WARNING: LONG LEGAL POST

The new opinions from the Iowa Supreme Court are up here.



The big newsmaker is going to be the decision regarding the suit between the legislature and Governor Vilsack over his line item veto. I decided to try to translate this very intricate opinion into semi-plain English for anyone who wanted to know the analysis behind the decision.



THE BACKGROUND

Governor Vilsack’s 2003 agenda featured an economic plan hinging on the creation of an “Iowa Values Fund” (IVF) , a source of funding for various projects that theoretically would stimulate the state’s economy. Vilsack wanted $500,000,000 committed to the Values Fund over a five-year period. The Republican legislature indicated it wanted tax reforms and regulatory reforms, as well as the Values Fund. The Governor opposed the proposals put forth by legislative Republicans. Negotiations broke down. In the end, while the House passed the IVF in House File 683 (HF 683), the Iowa Senate then failed to vote on HF 683 before the session adjourned, much to the Governor’s annoyance. On May 29, 2003, the Governor issued a proclamation reconvening the Legislature into an “extraordinary session” focused on the state’s budget for the 2004 fiscal year - but also including a reconsideration of the Values Fund. The results of these meetings were two bills, an amended HF 683 and House File 692 (HF 692). Together, these bills both created and funded a Values Fund and included provisions for tax and regulatory reform. HF 683 was the bill that funded the IVF. HF 692 created the IVF and outlined the tax and regulations reforms. It referenced HF 683, but was a distinct bill – I’m sure it was designed that way specifically to circumvent the veto power of the Governor. But the Governor didn’t give up. He passed HF 683, but returned HF 692 with several sections marked “disapproved.” The effect of the Governor’s item ‘vetoes’ was to eliminate the Legislature’s economic development priorities while preserving the Governor’s economic development priorities, including the Values Fund.



THE ANALYSIS

General Rules of Veto Power

Our form of government grants a “general” veto power to the national executive, which allows the executive to approve a bill presented by the legislature, to disapprove it, or to decline to act one way or another. If the executive declines to approve or disapprove, the bill automatically becomes law.



The laws also allow for a “pocket” veto power, to be used if the legislature decides to slip a bill pass right before the end of the session, or to adjourn right after they pass the bill, thus preventing the executive from returning the bill to them for reconsideration. The executive is given additional time to consider the bill, and in many cases the rules change so that the bill is automatically disapproved if the executive declines to act.



After the Civil War, states began to allow Governors to veto items on appropriations / spending bills without having to vote the entire bill up or down. This was to prevent the legislative practice of tacking on a bunch of minority interest items onto a single funding bill, in order to attain a majority vote. This constituted a major departure from prior practice, in that it essentially granted the Governor a limited legislative function – deviating from the traditional separation of powers that grants the function of appropriating money to the legislature.



Because it is a significant departure from the usual separation of powers that keeps our government balanced, the Courts tend to construe the veto power narrowly, with any doubt over the extent of the power resolved in favor of the traditional separation of governmental powers and the restricted nature of the veto.



Iowa Law on Veto Power

Under Iowa law, the Governor ordinarily has three days after a bill is presented to him, not counting Sunday, within which to veto it. If he does not veto it in those three days the bill becomes law without his signature. If he wishes to veto it, he must endorse his disapproval upon the bill and return it before the deadline to the house in which it originated so the legislature may reconsider it and possibly pass it by sufficient votes to override the veto.



However, if the general assembly adjourns too quickly for the Governor to be able to be return it to them for reconsideration, then the bill does not become law through the governor’s failure to sign or veto it within the regular period. Bills presented during the last three days of a session come within this exception because final adjournment shortens the available period for returning them. Instead, Iowa law gives the Governor thirty days after adjournment within which to decide whether to approve it, veto it, or let it die by failing to act.



With regard to appropriation bills, Iowa law gives the Governor the line item veto: the Governor may approve the bill in whole or in part, or can disapprove any particular item of the bill and approve the rest. Any item disapproved by the Governor is returned to the house in the same method with other bills. If he fails to approve or disapprove or any particular item, it will either: 1) Become law by default under normal circumstances; or 2) Lapse and not become law if it was turned into the Governor in the last three days of the legislative session; just as with other bills.



Analysis of Vilsack’s Line Item Veto on the Values Fund Bill

The Court indicated that every analysis of the item veto power must begin with a determination of the nature of the bill that the governor is attempting to item veto, because the fundamental prerequisite is that the bill to be item vetoed actually be an appropriation bill. The Court reviews each bill on an ad hoc basis to determine if it creates an appropriation.



The technical test for an appropriations bill is that it must allocate funds “whether from the general fund or from a revenue-producing bill, into a separate and distinct fund that the State can no longer utilize for other purposes absent subsequent legislation.”



There are two types of appropriations possible. The first is a traditional appropriation bill, which includes at least one flat out allocation of funds on the face of the bill. The other is a nontraditional bill, that doesn’t flat out allocate funds. There are two types of nontraditional bills, one that orders an expenditure. The second type is marked by the allocation of funds by either 1) the direct ordering of an expenditure or 2) an alteration to funding allocations already included in sections of the Iowa Code, which results in the expenditure of funds unless subsequent legislation is passed to stop the expenditure or somehow redirect it.



