Morency v. Nev. Dep't of Educ.

496 P.3d 584

Flor MORENCY; Keysha Newell; Bonnie Ybarra; AAA Scholarship Foundation, Inc.; Sklar Williams PLLC ; and Environmental Design Group, LLC, Appellants,

v.The State of Nevada DEPARTMENT OF EDUCATION ; Jhone Ebert, in Her Official Capacity as State Superintendent of Public Instruction; the State of Nevada Department of Taxation; James Devolld, Sharon Rigby, Craig Witt, George P. Kelesis, Ann Bersi, Randy Brown, Francine Lipman, and Anthony Wren, in Their Official Capacities as Members of the Nevada Tax Commission; Melanie Young, in Her Official Capacity as the Executive Director and Chief Administrative Officer of the Department of Taxation; and The Legislature of the State of Nevada, Respondents.

No. 81281

Supreme Court of Nevada.

FILED OCTOBER 07, 2021

Institute for Justice and Joshua A. House, Arlington, Virginia, and Robert Gall, Austin, Texas; Saltzman Mugan Dushoff and Matthew T. Dushoff, Las Vegas, for Appellants.

Aaron D. Ford, Attorney General, and Craig A. Newby, Deputy Solicitor General, Carson City, for Respondents the State of Nevada Department of Education; Jhone Ebert, in her official capacity as State Superintendent of Public Instruction; the State of Nevada Department of Taxation; James DeVolld, Sharon Rigby, Craig Witt, George P. Kelesis, Ann Bersi, Randy Brown, Francine Lipman, and Anthony Wren, in their official capacities as members of the Nevada Tax Commission; and Melanie Young, in her official capacity as the Executive Director and Chief Administrative Officer of the Department of Taxation.

Legislative Counsel Bureau Legal Division and Kevin C. Powers, General Counsel, Carson City, for Respondent the Legislature of the State of Nevada.

BEFORE THE SUPREME COURT, EN BANC.

OPINION

By the Court, HARDESTY, C.J.:

Under the supermajority voting provision set forth in Article 4, Section 18(2) of the Nevada Constitution, at least two-thirds of the members’ votes in each house of the Nevada Legislature are required to pass any bill "which creates, generates, or increases any public revenue in any form, including but not limited to taxes, fees, assessments and rates, or changes in the computation bases for taxes, fees, assessments and rates." Accordingly, a bill that is subject to the supermajority provision and fails to obtain the necessary two-thirds majority vote from each house cannot be constitutionally enacted.

Assembly Bill (A.B.) 458, which eliminates future increases in the amount of tax credits available to businesses that donate to certain scholarship organizations, did not meet the supermajority voting requirement but was nevertheless passed during the 80th session of the Nevada Legislature in 2019. Appellants, parents of scholarship recipients, a scholarship organization, and businesses who benefited from the tax credit, challenged the legislation as unconstitutional. The district court ruled in favor of the legislation's constitutionality, and appellants appealed.

On appeal, we first consider whether appellants have standing to challenge the legislation's constitutionality. Because we conclude that they do, we next determine whether the bill increases public revenue. We conclude that A.B. 458 does not increase public revenue but instead redirects funds from a specific appropriation to the State General Fund. Therefore, the bill was not subject to the supermajority requirement. Because the district court correctly found that A.B. 458 was constitutional, we affirm the district court's order.

FACTS

Nevada's Educational Choice Scholarship Program

In 2015, the 78th Nevada Legislature passed a bill establishing the Nevada Educational Choice Scholarship Program (NECSP). 2015 Nev. Stat., ch. 22, §§ 2-8, at 86-89. Under the NECSP, businesses can receive credits against the modified business payroll tax (MBT)¹ for their donations to NECSP scholarship organizations. 2015 Nev. Stat., ch. 22, §§ 2, 4, at 86-87 (codified at NRS 363A.139, NRS 363B.119, and NRS 388D.250 -.280).² The scholarship organizations receiving these donations must provide scholarships to low-income students from the money donated to them under the NECSP. NRS 388D.270(l)(e).

As enacted in 2015, NRS 363A.139 and NRS 363B.119 provided $5,000,000 in tax credits for the 2015-16 fiscal year, $5,500,000 for the 2016-17 fiscal year, and a ten-percent increase per fiscal year thereafter. 2015 Nev. Stat., ch. 22, § 4, at 86-87. Under that formula, the total amount of tax credits available for the 2017-18 fiscal year was $6,655,000 and $7,320,500 for the 2018-19 fiscal year. The NECSP tax credits are available to donors on a first-come, first-served basis. NRS 363A.139(3) ; NRS 363B.119(3). Consequently, once the allotted tax credit amounts are expended, businesses remain liable for any remaining MBT taxes owed. See NRS 363A.139(6) (providing that once the Department of Taxation approves the tax credit amount requested, the donor subject to the MBT tax will receive a tax credit equal to the amount donated to the NECSP scholarship organization, which the Department will apply against the MBT tax amount due); NRS 363B.119(6) (same).

