If pending lawsuits challenge Proposition 123 as conflicting with Arizona's federal Enabling Act, can the State Board of Investment be sued personally for following Prop 123's payout rules in the meantime?

Plain-English summary

Proposition 123 was the 2016 ballot measure that resolved a long-running lawsuit over Arizona's underfunding of K-12 education. It increased annual distributions from the state land trust permanent fund from 2.5% to 6.9% of the five-year average market value, for ten years. Voters approved it.

Soon after passage, lawsuits surfaced arguing that Prop 123 violated the federal Arizona-New Mexico Enabling Act of 1910, which created the trust and is widely understood to constrain how the State can spend trust principal. Treasurer Jeff DeWit, who chaired the State Board of Investment that distributes the funds, asked the AG: while these lawsuits are pending, can the Board or its individual members be held personally liable for paying out under Prop 123?

Solicitor General John R. Lopez IV (writing on behalf of AG Brnovich) answered no.

The reasoning rests on three pillars.

First, public officials in Arizona have a duty to obey the law as written until a court enjoins or invalidates it. The Arizona Supreme Court said as much in Button v. Nevin (1934): "Public officials . . . have but one duty, and that is to enforce the law as it is written, and, if the effect of their action is disastrous, the responsibility is upon the Legislature and not upon them." Proposition 123 amended Article 10, § 7 of the Arizona Constitution. The Board can't unilaterally override a constitutional amendment.

Second, qualified immunity protects individual Board members. The Supreme Court's Messerschmidt v. Millender (2012) and Ashcroft v. al-Kidd (2011) define qualified immunity as a "broad shield" protecting all but the "plainly incompetent" or those "knowingly violat[ing] the law." Following the law isn't either of those things. Austin v. Campbell (1962) is the Arizona analog: the state auditor was held not liable for paying per diem under a statute later declared unconstitutional, on the principle that "[c]itizens, including state officials, are entitled to rely on a statute as an 'operative fact which cannot be ignored.'"

Third, Prop 123 didn't change the trust's beneficiaries or create a new charter-school funding stream. Charter schools have received state-trust-fund money since 1994 (HB 2002, 9th Special Session) and were equal participants in the Classroom Site Fund created in 2000. Prop 123 modified amounts and formulas, not beneficiaries. So the Board isn't doing anything novel by continuing distributions to charter schools.

The opinion is careful not to opine on the merits of any Prop 123 challenge. It only addresses the Board's exposure for following the law in the meantime.

Currency note

This opinion was issued in 2016. 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.

Background and statutory framework

The state land trust originates from the 1910 Arizona-New Mexico Enabling Act. The federal government granted millions of acres to Arizona to be held in trust for specifically named beneficiaries (primarily public education). The Enabling Act and Article 10 of the Arizona Constitution constrain how the State manages and disposes of trust assets.

Article 10, § 7 (as amended by Prop 123, retroactive to June 30, 2015) sets:

• For fiscal years 2015-2016 through 2024-2025, distributions of 6.9% of the immediately preceding five-year average monthly market values.
• A specific FY 2015-2016 distribution of $259,266,200 from the permanent state school fund.

The State Board of Investment "shall determine the amount of the annual distributions required by this section and allocate distributions pursuant to law" (§ 7(G)).

The opinion's qualified-immunity analysis tracks federal § 1983 doctrine: officials acting in their official capacities receive immunity from money damages unless their conduct violates clearly established law that any reasonable official would know about. Following a duly enacted constitutional amendment is the opposite of that.

The Austin v. Campbell precedent is particularly relevant. There, a per diem statute was struck down, and someone sought to hold the state auditor liable for having paid out under it. The Arizona Supreme Court said no: officials and citizens alike are entitled to rely on duly enacted laws as operative until courts say otherwise. Anything else would chill law-following behavior.

The opinion also flags the Florida Lime & Avocado Growers exception: if compliance with two laws were a "physical impossibility," officials might have to choose. Prop 123 doesn't create that conflict. It modifies a constitutional provision; the Enabling Act question is one of preemption, which is a court's call, not the Board's.

Common questions

Q: I'm on the State Board of Investment. Can I be sued personally if Prop 123 is later found to violate federal law?
A: Under this opinion, no. Following a duly enacted constitutional amendment is qualified-immunity-protected conduct. Public officials cannot be expected to predict the outcome of pending litigation; their duty is to follow the law as enacted.

Q: What happens if a court enjoins Prop 123 distributions?
A: The Board's duty would shift. Officials must follow valid court orders. The opinion addresses pre-injunction conduct only.

Q: Why did charter schools become a focus of the question?
A: Some plaintiffs and commentators have argued that distributing trust funds to charter schools (which are public schools but operate independently of district governance) violates the Enabling Act's beneficiary restrictions. The opinion notes this is a 21-year-old practice predating Prop 123, so Prop 123 isn't introducing the question.

Q: Does this opinion bind federal courts considering Enabling Act challenges?
A: No. AG opinions are not binding on federal courts. The opinion is about Arizona officials' liability under Arizona law for following Arizona's constitution.

Q: What if the Board members personally believed Prop 123 was unlawful?
A: Their personal belief is not the standard. Qualified immunity asks whether a reasonable official would know the conduct violated clearly established law. Following an enacted constitutional amendment that hasn't been struck down is not such a violation.

