Kansas Bldg. Industry Work. Comp. Fund v. State (Court of Appeals)

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IN THE SUPREME COURT OF THE STATE OF KANSAS

No. 108,607

KANSAS BUILDING INDUSTRY WORKERS COMPENSATION FUND, et al.,
Appellants,

v.

STATE OF KANSAS and KENT OLSON,
DIRECTOR OF DIVISION OF ACCOUNTS AND REPORTS,
DEPARTMENT OF ADMINISTRATION,
Appellees.


SYLLABUS BY THE COURT

1.
Because a claim that an issue is a nonjusticiable political question presents a
question of law, appellate review of justiciability is plenary.

2.
Prominent on the surface of any case held to involve a political question is found
(1) a textually demonstrable constitutional commitment of the issue to a coordinate
political department; or (2) a lack of judicially discoverable and manageable standards for
resolving it; or (3) the impossibility of deciding without an initial policy determination of
a kind clearly for nonjudicial discretion; or (4) the impossibility of a court's undertaking
independent resolution without expressing lack of the respect due coordinate branches of
government; or (5) an unusual need for unquestioning adherence to a political decision
already made; or (6) the potentiality of embarrassment from multifarious pronouncements
by various departments on one question. Unless one of these formulations is inextricable
from the case presented to the court, it should not dismiss the case for nonjusticiability on
the ground of a political question's presence.
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3.
Not all moneys deposited into the State Treasury represent public moneys subject
to unfettered general appropriation by the legislature. "[M]oneys received or to be used
under constitutional or statutory provisions or under the terms of a gift or payment for a
particular and specific purpose are to be kept as separate funds [within the State
Treasury] and shall not be placed in the [State General Fund]. . . ." K.S.A. 75-3036.

4.
Under its police power, the State may reimburse itself for the costs of otherwise
valid regulation and supervision by charging the necessary expenses to the businesses or
persons regulated. A statute, however, exceeds the valid exercise of the police power if it
extracts more than adequate remuneration, i.e., if the assessment so exceeds the cost of
regulation that it is apparent the legislature is using it as a general revenue raising
measure. The claim that the legislature has invalidly exercised its police power is not a
nonjusticiable political question.

5.
The existence of jurisdiction and standing are both questions of law over which an
appellate court's scope of review is unlimited. When a district court grants a motion to
dismiss based on a lack of standing, the appellate court accepts the facts alleged in the
petition as true, and if those facts demonstrate that the appellants have standing to sue,
the decision of the district court must be reversed.

6.
Standing is a party's right to make a legal claim or seek judicial enforcement of a
duty or right. While standing is a requirement for case-or-controversy, i.e., justiciability,
it is also a component of subject matter jurisdiction that may be raised at any time. A
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justiciable controversy has definite and concrete issues between the parties and adverse
legal interests that are immediate, real, and amenable to conclusive relief.

7.
Under the traditional test for standing in Kansas, a person must demonstrate both
that (1) he or she has suffered a cognizable injury; and (2) there is a causal connection
between the injury and the challenged conduct. Despite our citation to the federal test for
standing in some earlier cases, this court has not abandoned the traditional Kansas test in
favor of the federal model.

8.
Where the State transfers moneys into the State General Fund from a fee fund
statutorily established for a specific purpose, the persons or entities subject to assessment
to replenish the fee fund have a colorable claim for a cognizable injury that is fairly
traceable to the State's action, thereby giving those assessed or assessable persons or
entities standing to challenge the State's transfer of moneys.

9.
An association has standing to sue on behalf of its members when: (1) the
members have standing to sue individually; (2) the interests the association seeks to
protect are germane to the organization's purpose; and (3) neither the claim asserted nor
the relief requested requires participation of individual members.

Review of the judgment of the Court of Appeals in 49 Kan. App. 2d 354, 310 P.3d 404 (2013).
Appeal from Shawnee District Court; FRANKLIN R. THEIS, judge. Opinion filed August 28, 2015.
Judgment of the Court of Appeals reversing the district court is affirmed. Judgment of the district court is
reversed and remanded with directions.

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Michael R. O'Neal, of Gilliland & Hayes, P.A., of Hutchinson, argued the cause, and Shannon L.
Holmberg, of the same firm, was with him on the briefs for appellants.

Derenda J. Mitchell, assistant attorney general, argued the cause, and Derek Schmidt, attorney
general, was with her on the briefs for appellees.

The opinion of the court was delivered by

JOHNSON, J.: Plaintiffs, who were required to pay fees to a State agency in order
to practice their trade or transact business in Kansas, brought suit against the State of
Kansas and Kent Olson, Director of Division of Accounts and Reports in the Department
of Administration. The action challenged a 2009 appropriations bill, Senate Substitute for
House Bill No. 2373, which directed the transfer of moneys into the State General Fund
(SGF) from the various State agency fee fund accounts into which the respective
plaintiffs had paid fees. The plaintiffs argued that the legislature's sweep of large sums of
money from the fee-funded accounts into the SGF was an invalid exercise of the State's
police powers and an unconstitutional exercise of its taxing authority.

The district court dismissed the lawsuit, finding that plaintiffs did not have
standing to sue, because the moneys were taken from the agencies, not from the
individuals that paid fees into the agencies' accounts. Further, the district court opined
that the plaintiffs' complaints were required to be addressed under the Kansas Judicial
Review Act (KJRA), K.S.A. 77-601 et seq.

Plaintiffs appealed and the Court of Appeals reversed the order of dismissal,
finding that plaintiffs had standing because they had been uniquely damaged by the
transfer of funds and that the plaintiffs were not required to bring their claims under the
KJRA because the agencies had no authority under the KJRA to grant the relief sought by
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plaintiffs, which was a finding that the legislation directing the fee fund transfers was
unconstitutional.

The defendants petitioned this court for review, raising several issues. Initially,
this court only granted review of the standing issue. Subsequently, we requested
additional briefing on whether plaintiffs' claims involved a political question and, if so,
whether that deprived the judiciary of jurisdiction. We resolve both the standing and
political question issues in plaintiffs' favor and remand to the district court to reinstate the
action.

FACTUAL AND PROCEDURAL OVERVIEW

In the district court, the litigation was terminated early upon a motion to dismiss.
Accordingly, we look to the plaintiffs' amended petition for the salient facts. Board of
Sumner County Comm'rs v. Bremby, 286 Kan. 745, 751, 189 P.3d 494 (2008) (when
district court grants motion to dismiss based on lack of standing, appellate court must
accept facts alleged by plaintiff as true, along with any inferences that can reasonably be
drawn therefrom); cf. McCormick v. Board of Shawnee County Comm'rs, 272 Kan. 627,
634, 35 P.3d 815 (2001) (review of district court's grant of motion to dismiss for failure
to state a claim requires appellate court to assume the facts alleged by the plaintiffs and
reasonably drawn inferences are true).

Background of H.B. 2373

In 2009, the Governor informed the legislature of an anticipated total revenue gap
between expenditures and available resources for fiscal year 2010 of over $900 million.
Ostensibly, in order to make up for this revenue gap, the Governor recommended
transferring $29 million in Special Revenue Fund balances into the SGF in fiscal year
2009 and another $2.2 million in fiscal year 2010. The Governor's published
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recommended budget contained an itemized listing of the proposed revenue transfers,
which were characterized as "cash sweeps." The listing included proposed transfers from
the Workers Compensation Fund administered by the Kansas Insurance Department (WC
Fund), the Real Estate Fee Fund administered by the Kansas Real Estate Commission
(RE Fund), and the Bank Commission Fee Fund administered by the Office of the State
Bank Commissioner (Bank Fund).