Assembly Bill 458

A.B. 458 was proposed in 2019 during the 80th legislative session. This bill eliminated the ten-percent annual increase in the amount of available NECSP tax credits, indefinitely capping the total available credits at $6,655,000. 2019 Nev. Stat., ch. 366, §§ 1-2, at 2296-99. While the bill was in the Assembly, the Department of Taxation submitted a fiscal note explaining that A.B. 458 "would increase general fund revenue by $665,500 in fiscal year 2019-20 and $1,397,550 in fiscal year 2020-21." A.B. 458, Fiscal Note, 80th Leg. (Nev. 2019). Assemblymembers voted in favor of the bill by at least a two-thirds majority. See Journal of the Assembly, 80th Leg., at 723 (Nev., April 16, 2019).

When the bill reached the Senate, legislative leadership presented two questions to the Legislative Counsel Bureau (LCB) relating to whether A.B. 458 was subject to the Nevada Constitution's supermajority provision. In a letter responding to legislative leadership's questions, LCB opined that A.B. 458 was not subject to the supermajority provision because limiting tax exemptions and credits changes neither the existing statutory tax formulas nor the existing computational bases, and ultimately, the Legislature did not subject the bill to a supermajority vote. When voted on in the Senate, A.B. 458 was passed by only a simple majority. The Governor signed it into law. See Senate Daily Journal, 80th Leg., at 27-28 (Nev., May 23, 2019); 2019 Nev. Stat., ch. 366, § 3, at 2299 (providing the bill's effective date).

Proceedings in the district court

After A.B. 458 was approved, appellants filed a complaint against respondents the State of Nevada Department of Education and Department of Taxation and several state employees in their official capacities (collectively, the State), challenging the constitutionality of the bill.³ The complaint sought declaratory relief, arguing that A.B. 458 violated the supermajority voting requirement because it increased revenue for the State General Fund and did not pass with the required two-thirds vote in the Senate. After the Legislature, represented by the LCB, intervened in the case pursuant to NRCP 24 and NRS 218F.720, the State moved to dismiss on the ground that appellants lack standing.⁴ The district court denied the motion, finding that appellants have standing and, in the alternative, that the public-importance exception to standing applies. The parties then filed cross-motions for summary judgment. After a hearing, the district court found that the supermajority provision does not apply to A.B. 458 because it does not increase public revenue. Accordingly, the district court granted the State's motion for summary judgment. This appeal followed.

DISCUSSION

Appellants have standing

We first address the State's argument that appellants lack standing because they fail to demonstrate that the State caused them harm and they do not meet the requirements under Schwartz v. Lopez, 132 Nev. 732, 743, 382 P.3d 886, 894 (2016), for the public-importance exception. "Standing is a question of law reviewed de novo." Arguello v. Sunset Station, Inc., 127 Nev. 365, 368, 252 P.3d 206, 208 (2011). "The question of standing concerns whether the party seeking relief has a sufficient interest in the litigation. The primary purpose of this standing inquiry is to ensure the litigant will vigorously and effectively present his or her case against an adverse party." Schwartz, 132 Nev. at 743, 382 P.3d at 894 (citation omitted). Thus, "a requirement of standing is that the litigant personally suffer injury that can be fairly traced to the allegedly unconstitutional statute and which would be redressed by invalidating the statute." Elley v. Stephens, 104 Nev. 413, 416, 760 P.2d 768, 770 (1988). A general interest in the matter is normally insufficient: "a party must show a personal injury." Schwartz, 132 Nev. at 743, 382 P.3d at 894.

Appellants claim that the State's enactment of A.B. 458 caused them each harm in the form of lost scholarships, scholarship funding, and tax credits and that their injuries are fairly traced to the State because it enforces the bill and is responsible for administering the NECSP. In the alternative, appellants argue that the public-importance exception to standing under Schwartz applies. We agree with appellants in part and conclude that they have standing under the Schwartz public-importance exception.

Appellants lack personal harm for general standing

We conclude that appellants fail to meet the personalized-injury requirement for general standing.⁵ The State argues that appellants cannot demonstrate harm because the Legislature passed another bill during the 2019 session, Senate Bill (S.B.) 551, which provided additional funding for the NECSP, recuperating part of the loss of funding caused by A.B. 458. See 2019 Nev. Stat., ch. 537, § 2.5, at 3273-74, § 3.5, at 3276-77. We agre...