                                                                                          September 25 2012


                                           DA 12-0358

               IN THE SUPREME COURT OF THE STATE OF MONTANA
                                           2012 MT 211



MEA-MFT, the Montana State AFL-CIO, the Montana
Public Employees Association, the Montana Association
of Area Agencies on Aging, and the American Federation
of State, County and Municipal Employees, Montana Council 9,

              Plaintiffs, Appellees and Cross-Appellants,

         v.

LINDA McCULLOCH, Secretary of State for the State of Montana,

               Defendant and Appellant.


APPEAL FROM:          District Court of the First Judicial District,
                      In and For the County of Lewis and Clark, Cause No. BDV-2011-961
                      Honorable Jeffrey M. Sherlock, Presiding Judge

COUNSEL OF RECORD:

               For Appellant:

                      Steve Bullock, Montana Attorney General; Andrew I. Huff,
                      Assistant Attorney General, Helena, Montana


               For Appellees and Cross-Appellants:


                      John M. Morrison, Frederick F. Sherwood; Morrison, Motl &
                      Sherwood, Helena, Montana


                                Submitted on briefs and decision rendered: August 10, 2012
                                   Opinion, analysis and rationale issued: September 25, 2012

Filed:
                      _________________________________________
                                        Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.


¶1     Secretary of State Linda McCulloch appeals from the District Court’s Opinion and

Order granting summary judgment to the plaintiffs and declaring Legislative Referendum

123 (LR-123) unconstitutional. On August 10, 2012 this Court entered a summary order

affirming the District Court, with an opinion to follow in due course.

¶2     McCulloch presents the following issues for review:

¶3     Issue One: Whether the challenge to LR-123 is ripe and justiciable.

¶4     Issue Two: Whether LR-123 is unconstitutional.

¶5     The plaintiffs, collectively referred to as the MEA-MFT, cross-appeal from the

District Court’s order dismissing Count 1 of the complaint. MEA-MFT contend in the

cross-appeal that LR-123 was an unconstitutional appropriation.

                  PROCEDURAL AND FACTUAL BACKGROUND

¶6     LR-123 was enacted by the Montana Legislature in 2011 as Senate Bill 426. It

proposed a vote in the November 2012 general election on whether to provide a tax credit

and potential tax refund, or outright State payment, to individuals in years in which there

is a certain level of projected surplus revenue. LR-123 provides that if the unaudited

ending State general fund balance exceeds 125% of the projected fund balance and this

excess balance over 125% is at least $5 million, then a taxpayer could claim the tax credit

as to taxes owed for the current year, and could receive a payment from the State if the

credit exceeds tax liability and even if the individual had no tax liability.




                                               2
¶7       The dispute in this case arises from the calculations required to determine whether

the credit-refund threshold is reached.       While LR-123 assigns various duties to the

Department of Administration, the primary dispute is over the role assigned to the

Legislative Fiscal Analyst.      The Legislative Fiscal Analyst (LFA) is an individual

employed by the Legislative Finance Committee and serves at its pleasure, § 5-12-205,

MCA.        The Finance Committee is a permanent joint committee of the Montana

Legislature, § 5-12-201, MCA. Section 1(7)(a) of LR-123 requires the LFA to calculate

a projected general fund balance by August 1 for the end of the current fiscal year.1 This

calculation involves a projection to be determined by a consideration of anticipated

revenues and transfers, the impacts of enacted legislation, anticipated supplemental

appropriations and anticipated reversions. The LFA is directed to calculate the projected

general fund balance by adding the unassigned fund balance from the most recent

completed fiscal year to the anticipated revenues and transfers, less the level of

appropriations and transfers, supplemental appropriations and anticipated reversions for

the most recent completed fiscal year. The constitutional issue in this case turns upon

whether LR-123 impermissibly delegates legislative power to an employee (the LFA) of

one of the Legislature’s committees (the LFC).