Using the Governor's proposed budget, the 2009 Kansas Legislature passed Senate
Substitute for House Bill 2373 (H.B. 2373). Senate floor amendments reduced the total
amount of transfers by 21.5 percent and granted outright exemptions to several fee funds
originally included within the Governor's itemized listing of proposed revenue transfers.
Ultimately, H.B. 2373 passed and was signed into law, effective June 11, 2009. The final
version of H.B. 2373 authorized and directed the Director of Accounts and Reports to
transfer a total of $2.355 million from the WC Fund account to the SGF, a total of
$195,671 in RE Fee Funds to the SGF, and a total of $534,517 in the Bank Fund to the
SGF. The legislation stated that the purpose of the transfers was to reimburse the SGF for
accounting, auditing, budgeting, legal, payroll, personnel and purchasing services, and
any other governmental services performed on behalf of the affected agencies by other
state agencies which receive appropriations from the SGF to provide such services.

Workers Compensation Fee Fund

Most Kansas employers are required to provide workers compensation coverage
for their employees. An employer may self-insure or obtain an insurance policy from a
State authorized insurance carrier or group-funded workers compensation pool. These
insurers are also required, by statute, to fund the operations of the WC Fund, which is
administered by the Kansas Commissioner of Insurance and is liable for specific
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statutorily authorized workers compensation awards, as well as payment of the actual
expenses of the Insurance Commissioner that are incurred in administering the WC Fund.

On June 1 of each year, the Commissioner of Insurance may impose an assessment
against the insurers in order to assure payment of compensation under the Workers
Compensation Act (the Act). The Act details how the assessment amount for each insurer
is computed, but the total amount of the assessment "shall be equal to an amount
sufficient, in the opinion of the commissioner of insurance, to pay all amounts, including
attorney fees and costs, which may be required to be paid from such fund during the
current fiscal year." K.S.A. 2014 Supp. 44-566a(b)(1). The assessments are received by
the Commissioner and remitted to the State Treasurer, who deposits them in the State
Treasury to the credit of the WC Fund.

In June 2009, the Kansas Insurance Department informed insurers that the
legislature's 2009 fund sweep required that the Department impose a 1 percent
assessment for fiscal year 2010. Subsequently, in June 2010 and June 2011, the
Department sent out additional notices indicating that because the legislature continued to
sweep money from the WC Fund, the Department would again have to assess additional
fees to the insurers. The Department represented that "but for" the $2.355 million sweep
from the WC Fund, no assessment would have been required in fiscal years 2010 and
2011. At oral argument, plaintiffs alleged that the WC Fund receives no services from
any other state agency that receives appropriations from the SGF to provide such services
to the WC Fund.

Real Estate Fee Fund

All persons desiring to operate as a licensed real estate agent or broker in Kansas
are required to pay licensing fees to the Kansas Real Estate Commission every 2 years.
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The license fees are ultimately deposited in the State Treasury, and at the time of the
actions giving rise to this lawsuit, 20 percent of the deposits were credited to the SGF for
administration costs, but the remainder was credited to the RE Fund. Plaintiffs alleged,
and the State admitted, that the transferred amount of $195,671 from the RE Fund was
derived from the Kansas Savings Incentive Program (KSIP), a State program that allowed
participating agencies to keep half of any savings realized by their agency during the
prior fiscal year to spend on employee bonuses, technology purchases, and professional
development.

Bank Commissioner Fee Fund

The Kansas State Bank Commissioner is statutorily authorized to make
assessments on all banks, savings and loan associations, and trust companies (hereinafter
"banks") in order to pay for all costs and expenses associated with administering the
banking, saving and loan, and trust laws in Kansas. The Bank Commissioner remits the
collected assessments to the State Treasurer, who deposits the money in the State
Treasury. Pursuant to the law in existence at the time of the 2009 transfer, 20 percent of
the deposit must be credited to the SGF, with the balance credited to the Bank Fund. In
other words, normally the State takes $1 out of every $5 of fees that the banks pay into
the Bank Fund, ostensibly to cover the costs incurred by other, tax-funded agencies that
support the operations of the Bank Fund. The transferred amount of $534,517 from the
Bank Fund—which was in addition to the usual upfront 20 percent service fee—was
derived from KSIP.

District Court Proceedings

In January 2010, plaintiffs brought suit against the State of Kansas, Department of
Administration, Division of Accounts and Reports. Plaintiffs were subsequently granted
leave to file an amended petition naming the State of Kansas and Kent Olson, Director of
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Accounts and Reports, Department of Administration, as defendants in the case. Plaintiffs
were comprised of: (1) Insurers who provide workers compensation insurance and are
required to pay assessments into the WC Fund (Insurer plaintiffs); (2) the Kansas
Association of Realtors, which is comprised of real estate agents and brokers who must
pay licensure fees every 2 years to the RE Fund (Realtor plaintiffs); and (3) two
supervised lenders, together with the Kansas Bankers Association, a trade association
made up of lenders, all of which are required to pay licensure fees and assessments to the
Bank Fund (Banker plaintiffs). Another group of plaintiffs who were required to pay into
a Conservation Fee Fund in connection with oil and gas operations had their fee funds
swept into the SGF, but that group is no longer participating in this lawsuit.

Plaintiffs alleged that the sweep of the respective fee funds constituted a general
revenue-raising measure and not a valid exercise of police power authority because the
transferred amounts of money exceeded the reasonable and necessary costs of regulation
and administration. Plaintiffs sought: (1) a declaratory judgment ruling that the cash
sweeps were unconstitutional; (2) injunctive relief barring further or future legislative-
enacted transfers of the fee funds; (3) mandamus or quo warranto relief against Kent
Olson, seeking restoration or reimbursement of the swept funds; and (4) class
certification.

Defendants filed a motion to dismiss, arguing, inter alia, that the court did not
have subject matter jurisdiction because plaintiffs lacked standing to bring their claims.
Specifically, defendants claimed that plaintiffs had no standing to seek enforcement of a
public right, namely the appropriation of public funds.

Plaintiffs responded, claiming that they had standing pursuant to the reasoning
found in Sac and Fox Nation v. La Faver, 31 F. Supp. 2d 1298 (D. Kan. 1998), and
Watson v. City of Topeka, 194 Kan. 585, 400 P.2d 689 (1965). Plaintiffs further argued
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that while they did not challenge the statutory authority of an agency to assess and collect
fees for the legitimate purposes authorized in enabling legislation, they did challenge "the
diversion of fee funds by the state into the State's General fund coffers and expended for
purposes not authorized or contemplated by the enabling legislation allowing the
collection of fees by regulatory agencies." In other words, the plaintiffs objected to their
fees—which were assessed for a specifically authorized purpose—being appropriated and
used by the State for public purposes as if they were general tax moneys.

The district court framed the motion to dismiss issue as:

"Assuming Plaintiffs' claims to be true, that is, the fees and charges now being
imposed are due to the shortfall in funds available to a respective agency because of the
various transfers noted and 'but for' they would not have been imposed as they are, the
questions before the Court devolve into the question of a remedy and the standing to
assert it."