Once the Court determines whether the bill is an appropriations bill, it still must determine whether the language vetoed by the Governor was an “item” under the terms of Iowa law. The term “item” has proved difficult to interpret, with some arguing it applies only to monetary allocations, and others taking the broad view it can apply to anything in the bill. There are added twists: Can the Governor veto individual words? For example, if you strike the word ‘not’ from a sentence, you change the entire meaning to the opposite of what the writer intended. Can you veto the item being funded without vetoing the funding itself, thus getting a little extra money into the budget to play with? The Court has found that:



“We generally recognize three types of items that may be item vetoed. The first is a specific appropriation made on the face of the bill. The second is a rider, “an unrelated substantive piece of legislation incorporated in the appropriation bill.” Colton, 372 N.W.2d at 191. The third is a condition, “a provision in a bill that limits the use to which an appropriation may be put,” which may be vetoed only if the appropriation accompanying it is vetoed as well. Id. at 189; Welden, 229 N.W.2d at 709. However, a condition, standing apart from its appropriation, may not be item vetoed because such a veto would invade the legislative prerogative to “specify how money shall be spent,” granted through the general appropriation power. Welden, 229 N.W.2d at 710. A provision must fall within one of these three types and circumstances to be subject to the item veto power.”



The Governor argued that the references to HF 683 within HF 692 was enough to transform HF 692 into an appropriation bill. The legislature vehemently disagreed. The Court agreed with the legislature:



“If we were to accept and apply the Governor’s approach, we would be condoning a vast expansion of the scope and reach of the governor’s item veto power . . . every bill that is somehow linked to another bill that contains a related appropriation—which HF 683 undoubtedly does—could be reached by the governor’s item veto power. However, the item veto power is a limited, negative power and cannot be expanded in this way.”



The Governor based his argument on several distinct provisions within HF 692. The first involved Section 84 of HF 692, which dealt with setting up the IVF. That section stated that payment of interest, repayment of money loaned, and recaptures of grants or loans shall be deposited in the Iowa Values Fund, and it discussed the method by which funds leftover in the IVF would revert at the end of the fiscal year. The Governor contended that these provisions were appropriations. The Court rejected this argument, because the IVF provisions in HF 692 did not directly involve the allocation of funds by ordering an expenditure or “commanding alterations to standing allocations within sections of the Iowa Code resulting in the expenditure of funds absent subsequent legislation to stop the expenditure or somehow redirect it.” Instead, it was dependent on further legislative action outside of the policy provisions crafted in HF 692 to make the Values Fund functional – the provisions contained in HF 683. The Governor wanted the Court to read the two together, creating one merged appropriations bill. The Court declined, stating:



“In effect, we believe the provisions of HF 692 create a “savings account” for the Values Fund and describe how the fund will operate, but do not place funds or alter funds that are to be spent pursuant to mandatory statutory language that are currently placed in that account. It is that placement or alteration of funds which is at the heart of the appropriation power and which triggers the Governor’s ability to item veto.”



The second provisions which the Governor cited in HF 692 were ones providing for compensation and expense payments for members of boards created in HF 692, and changing fines and surcharges related to the workers’ compensation act, and reducing income tax rates. The Court stated:



“We do not believe the provisions providing for compensation and expense payments for board members are allocations of any sort. These provisions call for the director of the department of economic development and state auditor to “budget” for the positions but do not allocate funds to fulfill those budget items . . . The Governor’s contention that changes to fees related to the workers’ compensation act are appropriations is similarly infirm . . . The first change would increase the possible assessment that may result if an employer fails to file certain reports pursuant to the workers’ compensation act. This series of possibilities is contingent on matters extraneous to HF 692 . . . The second change adjusts an unemployment fund surcharge . . . this surcharge does not order an expenditure or affect a standing allocation because any allocation from the fund is dependent on later legislative action not contemplated in HF 692.”



Finally, the Governor contended that alterations to the state tax code to reduce income tax rates provided for in HF 692 were appropriations. The Court vehemently disagreed with that issue:



“This contention is divorced from our prior case precedents and basic logic. The effect of the provisions altering the tax code would result in the reduction of the state general fund. We simply cannot comprehend how a reduction in the general fund could be considered the allocation of funds . . .”



THE HOLDING

"[T]he Legislature immediately adjourned sine die after conveying HF 683 and HF 692 to the Governor. Thus, the Governor had thirty days in which to approve the bills or both would have failed due to the absence of the Governor’s affirmative approval. Iowa Const. art. III, § 16. The Governor attempted to approve HF 692 in part and disapprove it in part on the theory he was permitted to item veto its provisions. However, as we have discussed, the Governor’s attempted item vetoes were unconstitutional. More importantly, because they were unconstitutional, his act of attempting to veto certain provisions of the bill is rendered a nullity and ineffective. The effect of this circumstance is to render the bill whole, as if the item vetoes never occurred. However, this result creates an unanticipated quandary. Had the Governor impermissibly exercised his item veto authority during the period in which his general veto power was in effect, thus effectively failing to veto any provision, the bill would have become law automatically. The appropriate conclusion in such a situation would be that the bill became law because the Governor failed to approve or disapprove it before the end of three days. However, in this case, the Governor has impermissibly exercised his item veto authority during the period in which his pocket veto power was in effect, thus effectively failing to veto any provision . . . [W]e are constrained to conclude that by operation of the Iowa Constitution, no portion of HF 692 became law because the entire bill did not receive the affirmative approval of both the Legislature and Governor before the end of the thirty day period provided the Governor to consider a bill pursuant to the process for consideration of bills passed “during the last three days of a session.”



I did have to laugh at that last argument by the Governor, that a reduction in taxes was somehow an "appropriation." Nice try, that. All in all, the case is a fascinating glimpse into the political poker game that goes on every day in Des Moines.