DISTRICT COURT CITY AND COUNTY OF DENVER, COLORADO City and County Building 1437 Bannock Street, Room

256 Denver, CO 80202 DOUGLAS BRUCE, Plaintiff, v. STATE OF COLORADO and GOVERNOR JOHN HICKENLOOPER, in his official capacity, Defendants. Attorneys for Defendants: JOHN W. SUTHERS, Attorney General MAURICE G. KNAIZER, Deputy Attorney General* Registration No.: 5264 Email: maurie.knaizer@state.co.us MATTHEW D. GROVE, Assistant Attorney General* Registration No.: 34269 Email: matthew.grove@state.co.us 1525 Sherman Street, 7th Floor Denver, CO 80203 Telephone: 303-866-5264 FAX: 303-866-5671 *Counsel of Record

EFILED Document CO Denver County District Court 2nd JD Filing Date: Jan 27 2011 8:20PM MST Filing ID: 35632422 Review Clerk: Sean McGowan

COURT USE ONLY

Case No. 10CV2425

DEFENDANTS MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT Defendants John Hickenlooper, in his official capacity as Governor of the State of Colorado, and the State of Colorado, submit the following Memorandum of Law in support of their motion for summary judgment.

INTRODUCTION AND PROCEDURAL HISTORY Plaintiff Douglas Bruce filed suit claiming a prior and ongoing violation of 20(5) of the Taxpayer Bill of Rights (TABOR), which requires the creation of emergency reserves equal to three percent or more of fiscal year spending. In particular, Bruce takes issue with the legislatively-determined composition of the emergency reserve, which is currently made up of portions of various state-owned cash funds and capital assets. Bruce asserts that this arrangement violates TABOR because, he insists, emergency reserves required by 20(5) must be maintained in an independent cash account. Bruces Complaint named the State, the General Assembly, and the Governor as defendants. It sought declaratory and injunctive relief against the dedication of already-existing cash funds and capital assets to the TABOR emergency reserve. Bruces Complaint also asserted various tort claims against the Governor and members of the General Assembly and, among other things, demanded that the state be placed in receivership under court supervision to ensure compliance with the courts order. Complaint 21. Each of the Defendants moved to dismiss on all claims. Relying on principles of legislative and sovereign immunity, the Court dismissed all of the claims against the General Assembly and all of the tort-based claims involving the Governor. See Courts Order Re: General Assemblys Motion to Dismiss (filed August 23, 2010); Courts Order Re: Colorado and Governor Ritters Motion to Dismiss (filed August 23, 2010). However, the Court denied the State and Governors motion to dismiss with respect to Bruces substantive constitutional claims, finding that [f]or the purposes of this motion, and based strictly on the averments in the Complaint, the Court finds that Plaintiff has

sufficiently stated a cause of action upon which relief may be granted. Courts Order Re: Colorado and Governor Ritters Motion to Dismiss, 5. DEFENDANTS STATEMENT OF UNDISPUTED FACTS 1. The TABOR emergency reserve has never been an independent and/or separately

maintained fund of liquid assets. Ex. 1, 10. 2. Rather, since its inception, the TABOR emergency reserve has always been

comprised of designated portions of various pre-existing state-owned assets. Ex. 1, 11. 3. The state-owned assets comprising the TABOR emergency reserve have

historically fallen into one of two categories, pre-existing cash funds and capital assets. Ex. 1, 16-20. 4. The spreadsheet attached hereto as Exhibit 2 accurately reflects the entire

composition of Colorados TABOR emergency reserve since its inception. Ex. 1, 12. 5. Colorados cash funds do contain cash, but many of them also contain non-cash

assets such as inventory, equipment, and prepaid expenses. Ex. 1, 15, 16. 6. When a cash fund is designated as a portion (or all) of the TABOR emergency

reserve, that pledge includes both cash and non-cash assets. Ex. 1, 15. 7. Thus, the TABOR emergency reserve has contained illiquid assets since it was

first established in accordance with Colo. Const. art. X, 20(5). Ex. 1, 13-20. 8. Accounting standards applicable under Colorado state law permit a reserve to

be comprised of any type of asset, whether cash or non-cash. Ex. 1, 27. 9. The inclusion of illiquid assets, including state buildings and other capital assets,

as components of the TABOR emergency reserve is fully consistent with Generally Accepted 3

