Did the legislature violate the Arkansas Constitution by adding a substantive premium-tax provision to the State Insurance Department's appropriation bill?

Plain-English summary

State Senator Bryan King asked AG Leslie Rutledge whether Section 29 of Act 871 of 2015 was constitutional. Section 29 had been added by Amendment 1 to HB 1152 (the State Insurance Department's appropriation bill for FY 2015-2016) during the 2015 regular session. Section 29 carved out the insurance premium tax credit at Ark. Code Ann. § 26-57-604(a)(1)(B)(ii) so the credit would not offset taxes from health insurance plans issued under the Health Care Independence Act of 2013 (the "Program") or the Arkansas Health Insurance Marketplace Act (the "Marketplace").

The senator's questions framed two constitutional arguments:

1. Article 5, Section 21 of the Arkansas Constitution forbids altering or amending a bill so as to "change its original purpose."
2. Article 5, Section 30 requires non-general-appropriation bills to "embrace[] but one subject" (the single-subject rule).

The AG concluded that Section 29 likely satisfied both constitutional tests:

• The premium tax credit carve-out was germane to HB 1152's original purpose, which already included substantive provisions on the Insurance Department's role in the Program and Marketplace.
• The provision was sufficiently connected to the appropriation's general subject (Insurance Department administration) under Arkansas Motor Carriers Ass'n v. Pritchett, 303 Ark. 620 (1990), to satisfy art. 5, § 30.

The AG also noted that effective January 1, 2017, Act 1 of the Second Extraordinary Session of 2016 expanded the carve-out to include the Arkansas Works Act of 2016.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

How germaneness works under Article 5, Section 21

The text: "[N]o bill shall be so altered or amended on its passage through either house, as to change its original purpose."

The Arkansas Supreme Court has read this to forbid amendments that "embrace[] new matter not germane to the original purpose of the act." Barclay v. Melton, 339 Ark. 362 (1999) (quoting Hickey v. State, 114 Ark. 526 (1914)). Practical application principles:

• The bill's original title is relevant but not controlling. Loftin v. Watson, 32 Ark. 414 (1877).
• Courts can look beyond the title to the bill's emergency clause to determine purpose. Matthews v. Byrd, 187 Ark. 458 (1933).
• Article 5, § 21 receives "practical and liberal construction." Loftin, 32 Ark. at 421-422.
• Courts strike provisions only if "it obviously appears" the original purpose was changed. Matthews, 187 Ark. at 464.

Why the safeguard exists: Without art. 5, § 21, last-minute amendments could "convert[] [bills], by amendment, into bills for totally different purposes" during the close of session, evading art. 5, § 34's three-day-rule on new bills.

How the single-subject rule works under Article 5, Section 30

The text: "The general appropriation bill shall embrace nothing but appropriations for the ordinary expenses of the executive, legislative and judicial departments of the State; and all other appropriations shall be made by separate bills, each embracing but one subject."

The "unity of subject" or "single subject" rule prevents combining unrelated provisions in an appropriation bill, which would invite logrolling and pork-barrel legislation. Cottrell v. Faubus, 233 Ark. 721 (1961). The test: each section must "accomplish a purpose of one design." Clinton v. Taylor, 284 Ark. 238 (1984). The court looks at the "ultimate end," not individual steps. Reid v. Jones, 261 Ark. 550 (1977).

Pritchett (the AHTD case) is the closest precedent. The bill there appropriated funds for AHTD operating expenses but also contained substantive provisions establishing salary limits, abolishing two predecessor agencies (Transportation Safety Agency and Transportation Regulatory Board), and transferring their duties to AHTD and the Highway Commission. The Arkansas Supreme Court upheld the package because all provisions "relate[d] to but one subject, the operations of AHC and AHTD."

Why Section 29 fit HB 1152

The AG built the case in steps:

1. HB 1152's original purpose was broader than just appropriations. Beyond funding Insurance Department operations, the bill (specifically Act 871, § 27) prohibited the Department from using funds to promote or encourage Marketplace or Program enrollment. So the bill's original scope already touched on the Department's role in the Program and Marketplace.

