A unanimous Arizona Supreme Court today struck down one of the most egregious taxpayer abuses in the state—a type of subsidy to public-sector unions known as “release time.” And the court made clear once again that Arizona’s constitutional ban on government subsidies means what it says.
Today’s decision is the first time that a state high court has squarely struck down release time as unconstitutional. It came after the Goldwater Institute sued the city of Phoenix on behalf of two city employees and taxpayers who objected to being forced to pay for unions to engage in recruiting, political lobbying, and other practices that don’t benefit the taxpaying public. “The costs and benefits here are so one-sided,” declared the justices, that the arrangement “represents an impermissible subsidy to a private entity.”
Release time is a practice that city, state, and federal governments engage in, whereby government workers are released from the jobs they were hired to perform to work full-time for the union instead—yet are still paid their taxpayer-funded salaries and benefits. While on release time, these government employees engage in political and lobbying activities, attend union conferences and meetings, recruit new members to the union, and do other things that advance the union’s own interests, not those of the public.
In this case, the city signed a Memorandum of Understanding, or MOU, with a local unit of the American Federation of State, County, and Municipal Employees union. Under that MOU, the city gave the union several release time benefits, including four full-time release positions. In other words, the city paid four employees to work exclusively for the union on the taxpayers’ dime.
The MOU said the cost of release time counted as part of the “total compensation” paid to all unit employees, whether members of the labor union or not. But that raised a problem: if release time was being paid as part of their “total compensation,” then it violates the free expression and association rights of these employees to force them to give up their compensation to fund the political speech of union representatives with whom these employees disagree. That was just what the U.S. Supreme Court said in the 2018 landmark Janus ruling. On the other hand, if release time did not count as part of their compensation, and was instead paid for out of the city’s own pocket, then it was a direct subsidy to the union, which violates the Gift Clause, the part of Arizona Constitution that forbids government from giving public resources to private entities.
In today’s 7-0 ruling, the Supreme Court chose the second option: the city pays for release time, it said, and that means release time violates the Gift Clause. First, what the city pays is so disproportionate to what the city gets in return (which is effectively nothing), that paying for release time is effectively a handout, which is illegal. Second, the justices rejected the city’s argument that as long as the MOU as a whole passes muster, any specific expenditure of public resources included within it must also be OK. “It would negate the purposes of the Gift Clause if scrutiny could be avoided merely because a gift is contained within a larger contract,” the court declared. Instead, “in all Gift Clause cases, courts must probe the reality of the transaction”—and including release time provisions “as part of a larger contract does not insulate them from review.”
What’s more, the court expressed skepticism that release time serves any beneficial public purpose at all. “The plain language of the Gift Clause aims to prevent subsidies to private individuals, associations, and corporations,” it held, and in this case release time employees are paid public funds to engage in private “union activities.” Since that doesn’t benefit the general public, the expenditure might be categorically prohibited. The justices found it unnecessary to definitively rule on that question, however, since the fact that the city gets nothing for its money was alone enough grounds to find the MOU unconstitutional.
Today’s ruling is a watershed decision that ensures taxpayer dollars will be spent to advance public interests, not private special interests, including the politically powerful special interests of government labor unions. And that will have nationwide ramifications, too. Just weeks ago, the Texas Supreme Court issued a lengthy decision making clear that the Lone Star State’s Constitution also bars government from giving away taxpayer money to private interests. Government entities throughout Arizona—and the United States—should take notice when they seek to transfer taxpayer funds to their political cronies.
Read the decision here, and read more about the case here.
Jon Riches is the Vice President for Litigation at the Goldwater Institute.
Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute.