Accounting Principles (GAAP) and standards promulgated by the Government Accounting Standards Board (GASB). Ex. 1, 28, 29. SUMMARY OF THE ARGUMENT The Defendants are entitled to summary judgment for several reasons. First, Bruces substantive claim that the TABOR-mandated emergency fund may only be held in a separate cash account finds no support in the Colorado Constitution and should be rejected as a matter of law. In the absence of a constitutional definition of the phrase reserve or emergency reserve, the question presented in this case is whether the States interpretation of the phrase to include both cash and non-cash assets is otherwise consistent with the remainder of state law. The evidence presented demonstrates that the demarcation of non-cash assets as comprising portions of the emergency reserve is fully consistent with statutorily mandated accounting principles, and is thus constitutional. This conclusion is buttressed by the heavy presumption of constitutionality that is attendant upon all legislation adopted by the General Assembly and signed by the Governor. This burden is particularly prevalent in TABOR cases, which require a reviewing court to affirm the constitutionality of a statute unless it is shown to be unconstitutional beyond a reasonable doubt. In light of the General Assemblys long history of designating non-cash assets to the TABOR emergency reserve and the crippling effect that his proposed remedy would have on state government, Bruce is unable to carry this heavy burden. SUMMARY JUDGMENT STANDARDS The purpose of summary judgment is to permit the parties to pierce the formal allegations of the pleadings and save the time and expense connected with trial when, as a matter of law, 4

based upon undisputed facts, one party could not prevail. Peterson v. Halsted, 829 P.2d 373, 375 (Colo. 1992). Summary judgment is appropriate when the pleadings and supporting documentation demonstrate that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c); W. Elk Ranch v. United States, 65 P.3d 479, 481 (Colo. 2002). The nonmoving party is entitled to any favorable inferences that may reasonably be drawn from the facts, and all doubts must be resolved against the moving party. Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223, 225-26 (Colo. 2001).

ARGUMENT I. The States designation of capital assets as a portion of its emergency reserves does not violate Colo. Const. art X, 20(5). Bruces Complaint is founded on his assertion that 20(5) prohibits the state from designating capital assets as a portion of its TABOR-mandated emergency reserves. This claim fails as a matter of law. Because TABOR does not require that the emergency reserves be held in an independent cash account, the Defendants are entitled to summary judgment in their favor. A. The States historical compliance with TABORs emergency reserves provision. TABOR requires every district, including the state, to establish an emergency reserve valued at least 3% of its overall annual budget. The applicable provision reads as follows: (5) Emergency reserves. To use for declared emergencies only, each district shall reserve for 1993 1% or more, for 1994 2% or more, and for all later years 3% or more of its fiscal year spending excluding bond debt service. Unused reserves apply to the next years reserve. Colo. Const. art. X 20(5). Although the General Assembly has faithfully complied with this provision in every year since the passage of TABOR, it has never done so by establishing a 5

