The Tax Commission's TABOR: A Path to Deterioration in Florida

PDF of this Report (10pp.)

By Iris J. Lav

March 21, 2008

Key Findings

  • The proposed state and local revenue cap contains the key elements of Colorado’s TABOR, which led to reductions in health, education, public safety, and transportation services. Voters suspended TABOR for five years in November 2005.
  • If the proposed limit had been effective in Florida beginning in FY 2002, capped state revenues for the FY 2003 – 2007 period would have been $5.7 billion less than the actual revenue level.
  • Florida is already at the bottom among states on many measures of public services; falling further could make it unattractive as a place to live or do business.

Related Areas of Research

Summary

The Taxation and Budget Reform Commission will soon consider placing an amendment on the ballot to tightly limit revenue growth for state and local governments.[1] This proposal, CP 45, deserves a great deal of attention because it shares the fundamental characteristics of Colorado’s Taxpayer Bill of Rights (TABOR):

  • it is a constitutional amendment,
  • it restricts revenue growth at both the state and local level to a formula based on population change and inflation, and
  • it is difficult to override if circumstances make that desirable.

The limit can therefore be expected to cause deterioration in public services in Florida similar to that produced by TABOR in Colorado.

Under CP 45, budget cuts would be required in good economic times because revenues above the limit could not be spent.  Budget cuts already occur in bad economic times because revenues are insufficient to support expenditures.  The outcome of CP 45 would be a state in which vital services that residents want and need — education, health care, public safety, roads, environmental protection and others — deteriorate in most years, through good times and bad.

During the twelve years since TABOR was adopted in Colorado, K-12 funding declined from 35Th to 49th in the nation, and higher education funding dropped by 31 percent.  In addition, the share of low-income children lacking health insurance doubled at a time that it was dropping nationally, and Colorado fell to near last in the nation in providing on-time full vaccinations to the state’s children.

These problems and others led business leaders and Chambers of Commerce across the state to push for the suspension of TABOR’s population-growth-plus-inflation formula for five years in order to allow the state to restore a portion of its fundamental public services.  In November 2005, Colorado voters approved this suspension. To date, Colorado is the only state to have adopted a TABOR, as well as the only state to have voted to suspend it.

Florida already ranks near the bottom among the states on a number of key public services and can’t afford any further declines in the public services upon which Floridians depend, such as health care, education and public safety. But as the Colorado experience has shown, this is likely to happen if the proposed revenue limit is adopted.

What Would CP 45 Do?

The following are the key provisions of CP 45:

  • Revenues of the state and all local governments would be limited.  The limitation applies broadly to taxes, fees, assessments, licenses, fines, and charges for services.  There are very few exceptions:  revenues to meet the requirements of bonds, lottery revenues that are returned as prizes, receipts of the Florida Hurricane Catastrophe Fund and Citizens Property Insurance Corporation, and a few others.
  • Revenues would not be allowed to grow faster than specified by a formula.  The formula is the sum of the inflation rate (CPI-U), population growth, and 1 percent.  For school districts, student enrollment is used instead of population growth.  For all other local governments, the local population growth is used.
  • A large supermajority would be required to override the limit.  For the state limit, a ¾ supermajority of each house of the legislature must vote to override.  For local limits, ¾ of the governing board of the local government must vote to override.
  • A vote of the people would be required to impose a new tax or fee.

Click here to read the full-text PDF of this report (10pp.)

End Notes:

[1] Committee Substitute for Committee Substitute for CP 45, 9:24 am March 10, 2008.

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