YES on Amendment 3, Which Would Keep Future Budget Growth in Check

September 25, 2012 | Print Print

By: Ellyn Bogdanoff

In 1994, Florida voters approved an amendment to the state Constitution that was intended to limit the growth of state government. The theory was that Florida government shouldn’t grow faster than the people’s incomes that are funding it.

While the theory is sound, the voters likely did not anticipate that that our Legislature would reduce state revenue on its own.

In the first few years after the adoption of the constitutional revenue limitation, state revenue collections were close to the constitutional limitation. Since that time, however, revenues have generally grown more slowly than personal income. The only other year they came close to the limitation was in 2005-2006, when state revenues, beefed up by a red-hot real estate market, came within $658 million of the limitation.

The effects of the recent recession, coupled with changes in tax laws, have also contributed to the widening gap, and we do not expect it to narrow in the foreseeable future.

Over time, the proposed state revenue limitation is more likely to constrain growth in state revenues than the current limitation. If the adjustment for growth proposed in this amendment had been in effect since 1994, state revenues would have exceeded the revenue limitation in fiscal years 2004-05 and 2005-06. This cap would have benefited Florida with a less drastic reduction in appropriations when the recession hit.

There are opponents of this amendment who try to draw a comparison to Colorado’s restrictive revenue limitation. However, there are some important differences.

First, the Colorado law applies to all taxing districts within the state and voter approval is required for any tax increase. Amendment 3 is only a state revenue limitation.

Second, the Colorado revenue limitation restricts general revenue to the prior year’s revenues adjusted for population growth and inflation. Since the limit in Colorado is based on prior year’s revenues, any decline in revenues due to a recession leads to a permanent ratcheting down of spending levels in Colorado. After the recession in the early 2000, the ratcheting-down effect held the revenue base at recessionary levels. We specifically studied this issue when drafting our proposed amendment. Because the proposed Amendment 3 is based on the prior year’s revenue limitation, there will not be a ratcheting-down effect, and growth in our economy will be allowed to continue.

Third, in Colorado, voter approval is required for any tax increase. Amendment 3 would authorize the Legislature to increase the revenue limitation by supermajority vote, either permanently or for one year, or to place a proposed increase before the voters.

Finally, proposed Amendment 3 directs “excess” funds over the cap to a budget stabilization fund until it is fully funded, then to pay down your local portion of the school property tax. After each school district’s required local effort is zero, only then will the cap require a return of state funds to the people, via some sort of reduction in general taxes or fees.

Thirty states currently have some kind of limit on taxes or expenditures, and we have studied what works and what doesn’t. I believe that this proposed amendment is a prudent way to align our future budget growth.

When the government takes less, the people have more.

 

Ellyn Bogdanoff is a Republican state senator representing Fort Lauderdale.

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