separate and independent emergency reserve fund. See Ex. 1, 10. Rather, the General Assembly has historically complied with this requirement by designating certain pre-existing state assets as the sources of the states emergency reserve in the Long Bill for each fiscal year. See, e.g., S.B. 93-234 1(20); S.B. 94-1356 1(19). The sources designated by the Long Bill have varied over the years. Most often, they include designated amounts of various cash funds (which despite their common name, generally contain a mix of cash and non-cash assets), such as the Higher Education Auxiliary and the Controlled Maintenance Trust Fund. In FY 1994-1995, for example, the designated emergency reserve included specific amounts of the Highway Users Tax Fund, the General Fund, the Unemployment Insurance Fund, and the Wildlife Fund. See S.B. 94-1356 1(19). For FYs 1996-1997 through 2000-2001, the Controlled Maintenance Trust Fund was designated as the source for the entire emergency reserve. See H.B. 96-1366 1(19), S.B. 97-215 1(19), S.B. 98-1401 1(19), S.B. 99-215 1(19), and H.B. 00-1451 1(19). The economic downturn of 2000-2001 reduced the amount of cash available in the states various cash funds. See Barber v. Ritter, 196 P.3d 238, 242 (Colo. 2008). Based on the FY 2001-2002 budget, the emergency reserve required by TABOR was approximately $217 million. To comply with this obligation, the 2001 Long Bill earmarked approximately $120 million in cash from the states Severance Tax Trust Fund, the Employment Support Fund, and the Wildlife Fund. The remaining $97 million was covered by designating a portion of the Wildlife Funds capital assets as part of the emergency reserve. See Ex. 3, State of Colorado Comprehensive

Annual Financial Report For the Year Ended 2002, at 76. 1 The state Controllers annual report observed that [i]n the event of an emergency that exceeded the financial assets in the reserve, these capital assets would have to be liquidated to meet the constitutional requirement. Id. As the states financial situation worsened in the early 2000s, the General Assembly sought an opinion from the Office of Legislative Legal Services (OLLS) as to whether 20(5) permitted the designation of capital assets to the emergency reserve, or whether it required the TABOR emergency reserve to be held in a separate cash account. OLLS addressed this question in a detailed memorandum issued on April 14, 2003. See Ex. 4. Noting not only the plain language of TABOR, but also the states historic inclusion of non-cash assets in the emergency reserve, OLLS opined that 20(5) does not require the TABOR emergency reserve to be comprised of cash alone. OLLS thus concluded that the General Assembly could, consistent with TABOR, designate capital assets as part of the emergency reserve. Id. at 1-2. Former Attorney General Ken Salazar concurred with this opinion in a letter addressed to the Chairman of the Joint Budget Committee. See Ex. 5. In accordance with the opinion of OLLS, Colorados fiscal appropriations have followed an explicitly hybrid approach since FY2003-2004. See Ex. 2. In FY2009-2010, for example, the cash portion of the emergency reserve consisted of approximately $152 million from the Major Medical Fund and the Wildlife Fund and approximately $3.6 million in accounts receivable from the Wildlife Fund. See Ex. 6 (letter from State Controller to Chairman of Legislative Audit
1

Because the FY2001-2002 Comprehensive Annual Financial Report is nearly 200 pages long, only the relevant page is excerpted as an exhibit here. Colorados Comprehensive Annual Financial Reports for every dating back to FY1995-1996 are available at http://www.colorado.gov/dpa/dfp/sco/CAFR/cafr.htm.
7

Committee), at 2. State-owned capital assets comprise the remainder of the emergency reserve; in March 2010 then-Governor Ritter identified $81.1 million worth of select state properties which would be usedtowards the State Emergency Reserve in the event the State needed to access such funds. See Ex. 7. B. The TABOR emergency reserve has never been held in a separate account, and has included both cash and non-cash assets since its inception. The bulk of Bruces Complaint derives from two fundamentally incorrect propositions: 1) that, in previous years, the TABOR emergency reserve was a separate account, see Complaint, 20; and 2) that, prior to the inclusion of state properties, the TABOR emergency reserve was made up entirely of cash. See Complaint, 20. As demonstrated below, both of these assertions are wrong. Since the measures passage in 1992, the States interpretation of TABOR has consistently acknowledged the legislatures authority to establish and maintain the required emergency reserve in a manner that meets TABORs requirements while simultaneously ensuring the States ability to function. 1. The TABOR emergency reserve has never been a separate account.

