More state legislatures push for tax caps, even as Colorado voters show signs of suffering By Elna Christopher

Governmentovernment consultantconsultantconsultant Carl Neu has spent years watching state legislatures try to tinker with local government revenues and authority while still requiring local governments to foot the bill for new mandates.

In Texas and other states, some lawmakers are effectively “ganging up on local government,” Neu said.

In states where lawmakers have been successful, local governments and their services to taxpayers have come out bruised and battered:

• The most glaring actions have come in Florida and Indiana, where state legislatures capped local governments either statutorily or through constitutional amendments.
• Colorado’s troubling Taxpayer Bill of Rights (TABOR) — the granddaddy of revenue caps — was passed in 1992. It mandated that all revenue increases be put to a vote, prompting almost 8,000 additional costly elections at the local level since 1992. State and local services were in such disarray from TABOR that Colorado voters in 2005 approved a five-year moratorium on TABOR that is now in its third year, and the speaker of Colorado’s House is recommending that TABOR be modified so that the state and its local governments do not face major declines in services when the moratorium expires.
• Florida and Oklahoma recently saw measures similar to Colorado’s TABOR considered for placement on the ballot, but the measures died — for now. However, the Missouri House of Representatives approved a TABOR-like constitutional amendment in March that now awaits action in the Senate.
• In Texas, House Speaker Tom Craddick announced the formation of the Select Committee on Property Tax Relief and Appraisal Reform, which is expected to be much like the governor’s task force headed by Dallas lawyer Tom Pauken — holding hearings around the state and then recommending lower revenue caps on counties and cities. Also, interim studies on revenue caps are gearing up, with continuing pressure from some in the leadership to lower the current 8 percent rollback rate on counties and cities, measures that did not obtain final passage in 2005 and 2007.

“We’re at a critical tipping point about the power and prerogatives of local government to serve the local people,” Neu told new board members of the Texas Association of Counties and its pools in February. “There’s a struggle going on…that would emasculate local government. Do we just become the front-door conduit for back-room authority?

“Texas is not alone. You can start to sense the winds of change … impending danger,” said Neu, a principal in Neu & Company and the Center for the Future of Local Governance headquartered in Lakewood, Colo.

Having watched the issue of revenue caps play out in numerous states, Neu warned that such measures diminish representative democracy and decision-making by locally elected officials.

“What happens is that local authority is stripped,” he said. “It’s the Legislature wanting to control local government with regard to taxes and spending.” He pointed to Florida as a prime example of the trend to cap local governments. “The Legislature and the anti-tax groups are really ganging up on local government, and there’s an erosion of local control.”

Neu noted certain similarities in the Florida and Texas tax structures that make the legislative playing field treacherous for local governments. “The absence of an income tax in both states puts a disproportionate burden on property taxes,” he said. “Counties are the delivery arm of services, but the average taxpayer doesn’t see that. They’re just frustrated with their taxes. It’s like kicking the dog closest to you.”

He said that anti-government leaders like Grover Norquist, president of Americans for Tax Reform in Washington, D.C., have capitalized on citizens’ antipathy toward property taxes, using cries of “the taxes are coming; the taxes are coming!” Neu sardonically noted. “There are some real government-haters out there who are of the same ‘starve the beast’ mentality as Grover Norquist.”

Norquist traveled to the Bahamas in 2004 with Texas Gov. Rick Perry, shortly before Perry announced proposals for a special legislative session that year that included both lower appraisal and revenue caps, neither of which passed.

Also in Texas, the anti-government group Americans for Prosperity and its head, Peggy Venable, continue to call for a TABOR-type measure, along with cutting off the ability of local officials — including those from counties, cities and public schools — to talk to members of the Legislature. Venable sued Williamson County and TAC over legislative lobbying and communicating with the news media. In the end, a district judge ruled that TAC has a constitutional right to lobby on county issues, so long as dues money is not used to lobby.