¶8       MEA-MFT filed a complaint seeking declaratory and other relief, contending that

LR-123 was unconstitutional because it proposed an appropriation and because it

unlawfully delegated legislative powers. McCulloch moved to dismiss and MEA-MFT

moved for summary judgment. The District Court granted the motion to dismiss as to

1
    The State fiscal year runs from July 1 to the following June 30.
                                               3
one count of the complaint, holding that LR-123 did not provide for an appropriation.

The District Court subsequently granted summary judgment to MEA-MFT, holding that

LR-123 unconstitutionally delegated legislative power to the LFA.

¶9     A critical component of LR-123 is the requirement that the LFA determine the

amount of the budgeted general fund balance. An affidavit by the LFA presented in the

District Court proceedings sets out in detail the numerous separate steps, some involving

other sub-steps, required to make this calculation. The calculation requires the LFA to

project and anticipate fund balances, revenues, transfers, appropriations and reversions to

arrive at a conclusion. That conclusion determines whether funds are paid into the State

coffers or are paid out.

                               STANDARD OF REVIEW

¶10    This Court reviews a district court’s decision on summary judgment de novo,

using the same standards of M. R. Civ. P. 56. Reichert v. State, 2012 MT 111, ¶ 18, 365

Mont. 92, 278 P.3d 455. This Court reviews a district court’s interpretation of statutory

language de novo, as a question of law, Reichert, ¶ 19, and we review issues of

justiciability de novo, as a question of law, Reichert, ¶ 20.

                                       DISCUSSION

¶11    Issue One: Whether the challenge to LR-123 is justiciable and ripe.

¶12    McCulloch contends that the District Court erred by refusing to reject the action

by MEA-MFT on the grounds that it was not ripe and therefore not justiciable. She

contends that the issues raised in this action will not be ripe for decision unless and until

the voters approve LR-123 in the November, 2012 election.

                                              4
¶13    Montana courts have been reluctant to consider pre-election challenges to

initiatives and referenda, guided by the principle that the initiative and referenda

provisions of the Constitution should be broadly construed to maintain the power of the

people. Nicholson v. Cooney, 265 Mont. 406, 411, 877 P.2d 486, 488 (1994); Cobb v.

State, 278 Mont. 307, 310, 924 P.2d 268, 270 (1996); Montana School Bds. Assoc. v.

Waltermire, 224 Mont. 296, 299, 729 P.2d 1297, 1298-1299 (1986). However, some pre-

election challenges are specifically allowed by statute. Montanans Opposed to I-166 v.

State, 2012 MT 168, 365 Mont. 520, ___ P.3d ___ (parts of the initiative process may be

challenged under § 13-27-312, MCA).

¶14    This Court does not consider the constitutionality of a provision unless it is

directly raised in litigation and a determination is necessary to the disposition of the case.

Potter v. Furnish, 46 Mont. 391, 395, 128 P. 542, 543 (1912). And, when faced with a

measure properly challenged as not properly submitted under the election laws, or as

facially defective, this Court has often considered the substance of the challenge. Sawyer

Stores, Inc. v. Mitchell, 103 Mont. 148, 62 P.2d 342 (1936) (vote on initiative enjoined

because the form of the ballot was defective); Burgan & Walker v. State, 114 Mont. 459,

137 P. 663 (1943) (vote on legislative referendum enjoined because the measure was

unconstitutional); Steen v. Murray, 144 Mont. 61, 394 P.2d 761 (1964) (vote on initiative

enjoined because the measure was substantively unconstitutional); Montana Citizens for

the Preservation of Citizens’ Rights v. Waltermire, 224 Mont. 273, 729 P.2d 1283 (1986)

(vote on initiative allowed to proceed after substantive analysis of the proposal);

Nicholson v. Cooney, 265 Mont. 406, 877 P.2d 486 (1994) (vote allowed on referendum

                                              5
after Court finds the measure to be constitutional); Livingstone v. Murray, 137 Mont.