Bruces first misconception is that the TABOR emergency reserve was at some point in the past held in a separate account that was raided in order to balance the state budget. As Exhibits 1 and 2 demonstrate, however, this is simply untrue. For the first ten years of its existence, the TABOR emergency reserve was made up exclusively of designated portions of pre-existing cash funds. It was never a separate cash account. See Ex. 1, 10. Although the specific funds designated by the Long Bill changed from year to year, the fundamental composition of the TABOR emergency reserve has been consistent since the beginning. 8

2.

The TABOR emergency reserve has included illiquid assets since its inception.

Bruce also places great emphasis on his claim that the designation of state properties as part of the TABOR emergency reserve a practice that began in FY2003-2004 marked a shift from the mythical all-cash, freestanding reserve to one that violates 20(5). As the history recited above makes evident, however, this argument betrays at least two fundamental misunderstandings of how the General Assembly has implemented TABOR. First as already discussed, no independent TABOR emergency reserve has ever existed. Second, the reserve has always contained illiquid assets because very few, if any, of the cash funds designated to the TABOR emergency reserve are made up solely of cash. Indeed, although most of the states cash funds have substantial liquidity, applicable accounting principles nonetheless require them to be valued based on all of the assets that they contain, whether those assets are held in cash or not. In other words, the General Assemblys explicit inclusion of State-owned properties beginning in FY2003-2004 did not mark a sudden change in the types of assets designated to the TABOR emergency reserve. To the contrary, the reserve has contained non-cash assets including consumable inventory, prepaid expenses, and accounts receivable since day one. 3. The General Assemblys contemporaneous interpretation of TABOR is important and is entitled to deference.

These historical considerations are important because [t]he General Assemblys construction of TABOR made shortly after its adoption is to be given great weight. Zaner v. City of Brighton, 899 P.2d 263, 267 (Colo. App. 1994). The affidavit and evidence attached to this motion demonstrate that the General Assemblys interpretation of 20(5) has remained 9

consistent since TABOR was first passed into law. Thus, the current TABOR emergency reserve, as it always has been, is composed of a blend of cash and non-cash assets that the General Assembly and Governor have deemed appropriate from a policy perspective. As discussed below, Bruces Complaint would have failed as a matter of law even if he had asserted it seventeen years ago. The legislatures longstanding interpretation of TABORs emergency reserve requirement only reinforces this conclusion. II. Sec. 20(5) does not impose liquidity or composition requirements on the TABOR emergency reserve. As already noted, TABOR requires that every district reserve3% or more of its fiscal year spending for emergencies. Colo. Const. art X, 20(5). Emergencies are defined (by exclusion) in TABOR, but the terms reserve and reserves (in either noun or verb form) are not. TABOR says nothing about the structure or makeup of the emergency reserve, and certainly does not expressly state that it must be kept, as the Complaint suggests, in liquid dollardenominated form. Complaint 2. Rules of constitutional and statutory construction must therefore be applied to determine whether 20(5) permits the emergency reserve to consist of a mix of liquid and capital assets. A statute is presumed to be constitutional and a party challenging it must establish its unconstitutionality beyond a reasonable doubt. City of Littleton v. Bd. of County Commrs of Arapahoe County, 787 P.2d 158, 163 (Colo. 1990). This burden, while already heavy, is even more demanding in the context of initiated constitutional amendments, where the General Assemblys contemporaneous interpretation and implementation of a measures undefined terms is subject to deference. See Zaner, 899 P.2d at 267. 10

The Colorado Constitution, unlike the federal constitution, does not comprise a grant of, but rather a limitation on power. Reale v. Bd. of Real Estate Appraisers, 880 P.2d 1205, 1208 (Colo. 1994). Consequently, the General Assembly is permitted to enact any law that is not expressly or inferentially prohibited by the constitution of the state or of the nation. People v. Y.D.M., 593 P.2d 1356, 1359 (Colo. 1979). The inclusion of capital assets in the emergency reserve is therefore constitutional unless the General Assemblys interpretation of TABOR is, beyond a reasonable doubt, inconsistent with the requirements of 20(5). Accordingly, in order to prevail, Bruce must: 1) show that the plain language of TABOR is expressly contrary to the legislatures interpretation; or 2) that TABOR inferentially prohibits the composition of the emergency reserve as established by the Long Bill. In order to do so he must not only overcome the deference that must be accorded the General Assemblys interpretation of TABORs undefined terms, but he must also demonstrate that the legislatures interpretation of 20(5) is unconstitutional beyond a reasonable doubt. So long as the legislatures interpretation of 20(5) is reasonable, it passes constitutional muster and must be upheld.

