Twenty five years to the week after a state question created the Tobacco Settlement Endowment Trust, the Oklahoma Supreme Court heard oral arguments today over whether a new law allowing members of its board to be removed without cause violates the original constitutional language approved by voters.
Appointed by seven different elected officials, TSET’s seven-member board governs the state agency, which holds, invests and distributes the earnings of payments made annually by tobacco companies under the 1998 Tobacco Master Settlement Agreement. Oklahoma is the only state in the country that endowed its settlement proceeds, with a corpus now exceeding $2 billion, annual returns topping $160 million and lingering looks from a Republican Legislature simultaneously inclined to cut taxes while still trying to fund projects.
Title 10, Section 40 says TSET’s investment earnings “shall” be used for certain purposes:
- Clinical and basic research and treatment efforts in Oklahoma for the purpose of enhancing efforts to prevent and combat cancer and other tobacco-related diseases;
- Cost-effective tobacco prevention and cessation programs;
- Programs other than those specified in paragraph 1 of this subsection designed to maintain or improve the health of Oklahomans or to enhance the provision of health care services to Oklahomans, with particular emphasis on such programs for children;
- Programs and services for the benefit of the children of Oklahoma, with particular emphasis on common and higher education, before- and after-school and pre-school programs, substance abuse prevention and treatment programs and other programs and services designed to improve the health and quality of life of children;
- Programs designed to enhance the health and well-being of senior adults; and
- Authorized administrative expenses of the Office of the State Treasurer and the board of directors.
This spring, TSET announced its investment returns had allowed for an additional pot of $150 million that would be awarded statewide under a “Legacy Grants” program. Somehow, conversations between TSET officials and House of Representatives leaders resulted in miscommunication. After House Speaker Kyle Hilbert (R-Bristow) told journalists that “TSET has had conversations with our appropriations team about some of the surplus revenues that they have over there and are wanting to invest in some capital projects,” TSET executive director Julie Bisbee said she had no knowledge of such conversations, eventually realizing that a discussion about the “Legacy Grants” process had been connected to the University of Oklahoma’s funding request for a pediatric heart hospital.
With TSET sticking to an application process that closed in June — after legislative budget decisions — and not acquiescing to lawmakers’ requests for either $50 million or $100 million to support OU’s $250 million pediatric heart hospital project, House Appropriations and Budget Committee Chairman Trey Caldwell revealed and ran HB 2783 to make TSET’s Board of Directors “serve at the pleasure of their
appointing authority, not to exceed a seven-year term of office.”
While Caldwell (R-Lawton) dodged questions about his impetus for the measure while presenting it in the House, he said he hoped “that TSET will do the right thing and be a collaborative partner for the benefit of all 4 million Oklahomans.”
TSET hired attorney Bob Burke to challenge the law, and the Oklahoma Supreme Court stayed its implementation until conclusion of the lawsuit.
On Monday — while the TSET Board of Directors convened for a special meeting in Tulsa to hear from grant-seekers and review “Stage 2” applicants for the “Legacy Grants” — justices heard oral arguments from Burke and state Solicitor General Garry Gaskins, who represented Hilbert, Senate President Pro Tempore Lonnie Paxton (R-Tuttle) and Attorney General Gentner Drummond.
Burke told the Supreme Court that HB 2783 was actually “a guise to grab control of the people’s $2 billion trust.”
“Chaos will result if this new law is found to be constitutional,” Burke said. “Every time a board member is against a pet project of one of the appointing authorities, he or she would be fired and replaced with someone who would support that project. The TSET board would be a revolving door of ‘yes’ men and women.”
Gaskins, however, said Burke’s argument “fails on the merits” because TSET “cannot identify any constitutional text precluding removal of TSET board members.”
“The petition argues the constitution says board members, ‘shall serve seven-year terms,’ therefore the Legislature cannot authorize removal before seven years,” Gaskins said. “But petitioners simultaneously admit the Legislature has already authorized exactly that through Title 51, Section 24.1 (regarding suspension from or forfeiture of office upon conviction of a felony) and the other statutes cited here today.”
Speaking to whether the Oklahoma Supreme Court should even accept Burke’s application for “original jurisdiction” — meaning the high court hears a challenge before it is litigated in district court — Gaskins highlighted concerns that Chief Justice Dustin Rowe, Vice Chief Justice Dana Kuehn and Justice Travis Jett raised in their recent dissents about the Legislature’s “business courts” bill deemed unconstitutional last month.