2. The premium tax credit administration is an Insurance Commissioner function. Section 26-57-603 imposes the 2.5% premium tax. Section 26-57-604 governs the credit. Section 26-57-610 directs the Commissioner to certify Program/Marketplace premium taxes separately to the State Treasurer for transfer to the Health Care Independence Program Trust Fund (Ark. Code Ann. § 19-5-1141).

3. Section 29 directly affects how the Commissioner administers the carve-out. By preventing the credit from offsetting Program/Marketplace collections, Section 29 changes the trust-fund deposit mechanics. That's an administrative-operations matter for the Insurance Department, fitting the same subject as the appropriation.

4. Pritchett applies. Just as substantive provisions transferring agency duties were proper alongside AHTD appropriations, substantive premium-tax-credit provisions affecting Insurance Department administration are proper alongside Insurance Department appropriations.

What Section 29 actually did

Before Act 871, the premium tax credit at § 26-57-604(a)(1)(B) could offset insurance premium taxes generally. Act 871 added § 26-57-604(a)(1)(B)(ii):

However, the credit shall not be applied as an offset against the premium tax on collections resulting from an eligible individual insured under the Health Care Independence Act of 2013, § 20-77-2401 et seq., or the Arkansas Health Insurance Marketplace Act, § 23-61-801 et seq.

The legislative effect: insurers writing Program/Marketplace policies pay full 2.5% premium tax on those collections, with no credit offset. The revenue feeds the Health Care Independence Program Trust Fund. Act 1 of the Second Extraordinary Session of 2016 expanded the carve-out effective January 1, 2017, to include the Arkansas Works Act of 2016 and individual qualified health plans (including stand-alone dental plans) issued through the marketplace.

Common questions

What's the practical effect of this opinion?
It tells legislators they can include substantive provisions in agency-specific appropriation bills, as long as those provisions relate to the same general subject as the agency's operations. The germaneness and single-subject tests are forgiving in practice.

Could a court still strike this down?
The AG offered an opinion on likelihood, not a guarantee. A challenger could argue Section 29 changes substantive tax law unrelated to the Department's mere administration. Under Pritchett's logic, that argument is weak. But "weak" is not "frivolous."

What is the Health Care Independence Program?
Arkansas's Medicaid expansion mechanism using federal dollars to purchase private Marketplace health insurance for Medicaid-eligible individuals. The Trust Fund segregates premium revenue from those plans. The Program was renamed/replaced by the Arkansas Works Program in 2016.

Why does logrolling matter?
Because legislators might trade votes by combining unrelated provisions. Article 5, § 30's single-subject rule limits that practice for non-general-appropriation bills. The remedy is forcing controversial substantive changes into separate bills.

Could a court look at how this provision was added (e.g., last-minute floor amendment)? Yes. Article 5, § 21's text concerns alterations during a bill's "passage through either house," and the Arkansas Supreme Court has paid attention to procedural irregularities. But if the amendment is germane to the original purpose, even a last-minute floor amendment survives.

Background and statutory framework

Article 5, § 21 (germaneness): A bill cannot be amended to change its "original purpose." Article 5, § 30 (single subject): Non-general-appropriation bills must each embrace but one subject. Article 5, § 34 (three-day rule): No new bills introduced in the last three days of session.

The Arkansas Insurance Department, headed by the Insurance Commissioner (§ 23-61-102), administers premium tax (§§ 26-57-603, -604, -610) and has rulemaking authority on the credit (§ 26-57-604(b)(5)). The Commissioner can suspend or revoke certificates of authority for non-payment (§ 26-57-607).

The Health Care Independence Program Trust Fund was created by the 2013 act (§ 19-5-1141). It expired January 1, 2017, with balances transferred to the Arkansas Works Program Trust Fund (§ 26-57-610(d)).

