Amendment 5 Could Hurt Health & Human Services
 
Due to a reduction in sales tax revenues and documentary stamp revenues derived from sales of real estate, the legislature was forced to reduce the budget by $5 billion from last year’s approved budget. The precarious budget situation may continue. General revenue collections for May 2008 were $121.1 million short of previous estimates adopted in March 2008 at the General Revenue Estimating Conference. Much of the loss is due to declines in sales tax collections and corporate income tax. The total reduction in revenue for the year is almost $2 billion or 8% less than 2007.

The Taxation and Budget Reform Commission which meets every 20 years has placed seven proposed tax reform amendments on the November ballot. The proposals must be approved by at least 60% of the voters to become effective. These proposals may seriously impact the dollars available for the state in the future.

Most importantly, Amendment 5, the tax swap, would eliminate property taxes that contribute to state education funding for schools estimated at over $9 billion and replace those funds with other sources. The possible replacements identified include:

• Up to a penny increase in sales tax (which is estimated to replace less than half of the current funding)
• The elimination of sales tax exemptions, which have been identified as having potential but have not been achieved after many years of various proposals.
• “Spending reductions.”
• “Other revenue options created by the legislature.”

Advocates are concerned that cuts to health and human services and other services will be necessary to make up the $5 billion difference. The language requires a hold harmless amount for education for the 2010-11 fiscal year that would be based on the funding for education for the 2008-09 year with increases based on historical growth during 2006-07 and 2007-08. The proposal would also change the cap on increases in assessed value to non-homesteaded properties from 10% to 5% effective January 1, 2009. Further, it requires future sales tax exemption proposals be limited to one subject matter, a single exemption and be shown to serve a public purpose.