“The alleged harm is entirely hypothetical. The petitioner speculates about chaos and disruption to $2 billion, yet provides no affidavit, no declaration, no evidence whatsoever. Hypothetical injuries do not bypass ordinary remedies,” Gaskins argued. “Until someone is actually removed (from the TSET board), any claim remains premature.”
Burke responded by saying he does see “a pressing need to rule on the matter at the present time” owing to “the nature of this controversy.”
“What possible record would there be (in district court)?” Burke asked. “There are no facts in this field. It’s simply a matter of a statute and a constitutional provision.”
But Gaskins pointed to Article 29, Section 7, part of the state question that created the Oklahoma Ethics Commission a decade before TSET was created. The section specifies that “a commissioner shall only be removed from office pursuant to the provisions of Article VIII of this Constitution.”
“So the Ethics Commission framers, just 10 years before TSET, expressly limited removal to a narrow constitutional process. They could have included identical [language] but they did not,” Gaskins said.
‘What’s the need for the change?’
Some justices asked the litigants a handful of questions Monday, with Justice James Edmondson drawing the day’s biggest chuckles as he wondered why the Legislature wants an additional avenue by which TSET board members could be removed.
“We’ve frequently deferred to the Legislature with the language that we do not presume to question the wisdom of the Legislature,” Edmondson said. “But you must admit as human beings — as most of us are — we want to know, what’s the need for the change? That’s why there’s some curiosity.”
Gaskins declined to speculate on legislative motivations.
“I have a hard time getting into the minds of everyone who voted in favor of this to say why they voted,” he said. “I think the effect is it certainly makes these TSET board members more removable.”
Edmondson asked Gaskins if he thinks it is “fair to make [the board members] at-will employees.”
“Whether it’s fair or not doesn’t really go into the analysis,” Gaskins said. “What matters is, does the Legislature have this authority, and does the constitution prohibit them from exercising this authority? And there’s nothing in the text that says that.”
Edmondson, whose brother Drew was Oklahoma’s attorney general when the 1998 Tobacco Master Settlement Agreement was struck and TSET was created, pressed further.
“I’m mystified why anybody thinks we need these directors of the trust fund to be appointed at the will of the appointing authority?” Edmondson asked.
Gaskins responded: “I respect that position, but on the constitutional issue —”
Edmondson finished his sentence for him: “— it can be done.”
Justice Richard Darby seemed to share Edmondson’s skepticism about the motivation behind HB 2783.
“I would put to you that there is no ‘need’ here. It’s just a big, fat want,” Darby said. “That concerns me as it does some of my colleagues. (…) Being able to remove your appointee at will is about as big (a power) as you can get, in my opinion. If we do that, I would submit to you we’ve flushed the constitution.”
Appointing authorities
With requirements that they hail from around the state and that no more than four can be registered with the same political party, the seven members of the TSET Board of Directors are appointed by separate elected officials:
• Governor
• President pro tempore of the Senate
• Speaker of the House
• Attorney general
• State treasurer
• State auditor and inspector
• Superintendent of public instruction
Justice M. John Kane IV called Burke’s attention to how the constitutional provision specified staggering the “initial” TSET board members’ seven-year terms so that they did not all expire at once. He noted that judicial terms are filled following resignations or even deaths in office, and he asked whether the board members’ terms were intended to be staggered in perpetuity or just initially.
“Doesn’t your reading that that goes on forever make the word ‘initial’ superfluous?” Kane asked Burke.
Burke seemed to share the concern.
“I’m not really certain whether or not those terms ought to always be staggered because I’m concerned about the word ‘initial,'” Burke said. “I don’t know about that, your honor, because I, too, am troubled by the word ‘initial.'”
Jett, the most recent appointee to the court, closed questions of Gaskins by offering a philosophical query about the checks and balances of government.
“The flip side of independence is lack of political accountability, right?” asked Jett, who was appointed following voters’ narrow decision not to retain former Justice Yvonne Kauger for another six-year term. “The flip side of being independent is that such people don’t stand accountable to the people, by election, for instance.”
Throughout Monday’s oral arguments, Gaskins claimed the court’s 1923 ruling in Bynum v. Strain offered precedent about the legality of being able to remove appointees to an executive board — the Banking Commission, which governs the Banking Department.
But Burke called the comparison “apples to oranges” owing to voters’ establishment of TSET through a state question and the Legislature’s creation of the banking bodies.
“There is just no reason that the Legislature can tell you other than they want to have political control of this,” Burke said. “They want the money. Follow the money. It’s just not right.”
