Ariz. AG urged to disobey law on housing cash

By PAUL DAVENPORT

PHOENIX

State Attorney General Tom Horne said Tuesday he has to implement an Arizona law taking $50 million from a settlement paid by mortgage lenders over their loan practices though he thinks the transfer to help balance the budget is poor public policy.

Public interest law firms are threatening to sue to block the transfer, contending the money should be reserved for helping stressed homeowners and coping with the effects of the housing collapse.

"The money should be used to help people stay in their homes," Horne said.

However, the transfer of $50 million from the state's $97.7 million settlement fund is legal and represents the choice of the state's policymakers -- the governor and the Legislature, Horne said.

"It would be suicidal for me to get into a war with the Legislature and the governor over a matter that is clearly within their area of responsibility under the Constitution," he said.

The national settlement with mortgage lenders provided Arizona and other states with separate, larger pots of money to be used to compensate or aid individual homeowners. Housing industry advocates in Arizona wanted the smaller fund to be used for legal aid, financial counseling and outreach.

Some other states are their settlement money for purposes like that, and Arizona still has $47 million available.

But Arizona isn't the only state using at least part of its settlement for general government purposes.

Others include Missouri, which plans to use settlement dollars to avert a budget cut for public colleges and universities, and South Carolina, where lawmakers want to use some of the cash to lure corporate expansions and relocations.

The public interest law firm lawyers, who represent a Mesa taxpayer and homeowner, told Horne in a letter that the transfer included in a budget law signed Monday by Gov. Jan Brewer violates both the Arizona Constitution and the settlement's terms.

The attorneys said it violates the separation of powers between branches of government and a prohibition on including legislation on more than one subject in a single bill.

The lawyers for the Arizona Center for Law in the Public Interest and the William E. Morris Institute for Justice also said the transfer isn't legal because general government costs aren't among the settlement's permitted uses.

The Arizona transfer would put the $50 million in the state General Fund, which is essentially the state government's checking account.

Though the transfer law says lawmakers intend that the money go for government agencies related to housing, that's not binding and the money would help pay for an array of state services ranging from schools to prisons.

During debate on the budget, Republican legislators who supported the transfer said it was allowed because the settlement permitted the money to be used to compensate states for costs resulting from alleged unlawful conduct by the lenders.

The housing industry's collapse hammered Arizona's economy, they noted.

While the public interest law firm lawyers said that provision isn't broad enough to include the general costs of government, Horne said that likely would be an issue a court would decide if the law firms file their expected lawsuit.

"They don't give any basis for what they say. That's just argument. I think you can read it either way," Horne added.