Citations

• Ark. Const. art. 5, § 21 (germaneness)
• Ark. Const. art. 5, § 30 (single subject)
• Ark. Const. art. 5, § 34 (no new bills in last three days)
• Ark. Code Ann. § 19-5-1141 (Health Care Independence Program Trust Fund)
• Ark. Code Ann. § 23-61-102 (Insurance Commissioner)
• Ark. Code Ann. §§ 26-57-603, -604, -607, -610 (premium tax administration)
• Acts 2015, No. 871, §§ 27, 29 (HB 1152 enacted)
• Acts 2016 (2nd Ex. Sess.), No. 1 (expanded carve-out effective Jan. 1, 2017)
• Barclay v. Melton, 339 Ark. 362, 5 S.W.3d 457 (1999)
• Hickey v. State, 114 Ark. 526, 170 S.W. 562 (1914)
• Loftin v. Watson, 32 Ark. 414 (1877)
• Matthews v. Byrd, 187 Ark. 458, 60 S.W.2d 909 (1933)
• Clinton v. Taylor, 284 Ark. 238, 681 S.W.2d 338 (1984)
• Cottrell v. Faubus, 233 Ark. 721, 347 S.W.2d 52 (1961)
• Reid v. Jones, 261 Ark. 550, 551 S.W.2d 191 (1977)
• Arkansas Motor Carriers Ass'n v. Pritchett, 303 Ark. 620, 798 S.W.2d 918 (1990)
• First Nat. Bank of Stuttgart v. Clinton, 304 Ark. 411, 802 S.W.2d 928 (1991)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2016-102
January 5, 2017
The Honorable Bryan B. King
State Senator
871 County Road 814
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
Green Forest, AR 72638-2657
Dear Senator King:
This is in response to your request for my opinion concerning certain special language that was added to House Bill 1152 ("HB 1152") by amendment during the 2015 regular legislative session. This bill became Act 871 of 2015. The language in question addressed an existing insurance premium tax credit and became Section 29 of the act. You ask the following specific questions in this regard: 1) In your opinion, is the language in Amendment 1 (Section 29) adopted into HB 1152, which became Act 871of2015, germane to the appropriation bill for the State Insurance Department for the fiscal year ending June 30, 2016? 2) In your opinion, does the substantive language in Amendment 1 violate the constitutional requirement that a bill cannot be altered or amended on its passage through either house, as to change its original purpose? 3) In your opinion, does the substantive language in Amendment 1, adopted into HB 1152, which became Act 871 of 2015, violate any provision of the Arkansas Constitution? 323 CENTER STREET, SUITE 200 · LITTLE ROCK, ARKANSAS 72201 TELEPHONE (501) 682-2007 · FAX (501) 682-8084 ARKANSASAG.GOV The Honorable Bryan B. King State Senator Opinion No. 2016-102 Page 2 RESPONSE Your first two questions appear to be directed toward Article 5, section 21 of the Arkansas Constitution, which places a limitation on the extent to which a bill filed in the legislature may be amended. As interpreted by the Arkansas Supreme Court, art. 5, § 21 forbids amendments to a bill that are not germane to the bill's subject. In my opinion, the language at issue that was added to HB 1152 by amendment was germane to the original bill, and thus did not violate art. 5, § 21. With regard to your third question, I can speculate that a challenger might argue that the addition of the substantive language violated the single subject requirement of Article 5, section 30 of the Arkansas Constitution. In my opinion, however, the Court would likely find the provision sufficiently connected to the purpose of the Insurance Department's appropriation to be permissible under art. 5, § 30. DISCUSSION Question 1: In your opinion, is the language in Amendment 1 (Section 29) adopted into HB 1152, which became Act 871 of 2015, germane to the appropriation bill for the State Insurance Department for the fiscal year ending June 30, 2016? Question 2: In your opinion, does the substantive language in Amendment 1 violate the constitutional requirement that a bill cannot be altered or amended on its passage through either house, as to change its original purpose? Under Article 5, section 21 of the Arkansas Constitution " ... no bill shall be so altered or amended on its passage through either house, as to change. its original purpose." 1 The Arkansas Supreme Court has interpreted this to mean that "where the body of an act 'embrace[s] new matter not germane to the original purpose of the act,' a bill may be unconstitutional."2 The Court has further interpreted this provision to prevent amendments to a bill that "would not be germane to the subject of the legislation expressed in the original title of the Act which it purports 1 Ark. Const. art. 5, § 21. 