State lawmakers cannot use proceeds from trust land sales or leases to run the Land Department, at least not without getting voter approval, the Arizona Court of Appeals ruled Thursday.
In a unanimous decision, the judges rejected arguments by the Brewer administration that the diversion of cash is legal. Attorneys for the state said any money used to operate the Land Department, which manages the trust properties, actually helps maximize the amount of proceeds the trust lands generate.
Judge Donn Kessler said that is legally irrelevant because the Arizona Constitution specifically forbids what was done.
“If the Legislature desires to use the proceeds from trust lands to pay for managing trust lands, it must obtain permission from the people of Arizona in the form of a constitutional amendment,’’ he wrote for the court.
Land Commissioner Maria Baier said late Thursday she was still studying the ruling. But she said it is likely see will seek review by the Arizona Supreme Court.
The lawsuit stems from an effort by legislators to provide more money for the Land Department.
Of the 10 million acres Arizona got when it became a state, about 9.2 million acres remain. The federal law conveying the land to the state specified the proceeds were designed for specific beneficiaries, mostly public schools.
The Arizona Constitution forbids taking money from trust funds for any reason other than the purpose for which they were established.
Two years ago, though, the Legislature let the state land commissioner divert up to 10 percent of what was raised in the prior fiscal year in proceeds from all trusts, including the one for public schools. This includes not only property sold off but also any revenues generated from the sale of minerals and timber.
That move allowed lawmakers to cut taxpayer funding used to run the Land Department so funds could be shifted to plug other budget holes.
Proponents of the move argued it would help the trust — and the beneficiaries — in the long run, saying it will enable the agency to get land ready to sell when the real estate market returns and developers want it again, presumably at a higher price.
And Baier said using some of the proceeds is only logical.
“Most trusts don’t function unless there’s a funding mechanism built into them,’’ she said.
Kessler, however, accepted the arguments of the Center for Law in the Public Interest, saying the courts cannot ignore the plain requirements of the Arizona Constitution.
He said the legislation allows the use of trust funds to assist the state in reducing budget deficits.
“In doing so, it diverts money from the trusts’ permanent funds, depriving the trusts of the value of lands sold and the products derived from such lands, as well as interest earned on those proceeds,’’ he wrote. “It is a paramount requirement that the trusts must be fully compensated for any lands or products lost from the trust through sales.’’