Citations and references

Statutes and constitutional provisions:

• Ariz. Const. art. 10, § 7 (as amended by Prop 123)
• 2015 Ariz. Sess. Laws, 1st Spec. Sess., ch. 1
• Arizona-New Mexico Enabling Act
• 1994 Ariz. Legis. Serv., 9th Sp. Sess., Ch. 2 (HB 2002)
• 2000 Ariz. Legis. Serv., 5th Sp. Sess., Ch. 1 (SB 1007)

Cases:

• Jennings v. Woods, 194 Ariz. 314 (1999)
• Button v. Nevin, 44 Ariz. 247 (1934)
• Austin v. Campbell, 91 Ariz. 195 (1962)
• Messerschmidt v. Millender, 132 S. Ct. 1235 (2012)
• Ashcroft v. al-Kidd, 131 S. Ct. 2074 (2011)
• Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963)

Source

• Landing page: https://www.azag.gov/opinions/i16-007-r16-012
• Original PDF: https://www.azag.gov/sites/default/files/2025-06/I16-007.pdf

Original opinion text

To:

The Honorable Jeff DeWit

Arizona State Treasurer

Questions Presented

Does the State Board of Investment or individual Board members (the "Board") face potential liability for complying with the distribution requirements of Proposition 123 in light of pending and potential future legal challenges to the propriety of those requirements based on provisions of Arizona's Enabling Act? In addition, does the Board face any liability for making distributions to charter schools pursuant to Proposition 123?

Summary Answer

No, the Board does not face liability, personal or otherwise, for acting in compliance with the law, including Proposition 123, because Arizona's public officials have a duty to obey laws unless a court enjoins a law or declares it unconstitutional. The Board cannot ignore the constitutional amendment created by Proposition 123, including the provisions related to continued distribution of monies to charter schools.

Background

Proposition 123 amended Arizona's constitutional provisions relating to school funding based on our state trust lands; the provisions of Proposition 123 were effective upon electorate approval, and made retroactive "to from and after June 30, 2015." 2015 Ariz. Sess. Laws, 1st Spec. Sess., ch. 1, §§ 8, 10. With the recent Proposition 123 amendments incorporated, Article X, section 7 of the Arizona Constitution clearly prescribes the forthcoming distribution requirements:

G. The board of investment shall determine the amount of the annual distributions required by this section and allocate distributions pursuant to law. The annual distribution from the permanent funds:

[ . . . ]

2. For fiscal years 2015-2016 through 2024-2025, shall be six and nine-tenths percent of the average monthly market values of the fund for the immediately preceding five calendar years, except that in fiscal year 2015-2016, the distribution made from the permanent state school fund shall be $259,266,200.

Ariz. Const. art. X, § 7(G)(2).

Specific constitutional provisions can create affirmative duties for public officials. Jennings v. Woods, 194 Ariz. 314, 320 (1999) (constitutional holdover provision provides an affirmative duty for corporation commissioner to remain in office until qualified successor is appointed). Arizona's public officials have the duty to obey laws unless a court enjoins them or declares them unconstitutional. See Button v. Nevin, 44 Ariz. 247, 257 (1934) ("Public officials . . . have but one duty, and that is to enforce the law as it is written, and, if the effect of their action is disastrous, the responsibility is upon the Legislature and not upon them.").

Qualified immunity protects government officials from personal liability insofar as their conduct does not invade clearly established statutory or constitutional rights known to reasonable persons. Messerschmidt v. Millender, 132 S. Ct. 1235, 1244 (2012). It represents a broad shield that ensures ample protection to all but the plainly incompetent or those who knowingly violate the law. Id. (quoting Ashcroft v. al-Kidd, 131 S. Ct. 2074, 2085 (2011)).

With regard to charter schools, such schools in Arizona have received monies from the state land trust fund for 21 years. See generally 1994 Ariz. Legis. Serv., 9th Sp. Sess., Ch. 2, § 2 (H.B. 2002) (authorizing the establishment of charter schools in Arizona, to be funded indirectly from state land trust proceeds routed through the general fund); see also 2000 Ariz. Legis. Serv., 5th Sp. Sess., Ch. 1, § 16 (S.B. 1007) (using money from the state land trust fund to create the Classroom Site Fund, which funds district and charter schools on equal terms). Proposition 123 does not change the class of permissible recipients or beneficiaries of state land trust fund monies; rather, Proposition 123 amends the formula and amounts of distributions from the state land trust.

Analysis

Even if the Board believes that a current or potential legal challenge to Proposition 123 is or would be well-founded and likely to prevail, it still is required to comply with the law. Proposition 123 amends the portion of the Arizona Constitution that the Board is entrusted to enforce. If there were a clear contradiction between Proposition 123 and another applicable law such that compliance with both was a "physical impossibility," Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S 132, 143 (1963), then the Board might have to choose which law to follow. That is not the case here. This situation is akin to Austin v. Campbell, 91 Ariz. 195 (1962), where the Arizona Supreme Court held that the state auditor was not liable for authorizing per diem payments for legislators under a statute later determined unconstitutional. The Court based its conclusion upon the fundamental point that citizens, including state officials, are entitled to rely on a statute as an "operative fact which cannot be ignored." Id. at 203. Noting that courts presume such acts constitutional, the Court stated that "No penalties should be visited upon the citizenry for doing likewise." Id.

In addition, qualified immunity protects the Board's members from liability because it protects government officials' conduct performed in compliance with the law, or absent a demonstration that such conduct violates "clearly established" law. al-Kidd, 131 S. Ct. at 2083 (citation omitted).

Finally, with regard to charter schools as specific beneficiaries, the Proposition 123 amendments do not alter the trust's beneficiaries. Charter schools have received monies from these trust funds for 21 years. Proposition 123 does not compel the Board to overturn more than two decades of pattern and practice in this area due to the nature of the beneficiary.

Conclusion

The Board does not face liability, personal or otherwise, for acting in compliance with the law as it stands currently. Arizona's public officials have a duty to obey laws unless a court enjoins them or declares them unconstitutional.

John R. Lopez IV

Solicitor General

Arguendo. Beyond the observation of presumptive validity, this Opinion does not address the merits of any legal challenge to Proposition 123.