required to pay licensure fees and assessments to the Bank Commissioner Fee Fund ($534,517).
The trade associations contend the legislative “sweep” of the fee funds was a general revenue-raising measure that was not a valid exercise of police power authority. Because the trade association members must pay higher fees as a result of the sweeps, the changes constituted an unauthorized tax and revenue enactment, an unconstitutional taking in violation of the Commerce Clause of the 5th and 14th amendments to the U.S. Constitution, and denial of their federal and state equal protection rights, their suit alleges.
Court of Appeals Judge Hill, writing for the court’s fellow hearing panelists, Judge David Bruns and assigned retired Judge Ernest L. Johnson, said Shawnee County District Judge Franklin Theis erred in dismissing the suit for lack of standing. The district court also ruled that a suit such as this must be brought by the local county or district attorney, or by the state attorney general; however, the Court of Appeals, citing prior case law, reversed that finding and remanded the matter for further proceedings.
The full text of the decision may be found at http://www.kscourts.org/Cases-and-Opinions/opinions/CtApp/2013/20130906/108607.pdf.