A.

TABOR does not expressly prohibit the General Assembly from utilizing capital assets as part of the TABOR-mandated emergency reserve.

[T]he General Assembly [is] vested...with plenary power to adopt general laws, subject only to the restraints and limitations of the state and federal constitutions. Y.D.M., 593 P.2d at 1359, citing Colo. Const., Art III. Constitutional limitations on the General Assemblys legislative prerogative may be express or implied. Id. Express limitations, if they exist, must

11

appear in the provisions plain language. See id. (pointing to lack of a plain, express limitation on the General Assemblys authority in the relevant constitutional provision). The plain language of TABOR does contain an express provision requiring the legislature to establish an emergency reserve. It does not, however, either in 20(5) or anywhere else, expressly require that the emergency reserve be held in cash. Nor does TABOR expressly prohibit the General Assembly from designating sufficiently valued capital assets as part of (or, for that matter, all of) the emergency reserve. To the contrary, 20(5) simply states that each district shall reserve3% or more of its fiscal year spending for emergencies. The provision says nothing about the sources of the funding or the accounts to which the emergency reserve may be allotted. Absent such an express restriction, Bruce is able to prevail only if he can establish that TABOR inferentially prohibits the inclusion of non-cash assets in the emergency reserve. B. TABOR does not inferentially prohibit the General Assembly from utilizing capital assets as part of the TABOR-mandated emergency reserve.

The lack of any express requirements as to the structure of the TABOR-mandated emergency reserve endows the General Assembly with substantial discretion as to the reserves makeup. This discretion is, of course, tempered by any implied limitations on legislatures broad authority to implement TABOR. See Y.D.M., supra. But the lack of any express requirements as to the makeup of the emergency fund means that Bruces claim may succeed only if he is able to show that TABOR inferentially limits the legislatures power to designate capital assets for that purpose.

12

Resorting to inference raises additional obstacles for Bruces Complaint. Indeed, in order to establish that the legislatures interpretation of 20(5) violates TABOR, Bruce must not only rebut the presumption of constitutionality attendant upon every legislative enactment, see City of Littleton, supra, but he must also overcome the deference conferred upon legislative interpretations of undefined constitutional terms. See Zaner, supra. Because the General Assemblys interpretation of 20(5) is entirely reasonable and is consistent with our supreme courts approach to the interpretation and application of TABOR, Bruces claim fails on the merits and the Defendants are entitled to summary judgment. Because TABOR does not define the key term reserve, the legislature retains discretion to reasonably interpret it. Section 20(5) uses reserve both as a noun (Unused reserves apply to next years reserve...) and a verb (Each district shall reserve...). The noun form is the important one. Bruces Complaint advances several arguments in support of his claim that the states emergency reserve must be cash-based. For the reasons outlined below, each of those arguments fails. 1. Bruces personal opinions are not entitled to consideration

Bruce implies that, as the drafter of TABOR, his own after-the-fact interpretation of the amendments provisions is entitled to deference. Complaint, 14 (Plaintiff, the author of TABOR, had a legal right to petition, and exercised it to require a cash reserve[.]). This suggestion is flatly incorrect, and has been refuted by our supreme court on several occasions. See, e.g., Davidson v. Sandstrom, 83 P.3d 648, 655 (Colo. 2004) ([t]he intent of the drafters, not expressed in the language of the amendment, is not relevant to our inquiry); see also In re Interrogatories Relating to the Great Outdoors Colorado Trust Fund, 913 P.2d 533, 540 (Colo. 13