2 Barclay v. Melton, 339 Ark. 362, 366, 5 S.W.3d 457, 460 (1999) (quoting Hickey v. State, l 14 Ark. 526, 170 S.W. 562 (1914)). The Honorable Bryan B. King State Senator Opinion No. 2016-102 Page 3 to amend."3 The Court has also stated that the original title does not control the question of whether an amendment is germane.4 The Court has explained the reason for art. 5, § 21: Now, but for [art. 5,] sec. 21, the force and intention of this sectionf5l might be avoided during the last three days of the session, by taking up bills previously introduced for purposes indicated in their titles, and expressed in their bodies, and converting them, by amendment, into bills for totally different purposes, or engrafting upon them provisions foreign to their original purposes.6 Challenges based on art. 5, § 21 have traditionally been difficult to sustain. The Court has observed that this constitutional provision is to be given a "practical and liberal construction"7 and that an act will not be declared unconstitutional under art. 5, § 21 "unless it obviously appears" that the act's original purpose was changed by an amendm.ent. 8 You have questioned whether the addition of certain language to HB 1152 violated this constitutional provision. After its introduction, HB 1152 was amended to add a section concerning Ark. Code Ann. § 26-57-604. This statute provides for a credit in connection with insurance premium taxes.9 The credit applies as an offset against the premium tax imposed on life and accident and health insurance.10 The amendment to HB 1152-which became section 29 of Act 871 3 Melton, 339 Ark. at 367, 5 S.W.3d at 460. 4 Loftin v. Watson, 32 Ark. 414, 420 (1877). See also Matthews v. Byrd, 187 Ark. 458, 60 S.W.2d 909 ( 1933) (looking beyond the title to the emergency clause in determining the bill's purpose). 5 The "section" referred to is Ark. Const. art. 5, § 34, which prohibits the introduction of "any new bill ... into either house during the last three days of the session." 6 Loftin, 32 Ark. at 421-422. 7 Id. 8 Matthews v. Byrd, 187 Ark. 458, 464, 60 S.W.2d 909, 911 (1933). 9 The premium tax is a 2Y:z% privilege tax imposed on authorized insurers. See Ark. Code Ann. § 26-57-603(d) (Repl. 2014). 10 Ark. Code Ann.§ 26-57-604(a)(l)(B) (Supp. 2015). The Honorable Bryan B. King State Senator Opinion No. 2016-102 Page 4 of 20 I 5-added the following language preventing this credit offset from applying to premium taxes collected for health insurance plans under the Health Care Independence Program and the Arkansas Health Insurance Marketplace: However, the credit shall not be applied as an offset against the premium tax on collections resulting from an eligible individual insured under the Health Care Independence Act of 2013, § 20-77- 2401 et seq., or the Arkansas Health Insurance Marketplace Act, § 23-61-801 et seq.11 In my opinion, this amendment was not foreign to or totally different from HB 1152's original purpose and would likely withstand scrutiny under art. 5, § 21. Originally, HB 1152 had as its purpose funding the Insurance Department's operations, 12 as well as restricting certain activities of the Department in connection with the Health Care Independence Program ("Program") and the Arkansas Health Insurance Marketplace ("Marketplace"). The bill contained special language prohibiting the Department from utilizing, applying for, or accepting any funds for the purpose of activities to promote or encourage enrollment in the Marketplace or the Program.13 The bill's original purpose therefore included the Department's operations or role concerning the Program and the Marketplace. The amendment to the premium tax credit statute did not 11 Id. at§ 26-57-604(a)(l)(B)(ii). Pursuant to Act I of the Second Extraordinary Session of 2016, the credit offset provision will state as follows effective January l, 2017: However, the credit shall not be applied as an offset against the premium tax on collections resulting from an eligible individual insured under the Health Care Independence Act of 2013, § 20-77-2401 et seq., the Arkansas Works Act of 2016, § 23-61-1001 et seq., the Arkansas Health Insurance Marketplace Act, § 23-61-80 l et seq., or individual qualified health insurance plans, including without limitation stand-alone dental plans, issued through the health insurance marketplace as defined by § 23-61-l 003. Ark. Code Ann.§ 26-57-604(a)(l)(B)(ii) (Adv. Code Svc., Oct. 2016). 