A broad range of groups sent a letter to state Senators last Thursday in opposition to Assembly Joint Resolution 79, which would require a supermajority vote for legislators to approve certain tax rate increases. The letter, which was signed by 20 organizations, asks Senators “not to tie the hands of future lawmakers by putting a supermajority requirement into the state constitution.”
AJR 79 was approved last week by the Assembly on a straight party-line vote. It would apply to three tax rates: the individual income tax, the corporate income tax, and the sales tax. In contrast to increases in the gas tax and tobacco taxes, which wouldn’t be affected by the proposed amendment, none of the three tax rates that the resolution applies to have increased more than once in the last 28 years.
The letter points out that even though those three tax rates are rarely increased, the proposed constitutional change could have a number of unintended consequences:
“For example, it could have the effect of increasing property taxes by limiting the state’s ability to appropriate funding for property tax relief. Read more
A constitutional amendment proposed by Wisconsin legislators would restrict the budget options of future lawmakers by making it harder to raise taxes. It would have the effect of making it more difficult to manage the state’s finances, and would probably shift costs from some residents to others and raise the cost of capital projects.
The amendment would change the state’s constitution to require a two-thirds majority of both houses of the Legislature to pass an increase in the rate of the state individual income tax, corporate income tax, or sales tax. The legislature could raise tax rates without a supermajority if voters passed a statewide referendum approving the change. A proposed constitutional amendment requires passage by two consecutive legislatures and a statewide referendum in order to go into effect.
A supermajority requirement would damage Wisconsin’s capacity to manage its budget in way that helps families and businesses. Here’s how:
- The amendment would tie legislators’ hands and make it harder to respond to recessions.
- Establish formulas for capping the rate of revenue growth for the state, each school district and technical college district, and most other local governmental units.
- Require state revenue collected in excess of the cap to either be deposited into a budget stabilization fund or returned to taxpayers in the next fiscal year.
- Require local revenue in excess of the cap to be returned to taxpayers in the next fiscal year.
- Limit spending from the state budget stabilization fund – so it can only be used: a) to provide tax relief, b) for certain emergency events, or c) in a fiscal year in which the amount of allowable revenue is greater than the amount of collected revenue.
Almost all of the sponsors of AJR 100 are Republicans, with the exceptions of Rep. Molepske and Rep. Ziegelbauer (who is an Independent). However, a Senate Democrat, Julie Lassa, is circulating a bill to require the state to use GAAP accounting. Her proposal would actually require the current GAAP deficit to be paid down at a faster pace than AJR 100, but Senator Lassa wouldn’t make the changes constitutional requirements.
Will Procedural Delay Shed Some Sunlight on Rainy Day Fund?
The proposed constitutional amendment (AJR 21) to establish a “fiscal responsibility” fund for Wisconsin was debated on the Assembly floor Thursday, and the measure’s proponents got most of what they hoped for. They fended off all 6 amendments that were offered by Democrats, and the measure was moved to the “third reading” stage on a party-line vote of 56-39 (with Rep. Zigelbauer, an Independent, joining the Democrats in voting “no.”).
The only disappointment for the authors of the measure (AJR 21), was that they were unable to muster a two-thirds vote to suspend the rules and advance the bill to a final Assembly vote. As a result, the fast-tracked bill has been sidetracked temporarily – until the next floorperiod begins on May 10. Although I expect the measure to be approved then, the 3-week delay creates a least a modest hope for shedding some light on the concerns we have about the very restrictive standards for using the rainy day fund. Read more
Hurry Up and Wait: Assembly Unnecessarily Rushes Passage of Constitutional Amendment for a Rainy Day Fund
Recently Introduced Resolution Gets Floor Vote Today
Amending the Wisconsin Constitution involves a long and deliberative process. A joint resolution must be approved by both houses of the legislature in one biennial session, and then reintroduced and approved again (without any changes) in the next two-year session. It must then be ratified by Wisconsin voters in a statewide referendum. Thus, a constitutional amendment proposed now can’t receive final approval any sooner than the first statewide election in 2013.
In light of the importance of constitutional changes, the long process is intended to ensure careful consideration of a proposed amendment. With that in mind, it is very surprising and disappointing that a recently proposed constitutional change requiring contributions into a rainy day fund is being rushed through the Assembly. The proposal, Assembly Joint Resolution 21, was introduced on April 1 and is scheduled for a vote on the Assembly floor today. Although establishing a robust rainy day fund is a laudable endeavor, the proposed standards for taking money out of the fund are so strict that a majority of legislators wouldn’t have been able to tap the fund (without a two-thirds vote in each house) during either the 2009-11 biennial budget or the current 2011-13 budget process – despite the dire effects of the Great Recession on state revenue and safety net programs. Read more
The Wisconsin Budget Project has released a new analysis of a proposed amendment to the state Constitution that would require the state to make specific contributions to a rainy day fund.
Establishing a rainy day fund could help cushion against future economic downturns; however, this proposal would make the fund difficult to access in times of need and could have the side effect of driving up state-imposed fees. Worse, it would enshrine these changes in the state constitution, severely limiting the Legislature’s options for confronting a budget crisis.
The proposed constitutional amendment, Assembly Joint Resolution 21, would:
- require contributions to a state “fiscal responsibility fund” intended to be used in a recession;
- specify that if the fund level gets high enough, the excess must be returned to taxpayers; and
- have the effect of capping state taxes (but not property taxes).
There are some positive aspects to this proposal. A robust rainy day fund would have been very useful in the current situation, as the state struggles with options to fill the revenue shortfall in the 2011-13 budget. Read more
In the future, will a supermajority of the Legislature be required to raise tax rates? The current Legislature continues to take steps to move us closer to such a requirement.
When the Wisconsin Budget Project last posted on this issue, it was to report that the Governor had proposed a bill in the special session that would require a two-thirds majority of the Legislature to raise the rates for the sales, individual income, or corporate income taxes. The supermajority requirement would not apply if a statewide referendum approved the hike.
That supermajority bill has passed the Assembly and is scheduled to be voted on in the Senate on Tuesday. Meanwhile, a more restrictive proposed constitutional amendment has been introduced. Unlike the bill, the proposed amendment does not include a provision to bypass the supermajority requirement if a statewide referendum approves an increase in the tax rate. Read more