557, 354 P.2d 552 (1960) (vote on legislative referendum enjoined because the measure

was unconstitutional); Harper v. Waltermire, 213 Mont. 425, 691 P.2d 826 (1984)

(election on constitutional initiative enjoined because the measure was unconstitutional);

Harper v. Greely, 234 Mont. 259, 763 P.2d 650 (1988) (Court rejected a challenge to a

legislative referendum that the form of the ballot was deficient, and allowed the election

to proceed); Cobb (election on legislative referendum enjoined based upon substantive

defect); Reichert (election on legislative referendum enjoined because it was

unconstitutional); and Montanans Opposed to I-166 (election allowed to proceed, form of

ballot initiative not defective).    In each of these cases the Court considered the

substantive challenge to the measure under consideration, and did not decline to act on

the ground that the issues were non-justiciable until after the election.

¶15    In the present case the MEA-MFT challenged the facial validity of LR-123 and

requested injunctive and declaratory relief. This Court recently discussed the law of

justiciability in this same context in Reichert, ¶¶ 53-60, concluding that the pre-election

challenge to a referendum in that case was ripe and justiciable.

¶16    The requirement that courts decide only justiciable controversies derives from

Article VII, Section 4 of the Montana Constitution, which confers original jurisdiction on

district courts over “cases at law and in equity.” Case law has established that this

language is the functional equivalent of the requirement in Article III of the United States

Constitution that courts exercise jurisdiction over a “case or controversy.” Plan Helena,

Inc. v. Helena Regional Airport Auth., 2010 MT 26, ¶ 6, 355 Mont. 142, 226 P.3d 567. A

                                              6
justiciable controversy in this context is one in which the parties have existing and

genuine rights or interests; the questions are presented in an adversary context; and the

controversy is one upon which the court’s judgment will effectively and conclusively

operate. Plan Helena, ¶¶ 7-8.

¶17    A component of justiciability is ripeness—whether there is an actual, present

controversy, and not merely a hypothetical or speculative issue. Montana Power Co. v.

PSC, 2001 MT 102, ¶ 32, 305 Mont. 260, 26 P.3d 91. Ripeness has both a constitutional

dimension based upon the case or controversy requirement, and a “prudential” dimension

that weighs the fitness of the issues for judicial decision and the hardship to the parties of

withholding a decision. Reichert, ¶ 56.

¶18    In the present case, as in Reichert, the issues are definite and concrete, not

hypothetical and abstract. LR-123 would have a definite impact upon the State treasury

and would require the LFA’s predictions of surpluses and calculations of refunds and

payments in August 2013. The parties have clearly articulated their positions on the

issues and this Court has determined that LR-123 is constitutionally defective on its face.

As in Reichert, allowing the defective referendum to proceed to election does nothing to

protect voter rights. Placing a facially invalid measure on the ballot would be a waste of

time and money for all involved, including State and local voting officials, the

proponents and opponents of the measure, the voters, and the taxpayers who bear the

expense of the election.




                                              7
¶19    Therefore, it is clear that there is a present case or controversy as to LR-123 and

there is no prudential reason for allowing the election on LR-123 to proceed prior to

addressing the issues raised in this action.

¶20    Issue Two: Whether LR-123 is unconstitutional.

¶21    Article III, section 1 of the Montana Constitution divides the government into

legislative, executive and judicial branches, and provides that “[n]o person or persons

charged with the exercise of power properly belonging to one branch shall exercise any

power properly belonging to either of the others, except as in this constitution expressly

directed or permitted.” Article V, section 1 of the Montana Constitution provides that the

“legislative power is vested in a legislature consisting of a senate and a house of

representatives.” Article VI, section 4 provides that the “executive power is vested in the

governor who shall see that the laws are faithfully executed.”

¶22    LR-123 delegates to the Legislative Fiscal Analyst, a staff person employed by a

legislative committee, the power and duty to determine the projected general fund

balance, which would involve two dozen separate steps or calculations, and requires

discretionary projections of balances, revenues, transfers, appropriations and reversions.