1996) (When courts construe a constitutional amendment that has been adopted through a ballot initiative, any intent of the proponents that is not adequately expressed in the language of the measure will not govern the courts construction of the amendment.). Bruce nonetheless argues that the Court may consider the opinions that he expressed as an initiative proponent prior to TABORs passage. Complaint 13, citing Bedford v. Sinclair, 147 P.2d 486 (Colo. 1944). Bruce has made this claim before. See Submission of Interrogatories on Senate Bill 93-74, 852 P.2d 1, 8 n.7 (Colo. 1993) (declining to consider Bruces post hoc interpretation of TABOR, and noting Bruces failure to point to any evident contemporary interpretation supporting the position advocated after the fact). Although Bedford has not been expressly overruled, more recent caselaw suggests that it is no longer persuasive. 2 To the contrary, the supreme court has repeatedly limited its consideration of adopted ballot initiatives to the text of the amendment itself, thereby refusing to lend weight to any intent of the proponents that is not adequately expressed in the language of the measure[.] Mesa County of Bd. of County Commrs v. State, 203 P.3d 519, 534 (Colo. 2009), quoting Great Outdoor Colorado Trust Fund, 913 P.2d at 540.

Even assuming that Bedfords acknowledgment of the influence of evident contemporary interpretation remains good law, its impact is far more limited than Bruce suggests. As a matter of logic, a proponents contemporary interpretation of a ballot initiative should have no impact on the electorate unless it has been widely disseminated prior to the election. The Blue Book would qualify, of course, as would proof of preelection media coverage of a proponents statements about the meaning of a particular provision. Even assuming that Bruces pre-election statements supported the position that he has now adopted, he would be unable to rely on them absent evidence that the public was actually made aware of those statements prior to November 3, 1992.
14

In any event, assuming arguendo that Bruces evident contemporary interpretation is relevant, Bruce has made only vague and conclusory allegations that such an interpretation exists and was expressed prior to TABORs passage. This is not to say that Bruce made no comments on TABOR before the 1992 general election. To be sure, he offered extensive testimony in support of TABOR at an Initiative Comment Hearing hosted by the Office of Legislative Legal Services on April 23, 1991. A review of the hearing transcript, attached hereto as Exhibit 8, reveals several discussions of TABORs emergency reserve provision. Crucially, however, these discussions never directly addressed the composition of the emergency reserve. Whether or not Bruce now claims that he intended that the emergency reserve would be cash-based, he never said that this was a requirement. See Ex. 8 at 13 (If you reserve appropriations...) (emphasis added), 30 (if they use it then in the following year they have to cut their spending by three percent in order to replace the emergency reserve). A review of the relevant pages of the 1992 Blue Book, attached hereto as Exhibit 9, yields similar conclusions. The Blue Books description of the required emergency reserve says nothing about its composition. As already noted, the General Assembly may pass any law not inconsistent with the constitution. The plain language of TABOR does not require the emergency reserve to be cashbased, and even if Bruce had declared it to be so before the November 1992 general election, it would make no difference now. Nonetheless, Bruces failure to make such a declaration prior to TABORs passage undercuts his claim still further. 2. TABORs plain language supports the States approach.

Bruces inferential argument is based on his claim that, when read in context, the term reserve must mean cash reserve. To this end, he declares it obvious that 3% of a dollar 15