12 HB 1152 was entitled "An act to make an appropriation for personal services and operating expenses for the State Insurance Department for the fiscal year ending June 30, 2016; and for other purposes." 13 See Acts 2015, No. 871, § 27 (uncodified). The Honorable Bryan B. King State Senator Opinion No. 2016-102 Page 5 change these original purposes. To the contrary, the amendment also relates to the Department's operations in connection with the Program and the Marketplace. Premium taxes are reported and paid to the Insurance Commissioner, who then deposits the taxes into the State Treasury. 14 Those insurers eligible for the premium tax credit apply to the Commissioner on Commissioner-prescribed forms.15 The Commissioner therefore administers both the premium tax and the credit that offsets the tax.16 In this regard, a separate, specific procedure applies to premium tax collections arising from the Program and the Marketplace. The Commissioner is required to certify these taxes to the State Treasurer separately for proper transfer to the Health Care Independence Program Trust Fund. 17 Following HB l 152's amendment to the premium tax credit statute, the credit cannot offset collections arising from the Program and the Marketplace. This change clearly impacts the Trust Fund. And the Insurance Commissioner's administrative role in this respect is equally clear. The Commissioner must properly account for the premium amounts arising from the Program and the Marketplace when separately certifying these tax collections to the Treasurer. Based on the foregoing, I believe a court faced with the question would conclude that the special language at issue in HB 1152 was germane to the bill's original purpose, which included matters pertaining to the Program and the Marketplace, and the Insurance Department's activities in connection therewith. 14 See Ark. Code Ann.§§ 26-57-603 (Repl. 2014), 26-57-604 (Supp. 2015 and Adv. Code Svc., Oct. 2016), and 26-57-610 (Supp. 2015 and Adv. Code Svc., Oct. 2016). 15 Ark. Code Ann.§ 26-57-604 (Repl. 2014). 16 See also Ark. Code Ann. § 26-57-607 (Repl. 2014) (authorizing the Commissioner to suspend or revoke the certificate of authority of any insurer failing to report and pay the tax). 17 Ark. Code Ann. § 26-57-610(b)(2)(A) and (B)(i) (Adv. Code Svc., Oct. 2016). The Program Trust Fund was created under the Health Care Independence Act of2013. See Ark. Code Ann. § 19-5-1141) (Adv. Code Svc., Oct. 2016). The Fund expires on January 1, 2017, and any balance in the Fund on that date will be transferred to the Arkansas Works Program Trust Fund. Ark. Code Ann.§ 26-57-610(d). The Honorable Bryan B. King State Senator Opinion No. 2016-102 Page 6 Question 3: In your opinion, does the substantive language in Amendment 1, adopted into HB 1152, which became Act 8 71 of 2015, violate any provision of the Arkansas Constitution? Another theory under which the validity of the amendment to HB 1152 might be questioned is that it caused the appropriation bill to embrace more than one subject, contrary to Article 5, section 30 of the Arkansas Constitution. Somewhat similar to art. 5, § 21, this constitutional provision requires that all appropriation bills other than those for the ordinary expenses of the three departments of the State "shall be made by separate bills, each embracing but one subject."18 This section of the constitution is the basis for the so-called "unity of subject" or "single subject" rule, which generally prohibits combinations of unrelated provisions in an appropriation bill. The Arkansas Supreme Court has held that in order to comply with the provisions of art. 5, § 30, the various sections of an appropriations bill must be said to "accomplish a purpose of one design."19 The Court has explained that the purpose of this rule is "to prevent the inclusion of separate and unrelated appropriations in a single bill, because that practice opens the door to the evils that have come to be known as logrolling and pork barrel legislation."20 The Court has held that the constitutional test is met: so long as the different parts of the act relate, directly or indirectly, to the same general object fairly indicated by its title; and that the unity of object must be looked for in the ultimate end, and not in the details or steps leading to the end; for it is within the province of the legislature to determine and provide what means will contribute to the accomplishment of the general object of an act, and it may include under its title every means convenient or necessary or that 18 Ark. Const. art. 5, § 30 (stating in full that "[t]he general appropriation bill shall embrace nothing but appropriations for the ordinary expenses of the executive, legislative and judicial depar1ments of the State; and all other appropriations shall be made by separate bills, each embracing but one subject."). 