Based upon these calculations and projections, LR-123 empowers the LFA to determine

whether money comes into the State treasury in taxes or is paid out in cash payments or

refunds. The District Court held that these were functions of either the Legislature itself,

or of an Executive branch official acting under responsibilities properly delegated by the

Legislature. The District Court ruled that “LR-123 is unconstitutional as a violation of



                                               8
the separation of powers envisioned by the Montana Constitution and as an unlawful

delegation of the power of the Legislature.”

¶23    This Court considered a similar issue in Judge v. Legislative Finance Committee,

168 Mont. 470, 543 P.2d 1317 (1975). In that case the Legislature enacted a provision

requiring the Legislative Finance Committee to approve budget amendments to allow

executive branch agencies to spend money from the State treasury that was not otherwise

appropriated by the Legislature itself.    This Court recognized that “[t]he power to

appropriate is a long established, well-recognized power of the legislature” and that the

“public operating funds of state government [are] subject to the appropriation process.”

Judge, 168 Mont. at 477, 543 P.2d at 1321.

¶24    Because of the public nature of the funds and the Legislature’s role in the

appropriation process, expenditure of funds to meet budget amendments could only be

authorized by the entire Legislature while in session or through a duty properly delegated

to an executive branch agency or officer. Since the Legislature had not appropriated the

money itself and had not properly delegated that duty to an executive branch agency or

officer, the budget amendment provision improperly delegated power to the Legislative

Finance Committee. The “hybrid delegation” of authority to the Committee did not “pass

constitutional muster.” Action by the Legislative Finance Committee was not action by

the Legislature, and neither was it action by the Executive branch.         Therefore the

provision was stricken as an unconstitutional delegation of legislative power.

¶25    The same considerations govern our analysis of LR-123. Here the authority to

determine when State funds should be paid out is not delegated to the Legislative Finance

                                               9
Committee, but to its individual agent, the Legislative Fiscal Analyst, who serves at the

pleasure of the Committee, § 5-12-205(2), MCA. This delegation is therefore yet another

step removed from the Legislature itself. If action by the Legislative Finance Committee

did not constitute the exercise of the legislative power in the Judge case then clearly

neither does action by the Committee’s staff, the Legislative Fiscal Analyst.

¶26    The separation of governmental powers into equal branches is a fundamental

precept of the American constitutional form of government. The drafters of the Montana

Constitution, commenting on Article III, stated that “dividing the powers of government

among three branches of state government is essential to any constitution.” Montana

Constitutional Convention, Committee Reports, February 19, 1972, p. 818. The

separation of powers in the Montana Constitution is “designed to act as a check on an

overly ambitious branch of government.”            Montana Constitutional Convention,

Committee Reports, February 19, 1972, p. 818.

¶27    The District Court’s discussion regarding separation of powers considered an act

similar to LR-123 that was rejected by the United States Supreme Court. In Bowsher v.

Synar, 478 U.S. 714, 106 S. Ct. 3181 (1986) the Court invalidated a law that required the

Comptroller General to estimate federal revenues and expenditures and then specify the

deductions in spending required to reach a balanced budget. The Comptroller General is

an agent of Congress and the Court found that as such he could not exercise what the

Court determined to be executive powers without running afoul of the constitutional

requirement for a separation of the three branches of government.



                                            10
       [W]e view these functions as plainly entailing execution of the law in
       constitutional terms. Interpreting a law enacted by Congress to implement
       the legislative mandate is the very essence of “execution” of the law.
       Under § 251, the Comptroller General must exercise judgment concerning
       facts that affect the application of the Act. He must also interpret the
       provisions of the Act to determine precisely what budgetary calculations
       are required. Decisions of that kind are typically made by officers charged
       with executing a statute.

Bowsher, 478 U.S. at 732-733, 106 S. Ct. at 3191.

¶28    Likewise, in Montana each branch of government is equal, coordinate and

independent, in that powers belonging to one branch may not be exercised by another.