The district court first determined that a challenge to the agencies' fee decisions
must be brought under the KJRA. The district court reasoned that, even assuming that the
transfers were unlawful, defendants' actions did not harm plaintiffs, but rather it was the
agencies' responses to the transfers that caused plaintiffs' injuries. For example, the
district court surmised, had the agencies cut back on expenses in response to the fund
transfer, rather than increasing fees, plaintiffs would not have brought this action because
they would have suffered no injury.

The district court then concluded that plaintiffs' only remedy under the KJRA
would be a determination that the additional fee assessment was unlawful but that the
KJRA did not provide a means for restoring funds that had already been used somewhere
else. The district court noted that the KJRA did not contain a procedure to add other
parties, such as the Director of Accounts and Reports or State Treasurer who would be
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necessary to reverse the transfers. Accordingly, the district court determined that the
agencies would be required to reimburse plaintiffs from their own funds, which, in turn,
would require the agencies to reduce their services and render them unable to perform
their statutory duties. The district court concluded that the agencies' presumed inability to
perform statutory duties constituted an issue of public concern, thereby undermining
plaintiffs' standing to bring the action. Finally, the district court found that the Attorney
General and district attorneys are charged with bringing an action that affects the general
public. The district court therefore ruled that plaintiffs had until September 9, 2011, to
either (1) "secure the substitution of the Attorney General of the State of Kansas or his
special designee" to prosecute the case; or (2) pursue individual claims under the KJRA.
The district court further ruled that if neither action was taken, it would dismiss the
lawsuit for lack of subject matter jurisdiction.

Plaintiffs failed to exercise either option but instead sought to add the affected
agencies as indispensable parties to the action. The district court denied this request and
consequently dismissed the case for lack of subject matter jurisdiction. Plaintiffs filed a
timely appeal.

Appellate Proceedings

Plaintiffs complained on appeal that the district court misconstrued their
arguments, especially with regard to their prayer for a declaratory judgment, which led to
the improper dismissal. The Court of Appeals agreed with plaintiffs that the district court
had terminated their lawsuit prematurely, summarizing its holding as follows:

"We reverse and remand this case because the district court erred when it ruled
the Plaintiffs had no standing to bring this action. They indeed appear to be uniquely
damaged by the legislative enactment in a way that the general public is not—they had to
pay increased fees. Thus, this lawsuit was not one that had to be brought by the attorney
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general or a county or district attorney. Also, the Plaintiffs were not required to bring a
case under the Kansas Judicial Review Act because the state agencies cannot give the
primary relief the Plaintiffs seek—the declaration that H.B. 2373 is unconstitutional.

"Because the district court dismissed this action solely upon the grounds of
standing and the Plaintiffs' failure to pursue a remedy under the Judicial Review Act, we
will not address questions that the district court has had no opportunity to answer first.
These questions include: whether the district court properly denied class certification;
whether the defendants are immune from suit; whether this is a political question; or
whether the Plaintiffs can seek mandamus or quo warranto relief. The district court must
address those issues on remand. We do not know how this controversy will end, but we
do know it can begin." Kansas Bldg. Industry Work. Comp. Fund v. State, 49 Kan. App.
2d 354, 356, 310 P.3d 404 (2013).

The State filed a petition requesting that this court review the panel's published
decision. The petition set forth the following issues:

"1. Whether the Defendants are immune from suit in this matter.

"2. Whether the Plaintiffs may avoid the Constitutional requirement that the
legislature be the sole branch that appropriates moneys, avoid the
presumption of constitutionality, and ask the courts to ignore the plain
language of the legislative journals to allow them to assume irregularity in
the legislative process.

"3. Whether the courts have jurisdiction to decide Plaintiffs' case.

"4. Whether Plaintiffs may bypass the exclusivity of the Kansas Judicial
Review Act.

"5. Whether Plaintiffs may bring claims of mandamus and quo warranto when
Plaintiffs have alleged no failure to perform an unfulfilled duty."
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The State's petition for review was only granted in part. Specifically, the court's
order and the clerk's notice of action to the parties stated that the petition was "granted
only as to Issue 3, regarding standing." After supplemental briefing and oral arguments to
this court, we determined that additional briefing was required on the correct test for
standing to be applied in Kansas state courts. But additionally, a question arose as to
whether the political question doctrine is jurisdictional or prudential. See Hegab v. Long,
716 F.3d 790, 800 n.4 (4th Cir. 2013) (quoting Chemerinsky, Federal Jurisdiction 45
[5th ed. 2007], for the proposition that the Supreme Court has not announced whether the
political question doctrine is constitutional and thus jurisdictional). An appellate court
can make a sua sponte inquiry into whether it has jurisdiction over a question presented
to it on appeal. See State v. Berreth, 294 Kan. 98, 117, 273 P.3d 752 (2012) ("appellate
courts have a duty to question jurisdiction on their own initiative").

Consequently, this court requested additional briefing that addressed the
following questions:

"1. With respect to the standing issue:
"a. How should the test for standing be stated in this case?
"b. Is the test for standing applied differently with respect to plaintiffs' prayer for
declaratory judgment?

"2. Whether this case involves a non-justiciable political question, including an
analysis of the following questions:
"a. Is the money in the plaintiffs' respective funds 'public moneys'?
"b. Is the money in the Kansas Savings Incentive Program (KSIP) 'public
moneys'?"

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We take the liberty of first considering the political question doctrine of
nonjusticiability, before discussing the standing issue. Ultimately, we affirm the Court of
Appeals and remand to the district court to reinstate the proceedings.

POLITICAL QUESTION DOCTRINE

In the district court, the State claimed an absence of subject matter jurisdiction
because the plaintiffs' claims raised a purely political question, i.e., the political question
doctrine rendered the plaintiffs' claims nonjusticiable. Essentially, the State argued that
budgeting is a political matter, the legislature's intent for the stated purpose of the
appropriation may not be questioned, and the court may not depose members of the
legislature and inquire into their motives and beliefs for passing the legislation. The State
reasoned: "A court may not step into the shoes of a legislator and second-guess the need
to reimburse the state and make appropriations."

Standard of Review

"Whether a claim is nonjusticiable is a question of law. See Cochran v. Kansas
Dept. of Agriculture, 291 Kan. 898, 903, 249 P.3d 434 (2011); cf. Van Sickle v.
Shanahan, 212 Kan. 426, 439, 511 P.2d 223 (1973); see also Connecticut Coalition for
Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 254-55, 990 A.2d 206 (2010)
('Because an issue regarding justiciability raises a question of law, our appellate review is
plenary.'); Nebraska Coalition for Ed. Equity v. Heineman, 273 Neb. 531, 540, 731
N.W.2d 164 (2007)." Gannon v. State, 298 Kan. 1107, 1118-19, 319 P.3d 1196 (2014).

Analysis

The seminal United States Supreme Court case on the political question doctrine is
Baker v. Carr, 369 U.S. 186, 82 S. Ct. 691, 7 L. Ed. 2d 663 (1962). There, certain
Tennessee voters sued under the civil rights statute seeking to declare a state
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apportionment statute unconstitutional on equal protection grounds. The federal district
court dismissed the action as nonjusticiable under the political question doctrine. The
Supreme Court reversed, finding the allegations that a state statute effected an
apportionment that deprived plaintiffs of equal protection of the laws in violation of the
Fourteenth Amendment to the United States Constitution presented a justiciable
constitutional cause of action which was within the reach of judicial protection, i.e., the
case did not present a nonjusticiable political question. 369 U.S. at 237.