19 Clinton v. Taylor, 284 Ark. 238, 240, 681 S.W.2d 338, 339 (1984). 2° Cottrellv. Faubus, 233 Ark. 721, 723, 347 S.W.2d 52, 53 (1961). The Honorable Bryan B. King State Senator Opinion No. 2016-102 Page 7 might tend to carry into effect the main design, without regard to the secondary objects thereby accomplished.21 The court has held, additionally, that art. 5, § 30 does not prohibit the inclusion of substantive provisions in an appropriation bill as long as "all [provisions] relate to but one subject."22 Pritchett may be the most instructive case for our purposes in addressing HB 1152. The bill at issue in that case was the appropriation bill for the Arkansas Highway and Transportation Department ("AHTD"). In addition to appropriating funds for AHTD's personal services and operating expenses, the bill included several substantive provisions relating to AHTD's powers and duties.23 The bill established salary limits, the number of authorized personnel, overtime pay, and certain allowances and moving expenses.24 It also permanently abolished two agencies and transferred their duties to the AHTD and the Arkansas Highway Commission ("AHC").25 The Court held that the bill's appropriations provisions only dealt with one subject-funding for AHTD personal services and operating expenses.26 The Court noted that the other provisions "are not merely appropriations in nature,"27 but it concluded that they all related to the same subject as the appropriations-"administration of the AHTD": The Constitution does not prohibit the addition of substantive provisions establishing powers and duties for AHC and AHTD together with appropriations, since all relate to but one subject, the 21 Reid v. Jones, 261 Ark. 550, 552, 551 S.W.2d 191 (1977) (citing State v. Sloan, 66 Ark. 575, 53 S.W.2d 37 (1899)). See also First Nat. Bank of Stuttgart v. Clinton, 304 Ark. 411, 802 S.W.2d 928 (1991). 22 Arkansas Motor Carriers Ass 'n v. Pritchett, 303 Ark. 620, 625-626, 798 S. W.2d 918, 921 ( 1990). 23 Id., 303 Ark. at 625, 798 S. W.2d at 921. 24 Id. at 626, 798 S.W.2d at 921. 25 The bill abolished the Transportation Safety Agency and the Transportation Regulatory Board. Id. at 622, 798 S.W.2d at 919. 26 Pritchett, 303 Ark. at 625, 798 S. W.2d at 921. 27 Id. at 626, 798 S.W.2d at 921. The Honorable Bryan B. King State Senator Opinion No. 2016-102 Page 8 operations of AHC and AHTD. The addition of powers and duties of AHTD, as successor to TSA and TRB, in Section 23, does not deal with any appropriation, but is within the same subject, i.e., administration of the AHTD. We hold this does not violate. our Constitution. 28 Similar to the appropriation bill at issue in Pritchett, HB 1152 contained appropriations provisions and substantive, non-appropriations provisions, all of which related to the administration of the Insurance Department. The particular substantive provision in question (preventing the premium tax credit offset from applying to collections for health insurance plans under the Health Care Independence Program and the Arkansas Health Insurance Marketplace) was related to the bill's other provisions through the administrative role served by the Department in collecting and certifying the premium tax. The Insurance Commissioner- who heads the Department29-is responsible for administering the premium tax. This includes computing the tax, applying the credit where appropriate, and depositing the tax as required. 30 The Commissioner has rulemaking authority in this respect. 31 All of these matters relating to the premium tax and the premium tax credit relate to the same subject as the appropriation-the specific administration and operations of the Department. It is therefore my opinion that the change in substantive law under the questioned language in HB 1151 likely was sufficiently connected to the purpose of the Insurance Department's appropriation bill to be permissible under art. 5, § 30. Sincerely,
~/~
LESLIE RUT~ .
Attorney General
28 Id., 798 S. W.2d at 921 (emphasis in original).
29 See Ark. Code Ann. § 23-61-102 (Rep I. 2012).
30 Ark. Code Ann.§§ 26-57-603, -604, and -610.
31 Ark. Code Ann.§ 26-57-604(b)(S).