Powder River County v. State, 2002 MT 259, ¶ 112, 312 Mont. 198, 60 P.3d 357. The

District Court found that under LR-123, as in Bowsher, the LFA would be required to

exercise “independent judgment and evaluation” with respect to the numerous estimates

and projections. We agree with the District Court that such judgment and interpretation of

the Act are functions plainly entailing execution of the law and are thus consistent with

executive branch functions that are routinely required to implement legislative

enactments. The Executive branch is ultimately the responsibility of the Governor. State

Pub. Empl. Assoc. v. Governor, 271 Mont. 450, 456-457, 898 P.2d 675, 679-680 (1995).

¶29    In this case the Legislative Fiscal Analyst is clearly an employee or agent of the

Legislature, serving “at the pleasure” of the Legislative Finance Committee. Section 5-

12-205(2), MCA. Under the separation of powers established in Article III, section 1 of

the Montana Constitution, the Legislative Fiscal Analyst may not “exercise any power

properly belonging” to the Executive or Judicial branches of government. It is the

exclusive power of the Legislature to enact the laws of this State, and the exclusive power


                                            11
of the Executive branch to implement and enforce those laws. Under Article VI, section

4 of the Montana Constitution it is the responsibility of the governor to see that the laws

passed by the Legislature are properly executed.

¶30    For the reasons stated above, we have affirmed the decision of the District Court.

LR-123 on its face violates both Article V, section 1 of the Montana Constitution as an

unlawful delegation of legislative power, and Article III, section 1 of the Montana

Constitution as a violation of the separation of powers of the independent branches of

government.

¶31    Because we have affirmed the decision of the District Court, it is unnecessary to

address the cross-appeal of the MEA-MFT.

¶32    LR-123 is unconstitutional on its face and therefore may not appear on the ballot

in November 2012.


                                                   /S/ MIKE McGRATH

We concur:


/S/ JAMES C. NELSON
/S/ MICHAEL E WHEAT
/S/ BRIAN MORRIS




Justice Beth Baker, dissenting.

¶33    I would conclude that the issues raised in the Plaintiffs’ complaint are not ripe for

resolution, and therefore would have reversed the District Court’s June 5, 2012 Opinion


                                            12
and Order. I now dissent from this Court’s ruling on Issue One of the appeal and would

not reach Issue Two absent approval of LR-123 by a majority of voters casting ballots in

the general election.

¶34    As I discussed in my dissent in Reichert, this Court generally determines the

constitutionality of legislation “only if, and after, a duly-enacted law has been

challenged.” Reichert, ¶ 93 (Baker, J., dissenting). While the Court acknowledges that

we use caution in entertaining pre-election challenges to ballot measures (Opinion, ¶ 13),

its decision today marks the second time in the last four months—only the third since

passage of the 1972 Constitution—that the Court has pre-empted a measure referred by

the Legislature from reaching the ballot.1 Current statutes express “a clear preference”

for deferring consideration of constitutional issues until and unless a ballot measure

becomes law. Montanans Opposed to I-166, ¶ 14 (Baker, J., concurring) (citing § 3-2-

202(5), MCA (preserving “the right to challenge a ballot issue enacted by a vote of the

people”), and § 13-27-316(6), MCA (“This section does not limit the right to challenge a

constitutional defect in the substance of an issue approved by a vote of the people.”)).

Deference is particularly warranted where a measure is referred by the Legislature, since

it already has been through an extensive review process by legislative staff, public

hearings, and deliberation by the legislative body. See Harper v. Greely, 234 Mont. at

268, 763 P.2d at 656. In my view, there is a strong case here for allowing the measure to

go to the voters before addressing its alleged constitutional infirmities.

1
 The first was Cobb v. State, 278 Mont. at 309, 924 P.2d at 269, where we kept a legislatively-proposed
constitutional amendment off the ballot because its approval by voters “would leave a defect in the
constitution which could not be remedied except by another election.” (Emphasis added.)
                                              13
¶35       First, the Court’s determination in Reichert to decide the constitutional issues prior

to a vote on LR-119 turned on its conclusion that “the disenfranchisement will occur this

election cycle” because the referendum would affect judicial offices that were on the very

same ballot as the referendum. Reichert, ¶ 58. In contrast, LR-123 would not have taken

effect until January 1, 2013, and affected no one’s immediate interest. Even under the

principles of Reichert, this case is not the extraordinary one in which pre-election review

should be granted.