Enroute to that decision, Baker extensively explored the political question doctrine
and reviewed many cases "in order to expose the attributes of the doctrine—attributes
which, in various settings, diverge, combine, appear, and disappear in seeming
disorderliness." 369 U.S. at 210. The Court opined:

"The nonjusticiability of a political question is primarily a function of the separation of
powers. Much confusion results from the capacity of the 'political question' label to
obscure the need for case-by-case inquiry. Deciding whether a matter has in any measure
been committed by the Constitution to another branch of government, or whether the
action of that branch exceeds whatever authority has been committed, is itself a delicate
exercise in constitutional interpretation, and is a responsibility of this Court as ultimate
interpreter of the Constitution. To demonstrate this requires no less than to analyze
representative cases and to infer from them the analytical threads that make up the
political question doctrine. We shall then show that none of those threads catches this
case." 369 U.S. at 210-11.

From its review of prior cases, the Court synthesized the elements of the political
question doctrine, which it described as follows:

"It is apparent that several formulations which vary slightly according to the
settings in which the questions arise may describe a political question, although each has
one or more elements which identify it as essentially a function of the separation of
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powers. Prominent on the surface of any case held to involve a political question is found
[1] a textually demonstrable constitutional commitment of the issue to a coordinate
political department; or [2] a lack of judicially discoverable and manageable standards for
resolving it; or [3] the impossibility of deciding without an initial policy determination of
a kind clearly for nonjudicial discretion; or [4] the impossibility of a court's undertaking
independent resolution without expressing lack of the respect due coordinate branches of
government; or [5] an unusual need for unquestioning adherence to a political decision
already made; or [6] the potentiality of embarrassment from multifarious pronouncements
by various departments on one question.

"Unless one of these formulations is inextricable from the case at bar, there
should be no dismissal for non-justiciability on the ground of a political question's
presence. The doctrine of which we treat is one of 'political questions,' not one of
'political cases.' The courts cannot reject as 'no law suit' a bona fide controversy as to
whether some action denominated 'political' exceeds constitutional authority. The cases
we have reviewed show the necessity for discriminating inquiry into the precise facts and
posture of the particular case, and the impossibility of resolution by any semantic
cataloguing." 369 U.S. at 217.

The Court also cautioned that, as a tool for maintenance of governmental order,
the political question doctrine "will not be so applied as to promote only disorder." 369
U.S. at 215. Baker ultimately found it "'"inconceivable that guaranties embedded in the
Constitution of the United States may thus be manipulated out of existence"'" by the
political question doctrine. 369 U.S. at 230 (quoting Gomillion v. Lightfoot, 364 U.S.
339, 344-45, 81 S. Ct. 125, 5 L. Ed. 2d 110 [1960]).

Recently, in Gannon, this court referred to the enumerated portion of the above
Baker quote as "the six Baker v. Carr factors" and clarified that one or more of the
factors must exist to give rise to a political question. 298 Kan. at 1137. Gannon further
noted "that this court has previously applied the Baker v. Carr factors, sometimes
concluding an issue was a nonjusticiable political question (Leek [v. Theis], 217 Kan.
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[784,] 813-16[, 539 P.2d 304 (1975)]) and sometimes concluding it was not (Van Sickle,
212 Kan. at 438-39)." 298 Kan. at 1138. Accordingly, we will continue to view the
political question doctrine through Baker's lens.

Pursuant to Baker, it seems that the first step is to make a "discriminating inquiry
into the precise facts and posture of [this] particular case." 369 U.S. at 217. As noted, the
posture of this case is a dismissal on jurisdictional grounds. As the Court of Appeals aptly
noted, the current appeal is not about which party will win in the end, but rather it
concerns whether the lawsuit may begin. Kansas Bldg., 49 Kan. App. 2d at 356.
Accordingly, the State's arguments concerning the presumption of constitutionality
afforded to legislative enactments are premature; if the lawsuit is a nullity, there will be
nothing to construe.

Likewise, the State's contentions that budgeting is a political process and that the
payment of government expenses is constitutionally committed to the legislative branch
are not in issue here. The plaintiffs do not dispute the legislature's power to appropriate
public money over which the State has exclusive control. Rather, in their words, "[w]hat
[p]laintiffs challenge is the diversion of fee funds by the state into the State's General
Fund coffers and expenditures for purposes not authorized or contemplated by the
enabling legislation which allows the collection of fees by regulatory agencies." The
State responds that all money in the State Treasury is public money; that the fees
collected for the agency funds involved in this case are deposited to the State Treasury;
and, therefore, the fee funds are public money subject to appropriation at the sole
discretion of the legislature. Accordingly, the character of the moneys in issue is a critical
fact to resolve.

The State's conclusory assertion that all moneys in the State Treasury are public
money subject to unfettered appropriation is not universally embraced.
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American Jurisprudence provides:

"Appropriations can be made only from state funds which are those funds raised
by the operation of some general law. To be subject to the appropriation power of the
legislature, funds held by state officers or agencies must belong to the state. Funds held in
trust to be distributed according to legislatively prescribed conditions are not subject to
appropriation, even though they are received on account of the state and the state
treasurer is designated custodian." 63C Am. Jur. 2d Public Funds § 28.

Similarly, Corpus Juris Secundum provides:

"All public funds and revenue coming into the state treasury, not specifically
authorized by the constitution or by statute to be placed in a separate fund, and not given
or paid over in trust for a particular purpose, constitute a part of the general fund of the
state. The general fund is the collective designation of all the assets of the state which
furnish the means for the support of the government and the defraying of the
discretionary appropriations of the legislature, that is, the necessary and contingent
expenses of the government. . . .

"The payment of funds into the state treasury does not necessarily vest the state
with title to those funds. The term general funds refers to funds belonging to the state and
does not apply to funds for the benefit of contributors for which the state is a mere
custodian or conduit." 81A C.J.S., States §§ 383, 384 (2004).

Especially with respect to workers compensation funds, a majority of other
jurisdictions considering the issue have found that those funds do not constitute public
moneys subject to appropriation by the legislature. For instance, in Moran v. State ex rel.
Derryberry, 534 P.2d 1282 (Okla. 1975), an action was brought by policyholders of the
Oklahoma State Insurance Fund seeking to enjoin statutorily directed liquidation of
certain assets of the Fund and the legislative appropriation of those funds. The action was
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prompted by the passage of a law to provide for disposition and use of "'existing surplus
funds of the State Insurance Funds in excess of the reserves and surplus authorized to be
maintained at law.'" 534 P.2d at 1284 (quoting 85 O. S. Supp. 1974 § 152). Included in
the legislation was authorization for the State Insurance Fund commissioner to liquidate
assets of the Workmen's Compensation Fund in the amount of $4 million dollars, which
was subsequently appropriated to the State Board of Education for the support of the
public school activities. 534 P.2d at 1284.

As in this case, the State of Oklahoma claimed that the fee funds involved in that
case were state moneys subject to appropriation. The Oklahoma Supreme Court rejected
the State's position as being the minority view. The Derryberry court reviewed various
treatises, to-wit:

"In Appleman, Insurance Law and Practice, Vol. 7A, § 4592, p. 190, 'State
Insurance Funds' it is stated:


'The purpose of a compensation act is to provide compensation for workmen
injured in occupations defined by the act, and the funds created by the act, together with
the revenues by which they are sustained, are trust funds devoted to the special purposes
designated by the act.'

