State Says Public Has No Right to Object, Even if Deal Violates Constitution

Phil Talmadge, attorney for Automotive United Trades Organization.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Jan. 13.—A challenge to the state’s controversial gas-tax deal with Indian tribes came down to oral argument before the state Supreme Court Thursday, not on whether the multi-million-dollar payments violate the state constitution, but whether the public has any right to raise the question in the first place.

            The lucrative gas-tax deals, authorized by the state Legislature in 2007, have been controversial from the start. They award millions of dollars of state gas-tax money to the tribes every year – $28 million in 2010, and growing. Automotive United Trades Organization, the scrappy McCleary-based service-station association that filed suit, says those payments violate the 18^th Amendment, which stipulates that gas-tax money may only be spent for highway purposes.

            But there's a mind-boggling hitch: The state says no one has the right to sue and force a court to whether the deals are proper, because the issue involves Indian tribes. The tribes ought to be a party to the lawsuit, it says. And if they’re a party to the lawsuit, then the whole thing has to be thrown out, because tribes are “sovereign nations” and can’t be sued.

            It’s a classic Catch-22 case, and it’s going to take the Supreme Court to decide it.

            No Accountability for Spending

            Back when the Legislature passed the bill, some Republicans complained that it would allow the governor to strike sweetheart deals with the tribes, a major campaign contributor. The arrangement continues to irk many today – state Rep. Mike Armstrong, R-Wenatchee has filed a bill seeking to force renegotiation. But the argument then and now was that if the state didn’t give the tribes a big payoff, the tribes might get into the refining business and start selling gas without any state tax at all, thus significantly undercutting non-Indian dealers. Deals struck between the state with 23 tribes keep them out of the refining business, and give most of them an amount equivalent to 75 percent of the tax generated by the stations on tribal land.

            Now AUTO maintains that the tribes are gobbling up market share with their low-priced filling stations, and it has a sneaking suspicion that state money may be making it possible. Not that anyone can tell, because tribal books aren’t open for inspection, and no one outside tribal headquarters knows for sure where the money is going. Hence its lawsuit, filed last year in Grays Harbor County.

            The money is supposed to be spent for transportation purposes, but the bill defines that to mean purposes much broader than mere highways. Sketchy information provided to the state Department of Licensing by the tribes indicates that some money has gone to things like parking lots and boat ramps. That’s illegal, too, AUTO says.

But there is actually very little scrutiny at all. The state reviews audit reports submitted by the tribes – basically one-page letters from accountants hired by the tribes who report that everything is A-OK. And even those letters are shielded from public review under the state Public Records Act by the provisions of the 2007 law.

            Challenges Use of Gas-Tax Money

Phil Talmadge, the former state senator and onetime Supreme Court justice, is advancing a clever argument on AUTO’s behalf. He says it isn't necessary to sue the tribes, because AUTO's suit focuses merely on the source of state money. That's the pot of money generated by state fuel taxes, now 37.5 cents a gallon. The suit basically says that if the state wants to give money to the tribes, it ought to get it someplace else.

            Of course, if the Legislature has to dip into the general fund to pay the tribes, the service-station operators suspect it might think twice. At the rate tribes are building stations and throwing up pumps, state estimates indicate that Washington will pay out $427 million over the next 10 years.

            The strategy hit a brick wall last year, however, when the state advanced its theory that no one can sue. It contends the tribes are "indispensible parties" to the case and must be named. Thus the Catch-22. A Grays Harbor judge ruled in the state's favor, though he said his goal was really to get the Supreme Court to weigh in.

            And so the issue landed before the Supreme Court Thursday, forcing the justices to decide a fine legal point: Even though the tribes might be involved, can anyone challenge the way the state fulfills its end of the bargain?

            Spending Called Illegal

            Of course they can, Talmadge argued. “I think it [the state's position] is really troubling when the state has the obligation to enforce the provisions of the Washington state constitution regarding state officers. I mean, that is incredibly troubling to me as a citizen and it should be troubling to this court as well.”

            Suppose you had a case of egregious misconduct by a high public official, he said – say, a case of bribery involving a governor who made a deal with an Indian tribe? If you buy the state’s argument, nobody could do a thing about it.

            The tribes don’t have to be brought into the case when the only real issue is the way the state obtains the money, he said. Surely the public can question that. “They [the tribes] have no legally protected interest in illegal actions by state officers,” he said.

            No Right to Sue

            Like it or not, that’s the way the law works, insisted Todd Bowers of the state attorney general’s office. Maybe the service station operators are trying to focus the question narrowly, on where the state gets the money, but you have to look at the big picture.

“I understand AUTO's statement that this case is about the constitution, and to some extent the state would accept that, but let's not forget this case is also about AUTO’s business interests. This is about the compacts.”

Justices appeared skeptical of that argument. Said Justice Tom Chambers, “I am one who tends to believe that if there is a wrong there probably should be a remedy and there shouldn’t be unnecessary barriers. It seems to me that your argument is pretty technical.”

And Justice Debra Stephens asked, “What is to distinguish one case from another? What if the state entered into a compact to pay every tribe X amount in exchange for nothing? Something that is just flat ultra vires [beyond the bounds], let’s just say that everyone would agree that it’s just flat ultra vires? …How do we distinguish between Case A and Case B?”

            Seemed to Get It

Now comes the long wait for a ruling, and you can bet Tim Hamilton, director of the service-station group, is going to be on pins and nozzles.