amount is itself a dollar amount, and therefore claims that the state must keep th[e] reserve in a liquid dollar-denominated form. Complaint 5. As support for these assertions, Bruce argues that it is nonsensical for the emergency reserve to consist of anything but cash, because the clear purpose of establishing the emergency reserve is to have money on hand to address INSTANT disaster relief. Complaint, 11, 10 (emphasis in original). As already discussed, however, Bruces post hoc personal interpretation of the clear purpose of the emergency reserve is not entitled to consideration. To the contrary, in the absence of an express constitutional command, the clear purpose of the emergency reserve may only be divined from the constitutional text. That text does not support Bruces claim. The TABOR-mandated emergency reserve is available for declared emergencies only. 20(5). Bruces claims about the clear purpose of the emergency reserve assume that, in every case, a declared emergency demands instant cash funding. But this conclusion does not necessarily follow from TABORs definition of emergency. Indeed, TABOR does not define what an emergency is, it only defines what an emergency is not: Emergency excludes economic conditions, revenue shortfalls, or district salary or benefit increases. Colo. Const., art X 20(2)(c). This exclusionary approach vests the states elected officials with substantial discretion; one can imagine any number of situations that might meet the criteria of a declared emergency, but that would not necessarily require instant funding to resolve. For example, a calf-killing spring blizzard on the eastern plains might qualify, but ranchers whose herds were not scheduled to go to market for months would not need immediate cash compensation in order to be made whole. A rockslide on a mountain road might likewise result in a declared

16

emergency, but the availability of alternate routes might very well give state officials time to assess the damage, the cost of repairs, and various sources of funding. Given that an emergency under TABOR encompasses such a broad range of potential disasters, the legislatures decision to split the emergency reserve between liquid and capital assets is perfectly reasonable. TABORs failure to mandate the reserves composition or the uses to which it can be put results in a delegation of those questions to the legislature. In other words, the composition of the reserve is a political question left to the discretion of the states elected officials. For the current fiscal year, the legislature has established what it deems to be an appropriate balance between cash and non-cash assets in order to provide sufficient insurance against disasters that might require instant cash relief. Its approach is completely consistent with applicable accounting principles. Bruces assumptions about the usefulness of capital assets are likewise misplaced. If a disaster occurred that was large enough to deplete the cash portion of the reserve, the equipment and buildings identified as part of the reserve could be used in a variety of ways. Despite Bruces claims to the contrary those capital assets could, under some circumstances, be used to provide direct emergency relief. In a worst-case scenario, they could quickly be converted into cash either through their sale or collateralization. In any event, Bruces assertion that the emergency reserve is intended solely to provide instant liquidity lacks support in the text of TABOR itself. When the entire spectrum of potential declared emergencies is considered, along with the appropriate response thereto, the legislatures interpretation of TABORs plain language as allowing discretion in the reserves composition is entirely reasonable. Bruces claim must therefore fail. 17

3.

Principles of constitutional interpretation support the States position.

Even if, arguendo, the legislatures interpretation of TABORs plain language is inaccurate, Bruces claim should still be dismissed based on an application of the canons of constitutional interpretation. Applying standard rules of interpretation and supplying definitions for TABORs undefined terms compels the conclusion that the legislature retains discretion to determine the composition of the emergency reserve on its own. Central to this analysis is the doctrine of consistent usage, which is a corollary of the principle that a statute should be interpreted so as to give consistent and harmonious effect to all of its parts[.] Colorado Common Cause v. Meyer, 758 P.2d 153, 161 (Colo. 1988). These principles assume that every word contained in a statute is included for a reason. See Blue River Defense Committee v. Town of Silverthorne, 516 P.2d 452, 454 (Colo. App. 1973) (courts are not to presume that the legislative body used the language idly and with no intent that meaning should be given to its language); cf. Meyer, 758 P.2d at 161 (when the legislature employs the same words or phrases in different parts of a statute...the meaning attributed to the words or phrases in one part of the statute should be ascribed to the same words or phrases found elsewhere in the statute). The rule of consistent usage is particularly applicable here given TABORs discussion of cash reserves in 20(4)(b), which immediately precedes (20)5. If Bruces interpretation of reserve is correct, then the word cash in 20(4)(b) has no meaning, an interpretation that is highly disfavored. See Colorado Ground Water Commn v. Eagle Creek Farms, Ltd., 919 P.2d 212, 218 (Colo. 1996). If 20(5) was intended to limit the emergency reserve to cash alone, it could have easily said so, simply by designating the emergency reserve as a cash reserve. 18