And at page 192, as follows:

'The fund, itself, is not synonymous with the state, and claims against the fund
are not claims against the state, the fund not being considered a state fund.'

"Also in Appleman, Vol. 7A, § 4594, pages 202, 203, 'State Insurance Funds-
Payment Out of Funds' it is stated:

20



'The Industrial Accident Board, Compensation Commission, or whatever
department stands in that stead, occupies a position of trust in relation to every person
who is entitled to receive benefits from the funds, of which the Board is made trustee.
The revenues received from the contributions of employers are a trust fund in the sense
that a moral and legal obligation is imposed upon the state to use the revenues for the
declared purposes for which they are collected.'

"In 100 C.J.S. Workmen's Compensation § 357b, page 40, relative to State
Funds, we find the following:

'. . . The fund is a public fund in the sense of being administered by a public
body, and its character as a public fund is indicated by a statute providing that industrial
insurance premiums shall be paid into the state treasury for the accident and medical aid
funds; but it is not public money in the sense of being money of the state to be used for,
and on behalf of, the state for a state expenditure.'" 534 P.2d at 1286-87.

Ultimately, the Oklahoma Supreme Court concluded that

"the funds of the State Insurance Fund are not State funds and do not belong to the State,
that such funds are trust funds for the benefit of employers and employees, and are not
available for the general or other purposes of the State, nor are they subject to
appropriation by the Legislature for purposes other than those contemplated by the State
Insurance Fund Act." 534 P.2d at 1288.

Accord State v. Musgrave, 84 Idaho 77, 84, 370 P.2d 778 (1962) ("The money in the fund
does not belong to the state . . . ."); Senske v. Fairmont & Waseca Canning Co., 232
Minn. 350, 356, 45 N.W.2d 640 (1951) ("It is a fund which belongs to industry, in which
the state has no interest other than its proper administration."); State v. McMillan, 36
Nev. 383, 388, 136 P. 108 (1913) (premiums could not be used or made available for
payment of ordinary expenses of state government); State v. Padgett, 54 N.D. 211, 217,
209 N.W. 388 (1926) ("The claims against the fund are not claims against the state; and
21



the fund itself is not a state fund."); State v. Olson, 43 N.D. 619, 625, 175 N.W. 714
(1919) ("not a state fund"); Chez, Atty. Gen. v. Industrial Comm. of Utah, 90 Utah 447,
452, 62 P.2d 549 (1936) (holding that while state workers compensation fund was "a
public fund in the sense of being administered by a public body, [it was] not public
money in the sense that it is money of the state to be used for and on behalf of the state
for a state expenditure"); State v. Yelle, 174 Wash. 547, 550, 25 P.2d 569 (1933) (holding
that funds within a workers' compensation accident fund were "trust funds drawn from
particular sources and devoted to special purposes. . . . These funds are therefore not
subject to appropriation by the legislature for purposes other than those contemplated by
the act, nor by methods that run counter to the effective operation of the act."). But cf.
Industrial Com'n of Arizona v. Brewer, 231 Ariz. 46, 51-52, 290 P.3d 439 (2012)
(rejecting idea that moneys held in workers compensation special fund were held in trust
for benefits of employers and employees and instead determining they were public
moneys that could be transferred by the Arizona Legislature to the general fund).

The majority view with regard to workers compensation funds comports with this
court's assessment of the purposes of Kansas' WC Fund. One of those purposes is to
encourage the employment of handicapped persons by relieving employers of workers
compensation liability; another purpose is to pay benefits to injured workers where the
employer has no insurance and is financially unable to pay, or where the employer cannot
be located to pay workers compensation. See Wasson v. United Dominion Industries, 266
Kan. 1012, 1019, 974 P.2d 578 (1999).

Likewise, while all of the funds involved in this litigation are deposited into the
State Treasury, the portion of the paid-in fees remaining after any automatic service fee
assessment by the State is credited to a separate account for the respective fund. Then,
expenditures from a fund account are limited to those purposes for which the fund was
statutorily created. For instance, money in the Bank Fund cannot be used to build a
22



bridge or to pay the Governor's salary. In that vein, K.S.A. 75-3036 contemplates that fee
funds designated for a specific purpose are not part of the SGF and are not "public
moneys." That statute provides:

"The state general fund is exclusively defined as the fund into which shall be
placed all public moneys and revenue coming into the state treasury not specifically
authorized by the constitution or by statute to be placed in a separate fund, and not given
or paid over to the state treasurer in trust for a particular purpose, which unallocated
public moneys and revenue shall constitute the general fund of the state; but moneys
received or to be used under constitutional or statutory provisions or under the terms of a
gift or payment for a particular and specific purpose are to be kept as separate funds and
shall not be placed in the general fund or ever become a part of it, except by proper
statutory enactment, and any such moneys which are wrongfully or by mistake placed in
the general fund shall constitute a proper charge against such general fund: Provided,
That all legislative appropriations which do not designate a specific fund from which they
are to be paid shall be considered to be proper charges against the general fund of the
state: Provided further, That all revenues received by the state of Kansas or any
department, board, commission, or institution of the state of Kansas, and required to be
paid into the state treasury shall be placed in and become a part of the state general fund,
except as provided in this act." (Emphasis added.)

In short, we reject the State's assertion that all moneys in the State Treasury are
public moneys over which the State has unfettered, general appropriation powers. Here,
the fee funds were composed of payments for a particular and specific purpose and,
accordingly, they were to be kept as separate funds and not as part of the general fund.
Consequently, the State's attempt to fit within the Baker v. Carr factors with conclusory
declarations that budgetary matters are political falls within Baker's rejection of
"semantic cataloguing." 369 U.S. at 217.

23



The State's more colorable argument is that, specific to these funds, the legislature
determined that the transfers were to "reimburse the state general fund for accounting,
auditing, budgeting, legal, payroll, personnel and purchasing services, and any other
governmental services which are performed on behalf of the state agency by other state
agencies which receive appropriations from the state general fund to provide such
services." Journal of the Kansas Senate for May 5, 2009, p. 803. The State contends that
such a legislative declaration is nonjusticiable. We disagree.

Although the Court of Appeals initially said that it would not consider the political
question issue, it nevertheless found that the question presented was justiciable. The
panel said:

"Our Supreme Court has held that the State may only reimburse itself for the
legitimate costs of regulation and supervision (i.e., what is reasonable and necessary)
through legislative transfers from fee funds to the State General Fund. See Panhandle
Eastern Pipe Line Co. v. Fadely, 183 Kan. 803, 806-07, 332 P.2d 568 (1958).
We follow the lead of the Supreme Court and consider this to be a question of the
propriety of an exercise of police powers of the State and is thus a justiciable
controversy." Kansas Bldg. Industry Work. Comp. Fund v. State, 49 Kan. App. 2d 354,
369-70, 310 P.3d 404 (2013).