Not satisfied with the court’s ruling, Venable continues to push for ways to stifle communication between local governments and state lawmakers. Her strident anti-government rhetoric during one legislative hearing prompted Sen. Robert Duncan (R-Lubbock) to tell her that she wants “unilateral disarmament.”

The other half of the problem faced by Texas county government continues to be unfunded and underfunded mandates — or as a Houston Chronicle reporter wryly noted, the legislative practice of “passing the buck” down to counties and their taxpayers. Lowering the revenue cap, whether through a TABOR amendment or statutorily, would severely restrict counties’ abilities to carry out state mandates.

A most recent example of the need for budget flexibility when mandates come down the pike is the massive child abuse investigation by the state’s Child Protective Services in Schleicher and Tom Green counties, involving a breakaway Mormon polygamist sect in Schleicher County. CPS placed 462 children from the sect into state custody. Not only must each of the children involved be appointed an attorney at Schleicher county’s expense, indigent parents who request lawyers to contest the proceedings must also be appointed one at county expense, under provisions of Senate Bill 6 from the 2005 legislative session.

As long-time Schleicher County Judge Johnny Griffin told the Fort Worth Star-Telegram, “The meter’s running faster than I can calculate. I’ve done 29 budgets, and this is the worst (financial) shape we’ve ever been in.”

Griffin said he is hopeful that the state will follow through on a written pledge by Perry, Lt. Gov. David Dewhurst and Craddick directing Comptroller Susan Combs to help the two counties pay expenses for the cases. “Due to the magnitude of the number of cases involved in this situation, we recognize that unrecovered costs would likely cause severe hardship for the involved counties,” their letter said. “We are currently working…to ensure that unrecovered allowable costs related to this emergency situation are reimbursed so that county budgets are not negatively impacted.”

In the meantime, before the promised state money arrives, Griffin told TAC that his county may have to be slow in paying some bills and hope that vendors understand the crisis.

The judge, who will retire from office later this year, said he mentioned to Duncan — often an ally of local governments in the Legislature — that lower revenue caps would have precluded the county from being able to cope financially with the massive, on-going case. Such examples of the fallacy of lower revenue caps are expected to be front and center as Texas legislative committees gear up to hear testimony on caps.

One reason caps are so popular among state legislatures is that it’s easy for lawmakers to pass along mandates and limit local officials’ taxing authority, since legislators are not required to find proper funding for legislation before it’s passed.

“There’s no accountability with legislatures. They pass laws, but counties and other local governments must implement them. … It’s a battle going on in almost every state on authority,” Neu said. “Local governments are squeezed — their authority, revenue, resources and direct control of who decides what.”

What to do?

“How local governments connect with their constituencies is extremely important,” Neu said, noting that property taxes and taxpayers’ perceptions about taxes are “a highly emotional issue.” For example, he said, Florida’s policies on appraisals and revenue caps are “not framed in terms of good or bad public policy. Instead, the answer merchants come in with the quick fix, the simple solution.”

He said that in the federal and state “zones” of government, there is “a disconnect. People in those places move to a different vantage point, partly due to the institutions themselves and the people in those institutions.

“We must tell our story,” Neu said. “How do we get people to recognize that counties provide needed services and not let people be affected by snake oil solutions?” He recommended that county officials help legislators understand that the state shares constituents with its local governments. “We’re all meeting the needs of our citizens. We share our citizens; it’s one constituency,” he said. “We must have a systems approach to service delivery, that shared constituency, what is important to ‘our citizens.’ Citizens want seamless, efficient services.”

Neu points to Minnesota as being “way ahead of the game” regarding his theory that service delivery needs to be a focal point of the debate. “The (Minnesota) Legislature thought citizens cared more about tax reform than local services. Viscerally, people want both; in reality, they want services.

“Cost-effective service delivery is now the focal point of discussion there. As a result, tax reform is pretty much off the table.

“The state administration and Legislature are incapable of dealing seriously with local service and tax issues, so local governments have to demonstrate that they can collectively solve problems, propose real solutions to policy issues and work effectively with each other and the state government. That is where the cultural shift is occurring.”