TABORs failure to make such a designation further demonstrates that the composition of the emergency reserve is a question left to the General Assembly. TABORs lack of a definition of the term reserve is likewise crucial. In the absence of a constitutional definition, courts may turn to the dictionary for clarification. See Hiwan Homeowners Association v. Knotts, 215 P.3d 1271, 1273 (Colo. App. 2009). Reserve is defined quite broadly. As a noun, the primary definition is something kept back or saved for future use or a special purpose. The American Heritage Dictionary, Second College Edition, p. 1051 (Houghton Mifflin Co. 1985). As a verb, reserve means to keep back or save for future use or a special purpose. Id. The breadth of both definitions is sufficient to encompass cash, capital, or any other type of state asset. In light of the broad dictionary definition of reserve, TABORs requirement that the emergency reserve constitute 3% of more of fiscal year spending is not an obstacle to the legislatures designation of capital assets. TABOR defines the phrase fiscal year spending as, with certain exceptions not relevant here, all district expenditures and reserve increases. 20(2)(e). This provides guidance as to the required value of the emergency reserve, but it says nothing about its composition. It certainly does nothing to limit the types of assets eligible for inclusion. 4. TABOR should not be interpreted in a manner that will cripple the ability of government to function.

In order to prevail, Bruce must prove beyond a reasonable doubt that the State has misinterpreted TABOR from the date of its adoption in 1992. He must overcome the deference owed to the legislature that first construed TABORs provisions, see Zaner, supra, and 19

demonstrate that TABOR expressly or inferentially prohibits the General Assemblys interpretation. Moreover, in addition to all of these hurdles, Bruce can only prevail by showing that TABORs text leaves [the Court] no other choice but to adopt the interpretation he urges. Barber v. Ritter, 196 P.3d 238, 248 (Colo. 2008). This is so because our supreme court has consistently rejected readings of [TABOR] that would hinder basic government functions or cripple the governments ability to provide services. Id. In Barber, the supreme court applied this exacting standard to a TABOR challenge that would have required a $442 million refund to the States cash funds. Id. at 242. The quantities of money at stake here are of a similar magnitude. Indeed, the TABOR emergency reserve was valued at more than $270,000,000 in FY2010-2011. Granting Bruce the relief he has demanded would require the State to strip that amount from its annual appropriations. It cannot be disputed that this interpretation would have the effect of working a reduction in government services, Bolt v. Arapahoe County Sch. Dist. No. Six, 898 P.2d 525, 537 (Colo. 1995), and thus should be adopted only if the text of TABOR leaves the Court no other choice. Barber, 196 P.3d at 248. The arguments herein amply demonstrate the existence of other satisfactory interpretations of TABOR. To the extent that those interpretations will permit state government to continue to function as it has since the passage of TABOR, they must be adopted by this Court. Affirming the reasonableness of the Defendants interpretation of

TABOR is fully compatible with our supreme courts historically narrow reading of the provision. It is entirely reasonable for the legislature to conclude that the entirety of the emergency reserve need not be available on a moments notice, and TABORs failure to explicitly require that the emergency reserve be maintained in a separate, all-cash account gives 20

the legislature the latitude to do so as a matter of policy. If the legislature is willing to liquidate designated assets in order to respond to an emergency, it remains within its authority to do so. CONCLUSION Based on the foregoing reasoning and authorities, Defendants respectfully request that the Court grant summary judgment in their favor on all remaining claims. JOHN W. SUTHERS Attorney General

s/Matthew D. Grove MAURICE G. KNAIZER,* Deputy Attorney General MATTHEW D. GROVE, * Assistant Attorney General Public Officials Unit State Services Section Attorneys for Defendants *Counsel of Record

CERTIFICATE OF SERVICE I hereby certify that on the 27th day of January 2011, a true and accurate copy of the foregoing MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT was served upon the following by first-class mail, postage prepaid at Denver, Colorado, addressed as follows: Douglas Bruce Box 26018 Colorado Springs, CO 80936 Plaintiff, pro se s/Thomas R. Bovee Thomas R. Bovee Legal Assistant Public Officials Unit State Services Section 21