Panhandle Eastern Pipe Line Co. v. Fadely, 183 Kan. 803, 332 P.2d 568 (1958)
involved a circumstance similar to the facts of this case. Panhandle paid assessments into
the Natural Gas Conservation fund (NGC Fund), which was administered by the State
Corporation Commission (KCC) to pay the expenses of the agency's Conservation
Division. The KCC determined that the NGC Fund had sufficient moneys to pay its
expenses and reduced its assessments. Shortly thereafter, the legislature passed two bills:
One directed the transfer of $100,000 from the NGC Fund to the SGF, and the other
directed the State Treasurer to credit the SGF with 20 percent of all NGC fees collected
24



by the KCC. After the $100,000 fee fund transfer, the KCC restored its former
assessment order. Panhandle brought suit to challenge the constitutionality of the
enactments.

Panhandle argued that the legislatively ordered transfer of NGC Fund moneys to
the SGF was a revenue-raising measure that took its property without due process and
violated the taxing provisions in Article 11, §§ 1 and 5 of the Kansas Constitution.
Further, it contended that charging 20 percent of the fee assessments for the SGF violated
the Commerce Clause and Fourteenth Amendment to the United States Constitution.

The State answered that the transfer and the 20 percent exaction merely covered
indirect expenses incurred by the KCC and paid by the State from the SGF. It argued that
neither the Kansas Constitution nor the United States Constitution prohibited the State
from receiving "reasonable recompense for the assistance in regulation and supervision
rendered by other departments." 183 Kan. at 806.

The district court found the legislation unconstitutional, and the Supreme Court
affirmed, stating, inter alia:

"[I]t is clear that under its police power the state may reimburse itself for the costs of
otherwise valid regulation and supervision by charging the necessary expenses to the
businesses or persons regulated. [Citations omitted.] A statute, however, is void if it
shows on its face that some part of the exaction is to be used for a purpose other than the
legitimate one of supervision and regulation [citation omitted], or if more than adequate
remuneration is secured [citations omitted]." (Emphasis added.) 183 Kan. at 806-07.

"When a regulatory measure openly becomes a revenue enactment, that portion
thereof which exacts revenue fails as a valid exercise of the police power. We are of the
opinion that [the bills at issue] amount to a tax and a revenue measure levied under the
guise of a regulatory fee, and violate article 11, section 1 of our state constitution, the
25



commerce clause and the Fourteenth Amendment of the Federal constitution." 183 Kan.
at 808.

Granted, the legislation reviewed in Panhandle did not include a legislative
expression that the transfer was intended as a reimbursement of costs. But nevertheless,
the overarching point for our purposes is that the question of whether the legislature has
failed to validly exercise its police power is a justiciable question. As the Court of
Appeals pointed out, even a Kansas Attorney General's opinion suggests that courts need
to analyze whether cost assessments are reasonable in relation to the actual costs of
regulation, i.e., the question of whether the legislature has exceeded its police power
authority is justiciable. Att'y Gen. Op. No. 2002-45, at *5 recites:

"If an assessment is determined to so exceed the cost of regulation that it is apparent the
Legislature is using it as a general revenue raising measure, the overage cannot stand on
police power authority. If the assessment is in fact a revenue raising measure, it must be
analyzed as such, which may include a determination as to whether it meets Commerce
Clause and Equal Protection requirements, as well as any state constitutional
requirements applicable to the type of tax that it is."

Moreover, a review of the Baker v. Carr factors shows the inapplicability of the
political question doctrine. The State has not shown a textually demonstrable
constitutional commitment of the unfettered exercise of the State's police power to the
legislature. Courts often are called upon to determine whether the amount charged for
expenses was reasonably necessary, so that judicially discoverable and manageable
standards exist to resolve the question. The question does not require an initial policy
determination of a kind clearly for nonjudicial discretion, but rather the resolution is a
matter of accounting. In undertaking an independent resolution to the question
presented—whether the legislature overstated the amount required to be reimbursed—it
will not be necessary to express a lack of respect for the legislative branch. The State has
26



not revealed an unusual need for unquestioning adherence to a political decision already
made, especially in light of the plaintiffs' request for a declaratory judgment to protect
their future assessed fees from being swept. Finally, the potentiality of embarrassment
from multifarious pronouncements by various departments on one question is not evident
in this case. Baker, 369 U.S. at 217.

Having determined that this case does not present a nonjusticiable political
question, we move on to the issue of standing.

STANDING

Utilizing the federal test for standing, the State argues that plaintiffs do not have
standing because they: (1) fail to show an interest not possessed by all citizens who pay
fees and taxes; (2) fail to show that their claimed injury was caused by defendants; and
(3) fail to show how the defendants can redress the claimed injury. On the other hand,
plaintiffs claim that they meet the requirements for standing as articulated in Kansas
caselaw, i.e., they "have been uniquely damaged by [H.B. 2373] in a way that is entirely
different from any harm experienced by members of the general public." As noted, we
gave the parties an opportunity to submit supplemental briefing on which standing test
that we should employ in this case, which we will discuss below.

Standard of Review

"The existence of jurisdiction and standing are both questions of law over which
an appellate court's scope of review is unlimited." Friends of Bethany Place v. City of
Topeka, 297 Kan. 1112, 1121, 307 P.3d 1255 (2013). When a district court grants a
motion to dismiss based on a lack of standing, the appellate court accepts the facts
alleged in the petition as true, and if those facts demonstrate that the appellants have
27



standing to sue, the decision of the district court must be reversed. See Board of Sumner
County Comm'rs v. Bremby, 286 Kan. 745, 751, 189 P.3d 494 (2008).

The State agrees that a de novo standard of review is generally employed when
determining standing. But it then makes the curious argument that we must "dismiss this
case forthwith on the basis that the question the Plaintiffs ask the Court to review is
beyond the proper standard of review." The State points to Harris v. Shanahan, 192 Kan.
183, 194, 387 P.2d 771 (1963), for the proposition that all doubts as to the
constitutionality of legislation are construed in favor of validity. The State then suggests
that the presumption of validity is a standard of review which requires this court to
decline to review the constitutionality of presumably valid legislation.

The State's circular argument is apparently the product of melding the concepts of
a standard of review, a canon or rule of statutory construction, and jurisdiction or
justiciability. A standard of review denotes "[t]he criterion by which an appellate court
exercising appellate jurisdiction measures the constitutionality of a statute or the
propriety of an order, finding, or judgment by a lower court." Black's Law Dictionary
1441 (8th ed. 2004). The presumption of constitutionality is not a standard of review but
a canon of statutory construction. See Kansas One-Call System v. State, 294 Kan. 220,
225, 274 P.3d 625 (2012). Jurisdiction encompasses "the court's statutory or
constitutional power to adjudicate the case." Steel Co. v. Citizens for Better Environment,
523 U.S. 83, 89, 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998). Therefore, the presumption
of constitutionality has no relevance to whether this court has authority or jurisdiction to
adjudicate a case or controversy, nor does it define the scope of review or deference
afforded the trial court. Moreover, as noted above, the presumption has no impact on
determining the nonjusticiability of a political question.

