July 16, 2020 –The same day the Wisconsin Supreme Court struck down three of Gov. Tony Evers’ partial vetoes to the 2019-2021 budget bill, a majority ruled that a separate challenge to partial vetoes in Gov. Scott Walker’s 2017-19 budget bill is barred.

In Wisconsin Small Business United, Inc. v. Brennan, 2020 69 (July 10, 2020), the majority ruled that the respondents – including Wisconsin Department of Administration Secretary Joel Brennan – met the required elements to obtain equitable relief.

“We agree that laches should be applied here,” wrote Justice Brian Hagedorn, joined by Chief Justice Roggensack and Justices Ann Walsh Bradley, Rebecca Dallet, and Annette Ziegler. “The respondents have proved the three elements of a laches claim——unreasonable delay, lack of knowledge a claim would be brought, and prejudice.”

Justice Rebecca Bradley wrote a dissenting opinion, joined by Justice Daniel Kelly, concluding “the text of the constitution does not support the exercise of either veto challenged in this case and the court should have so declared.”

The Vetoes

Former Gov. Scott Walker signed the 2017-2019 biennial state budget bill in September 2017 with partial vetoes, one relating to a one-year moratorium on existing law that allows school districts to increase revenue limits based on energy efficiency efforts.

The proposed budget bill said that if a school district voted, by resolution, to increase the revenue (tax) limit, the increase would not be effective unless the resolution was adopted after Dec. 31, 2018. Thus, if a school board adopted a resolution for an increase on Jan. 1, 2019, the increase would be delayed by a year, until 2020.

But Gov. Walker changed the dates by partial veto, which said the increase would not be effective unless the resolution was adopted after Dec. 3, 3018.

Thus, school boards would need to wait 1,000 years to adopt a resolution increasing revenue limits. Then the increase would be delayed by one year, through the one-year moratorium. The governor’s veto barred any revenue increase for 1,001 years.

Similarly, Gov. Walker changed the effective date of a budget bill provision that authorized third-party lenders that provide credit through retailer-lender credit cards to take tax deductions for bad debts. The change delayed the effective date by 61 years.

The legislature did not override the vetoes and the 2017-19 budget bill, with these partial vetoes, became law in 2017. No party challenged Gov. Walker’s vetoes until 2019, after the 2019-21 biennial budget bill was proposed, negotiated, and enacted.

Lawsuit Barred

Wisconsin Small Businesses United (WSBU) – an advocate for small businesses – filed an original action challenging Walker’s 2017-19 vetoes in October 2019, four months after new Gov. Tony Evers signed the 2019-21 biennial budget into law.

Thus, the respondents argued that the lawsuit should be barred by the equitable doctrine of laches, and the five-justice majority recently agreed. That is, the respondents argued that the case should not be decided on the merits because it’s too late.

The majority agreed that the lawsuit should be barred, noting laches is an “affirmative, equitable defense designed to bar relief when a claimant’s failure to promptly bring a claim causes prejudice to the party having to defend against the claim.”

A merits decision would have required the court to determine whether a governor can use veto power to strike individual numeric digits.

“While this Court has found that the governor may reduce monetary sums in appropriations bills by striking individual digits, it has never ruled that the governor may do so with respect to dates,” the petitioners argued.

Interestingly, a merits win for Wisconsin Small Businesses United, Inc. would have undone Gov. Walker’s vetoes but restricted future veto power. Evers must approve the upcoming 2021-23 biennial budget.

The respondents –members of the Evers Administration – argued that the court should not decide the issue on the merits, likely because a loss would tie Gov. Evers’ hands.

The Wisconsin Constitution, art. V, s. 10(1)(c), says: “In approving an appropriation bill in part, the governor may not create a new word by rejecting individual letters in the words of the enrolled bill, and may not create a new sentence by combining parts of 2 or more sentences of the enrolled bill.” It doesn’t say anything about numbers.

Art. V, s. 10(1)(b), says: “Appropriation bills may be approved in whole or in part by the governor, and the part approved shall become law.” But the justices, in another decision released the same day, reached no majority on how to resolve the partial veto question.

Doctrine of Laches

The majority decision leaves the merits issue for another day. The majority ruled that WSBU’s challenge was unreasonably delayed because it could have been filed in 2017.

The delay caused prejudice, the majority concluded, because the benefit of a decision earlier may have led to different policy choices with respect to the 2019-21 budget.

Additionally, the respondents lacked knowledge of the claims until the original action was filed, satisfying the third element necessary to prove a laches claim.

Justice Hagedorn, in the majority opinion, noted that courts have discretion to impose equitable remedies, and it was warranted in this case.

“It is true that the proper interpretation of the governor's partial veto powers is an important question,” he wrote. “But that alone, in our view, does not counsel undoing the current policy framework that was crafted in reliance on the policy choices settled in the previous biennium.” In other words, the Evers administration may have made different budget and/or veto choices if it knew Gov. Walker’s vetoes would be undone.

“The 2017-19 biennium has closed, and a new biennial budget has since been enacted relying in part on the law enacted in 2017,” Justice Hagedorn wrote.

“The respondents have established the elements of laches and demonstrated that application of the equitable doctrine is appropriate here.”

Dissent

Justice R. Bradley dissented, joined by Justice Kelly, concluding Walker’s vetoes were unconstitutional because they effectively nullified the laws at issue, delaying by 1000 years and 60 years, respectively. They would have reached the merits.

“The constitution does not confer on the governor any authority to amend or otherwise rewrite a bill in this manner, much less abolish laws altogether,” R. Bradley wrote.