¶36       In addition, as the Court observes, this case comes to us on the District Court’s

grant of summary judgment for the plaintiffs. Opinion, ¶ 8. The District Court denied

their motion to dismiss on the separation of powers issue, concluding that the question

was “more murky” and could not be determined on the face of the pleadings. Only after

considering the detailed affidavits of the Director of the Department of Revenue and the

Principal Fiscal Analyst for the Legislative Fiscal Division did the District Court

determine that LR-123 constituted an unconstitutional delegation of legislative authority.

Rather than a case of palpable facial invalidity, 2 determining LR-123’s constitutionality

impelled the District Court to consider evidence, including factual information such as

potential forest fire expenditures and the Legislature’s failure to adopt the LFA’s revenue

estimates in previous sessions.

¶37       “[T]he constitutional requirement of a ‘case or controversy’” obligates the courts

to refrain from issuing advisory opinions.                 Greater Missoula Area Fed’n of Early

Childhood Educators v. Child Start, Inc., 2009 MT 362, ¶ 23, 353 Mont. 201, 219 P.3d

2
    State ex rel. Steen v. Murray, 144 Mont. at 69, 394 P.2d at 765.
                                                  14
881.   That the parties “have clearly articulated their positions” says nothing about

whether the issues are either hypothetical or concrete. Opinion, ¶ 18. The Court’s

acknowledgment that the LFA’s calculations would not be required until August 2013

undermines its conclusion that the issues require a decision before the 2012 election.

Opinion, ¶ 18. The measure would “have a definite impact upon the State treasury” only

if the voters approve it. If that were to occur, there would be plenty of time for this Court

to consider and decide the constitutional issues before any action would be required by

the new law.

¶38    It is ironic that the constitutional defect on which the Court’s decision rests is the

Legislature’s violation of the principle of separation of powers. Opinion, ¶ 30. While the

Court faults the Legislature for attempting to short-cut the constitutional process, it too is

being unfaithful to that process by deciding the validity of a proposed law. I do not agree

that voter rights are not at stake here.       Much about the electoral process could be

characterized as “a waste of time and money for all involved.”               Opinion, ¶ 18.

Nonetheless, “[c]onvenience and efficiency are not the primary objectives -- or the

hallmarks -- of democratic government . . . .” Immig. & Naturalization Serv. v. Chadha,

462 U.S. 919, 944 (1983). It is the Court’s unflagging obligation to protect the rights

guaranteed by the Montana Constitution, including its provisions governing initiative and

referendum. Efficiency should not outweigh the people’s constitutionally prescribed

right to vote on measures referred by the Legislature.          Reichert, ¶ 99 (Baker, J.,

dissenting). The courts then should perform their constitutional duty to hear and decide

challenges to laws that are duly enacted, even those the people have directly approved.

                                          15
As the Supreme Court has observed, while governmental processes “often seem clumsy,

inefficient, even unworkable . . . [,] [t]here is no support in the Constitution or decisions

of this Court for the proposition that the cumbersomeness and delays often encountered

in complying with explicit constitutional standards may be avoided, either by the

Congress or by the President.” Chadha, 462 U.S. at 959 (citation omitted).

¶39    The same holds true for the third branch of government. This Court should not

start down the path of routinely granting pre-election review of legislative referenda,

particularly where litigation timelines are so limited and comprehensive consideration of

constitutional questions may be short-changed. In my opinion, we are “overly ambitious”

in reaching the merits of this dispute.



                                          /S/ BETH BAKER




Justice Jim Rice and Justice Patricia O. Cotter join in the dissenting Opinion of Justice
Baker.

                                          /S/ JIM RICE
                                          /S/ PATRICIA COTTER




                                          16