28



Clearly, courts have the power to determine whether a statute is unconstitutional.
Marbury v. Madison, 5 U.S. (1 Cranch) 137, 138, 2 L. Ed. 60 (1803); State v. Cheeks,
298 Kan. 1, 11, 310 P.3d 346 (2013) (It is the legislature's prerogative to make policy
decisions, but the court is tasked with ensuring those decisions are within the parameters
of the constitution.). This power applies to statutes dealing with legislative
appropriations. Gannon v. State, 298 Kan. 1107, 1181, 319 P.3d 1196 (2014) ("the
legislature's withholding of all capital outlay equalization payments since fiscal year 2010
renders the operation of 72-8814[c] unconstitutional—whether done by appropriations
bill or the provisions of the statute itself"). However, this power only arises when the
question is presented in an actual case or controversy between parties. State ex rel.
Morrison v. Sebelius, 285 Kan. 875, 888, 179 P.3d 366 (2008). Standing is a requirement
for a case or controversy. Gannon, 298 Kan. at 1122. Standing is also a component of
subject matter jurisdiction. 298 Kan. at 1122. As a jurisdictional matter, standing requires
the court to decide whether a party has alleged a sufficient personal stake in the outcome
of the controversy to invoke jurisdiction and to justify the court exercising its remedial
powers on the party's behalf. Cochran v. Kansas Dept. of Agriculture, 291 Kan. 898, 903,
249 P.3d 434 (2011). Thus, although this court has authority to determine whether H.B.
2373 is constitutional, it must first determine whether it has subject matter jurisdiction
based on plaintiffs' standing.

Analysis

"Standing is 'a party's right to make a legal claim or seek judicial enforcement of a
duty or right.' Black's Law Dictionary 1536 (9th ed. 2009)." Board of Miami County
Comm'rs v. Kanza Rail-Trails Conservancy, Inc., 292 Kan. 285, 324, 255 P.3d 1186
(2011). "While standing is a requirement for case-or-controversy, i.e., justiciability, it is
also a component of subject matter jurisdiction that may be raised at any time." Gannon,
298 Kan. at 1122. "A justiciable controversy has definite and concrete issues between the
29



parties and 'adverse legal interests that are immediate, real, and amenable to conclusive
relief.' State ex rel. Morrison v. Sebelius, 285 Kan. 875, 890-91, 179 P.3d 366 2008)."
State v. Montgomery, 295 Kan. 837, 840, 286 P.3d 866 (2012).

Kansas' standing requirement is grounded in the separation of powers doctrine
which is implicit in our State Constitution. Morrison, 285 Kan. at 896. "Under the
traditional test for standing in Kansas, '"a person must demonstrate that [1] he or she
suffered a cognizable injury and [2] that there is a causal connection between the injury
and the challenged conduct."'" Gannon, 298 Kan. at 1123 (quoting Cochran v. Kansas
Dept. of Agriculture, 291 Kan. 898, 908-09, 249 P.3d 434 [2011]). This traditional
standing test has been utilized repeatedly by the Kansas Supreme Court. See Sierra Club
v. Moser, 298 Kan. 22, 33, 310 P.3d 360 (2013); Friends of Bethany Place, Inc., 297
Kan. at 1126; Board of Miami County Comm'rs, 292 Kan. at 324; Cochran, 291 Kan. at
908; Bremby, 286 Kan. at 761; Lower v. Board of Dir. of Haskell County Cemetery Dist.,
274 Kan. 735, 747, 56 P.3d 235 (2002).

The Court of Appeals initially referred to the two-part Kansas test. But in
discussing the impact of the federal case, Sac and Fox Nation of Missouri v. Pierce, 213
F.3d 566 (10th Cir. 2000), the panel also discussed and applied both the constitutional
and prudential standing requirements utilized by federal courts. Kansas Bldg. Industry, 49
Kan. App. 2d at 367-68. Federal constitutional standing enforces the United States
Constitution's case-or-controversy requirement found in Article III. United States v.
Windsor, 570 U.S. ___, 133 S. Ct. 2675, 2685, 186 L. Ed. 2d 808 (2013). It requires: (1)
that the plaintiff suffered an injury in fact, or a concrete and particularized actual or
imminent injury; (2) a causal connection between the injury and the conduct complained
of; and (3) a likelihood that the injury can be redressed by a favorable decision. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 559-61, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992).
Prudential standing, on the other hand, embodies self-imposed judicial restraints on the
30



exercise of jurisdiction. Windsor, 133 S. Ct. at 2685-86. The prudential standing
principles are: (1) the plaintiff asserts his or her own rights and not those of a third party;
(2) the plaintiff's grievance is not a general one shared by a large class of citizens; and (3)
the interests which the plaintiff seeks to protect are arguably within the zone of interests
protected by statutory or constitutional guarantee. See Sac and Fox, 213 F.3d at 573.
Prudential standing requirements apply only to the exercise of federal courts' jurisdiction.
The Wilderness Soc. v. Kane County, Utah, 632 F.3d 1162, 1168 (10th Cir. 2011).

This court has occasionally cited to the federal constitutional standing
requirements. See, e.g., Ternes v. Galichia, 297 Kan. 918, 921, 305 P.3d 617 (2013). But
we have not explicitly abandoned our traditional state test in favor of the federal model.
Moreover, as opposed to the United States Constitution, our State Constitution contains
no case or controversy provision. The Kansas Constitution grants "judicial power"
exclusively to the courts. Kan. Const. art. 3, § 1. And Kansas courts have repeatedly
recognized that "judicial power" is the "'power to hear, consider and determine
controversies between rival litigants.'" State ex rel. Tomasic v. Unified Gov. of Wyandotte
Co./Kansas City, 264 Kan. 293, 337, 955 P.2d 1136 (1998) (quoting State, ex rel., v.
Mohler, 98 Kan. 465, 471, 158 P. 408 [1916], aff'd 248 U.S. 112, 39 S. Ct. 32, 63 L. Ed.
153 [1918]). Given the differences in the genesis of the two systems, we do not feel
compelled to abandon our traditional two-part analysis as the definitive test for standing
in our state courts. Nevertheless, we would find, as did the Court of Appeals, that
plaintiffs established standing under either test.

Cognizable Injury

The Court of Appeals adequately described a cognizable injury that plaintiffs
suffered:

31



"The damage alleged by the Plaintiffs is entirely different from any harm that members of
the general public experienced. H.B. 2373 reduced the fee funds that the Plaintiffs paid
into, and the Plaintiffs were required to pay increased fees and assessments in order to
replenish those funds. That increase in fees was the specific injury suffered by the
Plaintiffs. Members of the general public do not pay into the fee funds, and, therefore,
they could have suffered no special harm from the fee transfers caused by the enactment
of H.B. 2373. In the event that the fee transfers were reversed by a court, any possible
harm to the public upon that occurrence would be speculative at this point and would
only oppose a possible remedy of the Plaintiffs and not deny them the right to sue." 49
Kan. App. 2d at 364-65.

The State advocates for the causation rationale of the district court, i.e., the
increased fees were due to the agencies' actions, rather than the legislature's cash sweeps,
because the agencies could have chosen to reduce expenses rather than replenish their
respective funds through increased assessments. We will discuss the causation aspect of
this rationale in the second step, causal connection. But it bears mentioning that, if the
agencies had reduced the level of services instead of assessing additional fees, the
plaintiffs might still have presented a cognizable injury because they did not get what
they paid for. For instance, a bank contributing to the Bank Fund has an interest in the
Bank Commissioner assuring that competing banks are following the same rules under
which the contributing bank must operate. If the Bank Commissioner reduces its auditing
operations because the State took most of the Bank Fund, the contributing bank has paid
for a service that it is not getting.

Before moving to causation, we address the State's complaint aimed specifically at
the RE Fund. The State contends that plaintiffs did not allege that the Real Estate
Commissioner had actually assessed the payors into that fund for the amounts swept.
Nevertheless, the RE Fund plaintiffs are required to make periodic fee payments into the
fund which will arguably be used to replenish the swept funds. The fact that the
32



replenishing fees may not have actually been paid at the time of the lawsuit does not
foreclose a cognizable injury. Perhaps those plaintiffs will fail in proving their damages
when the case proceeds on the merits, but their showing at this early stage forecloses their
dismissal.

Moreover, part of the requested relief is a declaratory judgment safeguarding the
RE Fund from future cash sweeps. As the sole contributors to the RE Fund, the injury
caused by any future sweeps would fall squarely on the RE Fund plaintiffs.

Causal Connection

In Gannon, this court borrowed the federal courts' definition of the requisite causal
connection for standing: "[T]he injury must be '"fairly . . . trace[able] to the challenged
action of the defendant, and not . . . th[e] result [of] the independent action of some third
party not before the court."' Lujan, 504 U.S. at 560." 298 Kan. at 1130. Federal courts
have clarified that the fairly traceable standard does not set a high bar for plaintiffs:

"Such a nexus is most easily shown if there is a direct relationship between the plaintiff
and the defendant with respect to the conduct at issue. However, while the 'indirectness'
of an injury '"may make it substantially more difficult"' to show the 'fairly traceable'
element of Article III standing, i.e., 'to establish that, in fact, the asserted injury was the
consequence of the defendants' actions,' indirectness is 'not necessarily fatal to standing,'
. . . because the fairly traceable standard is lower than that of proximate cause. [Citations
omitted.]" Rothstein v. UBS AG, 708 F.3d 82, 91 (2d Cir. 2013) (finding that terrorist
victims had Article III standing to sue bank that provided Iran with U.S. currency because
injury was fairly traceable based on reasonable inference that Iran's ability to amass U.S.
currency to fund terrorist organizations was increased by bank transfers).

See also Bennett v. Spear, 520 U.S. 154, 168-69, 117 S. Ct. 1154, 137 L. Ed. 2d 281
(1997) (It is wrong to equate injury "'fairly traceable' to the defendant with injury as to
33



which the defendant's actions are the very last step in the chain of causation."); Focus on
the Family v. Pinellas Suncoast Transit, 344 F.3d 1263, 1273-74 (11th Cir. 2003) (The
standing doctrine does not require proximate causation, it suffices that the injury flow
indirectly from the challenged conduct.). "Thus, the fact that there is an intervening cause
of the plaintiff's injury may foreclose a finding of proximate cause but is not necessarily a
basis for finding that the injury is not 'fairly traceable' to the acts of the defendant."
Rothstein, 708 F.3d at 92.

Notwithstanding that the fairly traceable standard encompasses injury that flows
indirectly from the challenged conduct, the State contends that the plaintiffs' injuries—
increased fee assessments—were caused by the nonparty agencies, rather than by the
State. It claims that "but for" the agencies' decisions to assess additional fees to replenish
the swept funds, the plaintiffs would have suffered no injury.

The Court of Appeals rejected this middleman-as-intervening-cause argument,
based in part upon the holding in Sac and Fox, 213 F.3d at 573-74. Kansas Bldg.
Industry, 49 Kan. App. 2d at 368-69. There, Kansas assessed a motor fuel tax on
distributors, who sold to retailers on sovereign Native American lands. The distributors
passed on the Kansas tax in its pricing to the tribal retailers. The tribal retailers sued
Kansas because they were not subject to State taxation. The State unsuccessfully argued
that the tribal retailers' injuries were actually caused by the distributors' pricing, rather
than by the State's tax on the distributors.

But the Tenth Circuit disagreed, holding that the tribe's economic injury—the
distributor's act of passing the cost of the tax along to the retailers—was causally
connected to the challenged act of taxing the distributor, giving the tribal retailers
standing to challenge the tax in a lawsuit against the State. 213 F.3d at 573-74; see also
Maryland v. Louisiana, 451 U.S. 725, 736-37, 101 S. Ct. 2114, 68 L. Ed. 2d 576 (1981)
34



(finding first-use tax on pipeline was fairly traceable to injury of increased cost of natural
gas suffered by consumers); but cf. Illinois Ass'n of Realtors v. Stermer, 2014 IL App.
(4th) 130079, ¶ 37, 5 N.E.3d 267 (2014) (finding no standing for contributors to swept
real estate license fee fund because fee increases may have resulted from other factors
such as inflation or increased overhead costs).

Any notion that the increased fee assessments for the WC Fund or the Bank Fund
were precipitated by something other than the cash sweeps, i.e., was not fairly traceable
to the legislative transfers, is belied by the agencies' notice to their contributors. A June 1,
2010, Kansas Insurance Department notice to insurers stated: "'This Legislative sweep
makes it necessary that the Kansas Insurance Department levy an assessment this year of
1.0%.'" The Bank Commissioner's Notice of Assessment provided, in part,

"'Over the past several years the Kansas Legislature has made the difficult decision to
"sweep" surplus funds from our Agency and others for use in other areas of state
government, thereby eliminating that surplus. As a result, our fees must be increased to
better reflect the actual cost of regulation and maintain a viable regulatory structure.'"

The RE Fund was in the same position as the other plaintiffs in losing its funds to the
SGF because of the legislatively ordered transfers, so that the injury suffered by the fund
contributors to replenish the swept funds has to be fairly traceable to those transfers.

Likewise, we reject the district court's suggestion that the agencies caused the
plaintiffs' injuries by choosing to replenish their funds with additional assessments, rather
than constricting their operations to live within their post-sweep means. The agencies are
granted the authority to assess fees for their respective funds for a reason. The agencies
are charged with the responsibility to regulate and supervise the particular operations to
which the respective funds apply. They are not granted the discretion to cease operations
35



if they run out of money, but rather it is their responsibility to raise the funds necessary to
carry out their statutorily mandated responsibilities. For instance, the Insurance
Commissioner cannot refuse to pay covered workers compensation benefits to a claimant
simply to reduce the expenditures from the WC Fund.

As an additional standing argument, the State claims that Kent Olson, Director of
the Division of Accounts and Reports, Department of Administration, is not a proper
party to be a defendant in this action. That is a separate issue which is not properly before
the court in this appeal because the propriety of naming Olson is irrelevant to whether
plaintiffs have standing to bring their claim.

In short, we find that the plaintiffs have suffered a cognizable injury and that the
injury is fairly traceable to the challenged conduct, which is the legislatively ordered
transfer of fee funds to the SGF.

Associational Standing

Additionally, we note a potential issue of associational standing, given that two of
the plaintiffs are trade associations, the Kansas Bankers Association and the Kansas
Association of Realtors. Although the parties do not discuss this issue, its impact on our
jurisdiction mandates that we do.

An association has standing to sue on behalf of its members when: "(1) the
members have standing to sue individually; (2) the interests the association seeks to
protect are germane to the organization's purpose; and (3) neither the claim asserted nor
the relief requested requires participation of individual members." Friends of Bethany
Place, Inc., 297 Kan. at 1126. Here, a member would have standing to sue individually,
but the individual participation of a member is not required to resolve the claim or grant
36



relief. Clearly, the associations seek to protect interests that are germane to their missions
of advocating for their respective professions. We find all plaintiffs have standing here.

Accordingly, we affirm the Court of Appeals' reversal of the district court's
dismissal of the lawsuit and remand to the district court to reinstate the lawsuit.