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Ohio’s TEL/TABOR: Closing the Door to Public Libraries?

Ohio’s TEL/TABOR: Closing the Door to Public Libraries?. What is TEL? What is TABOR?. Ohio’s TEL is a state-wide ballot issue to amend the Ohio Constitution Originally planned for November 2005 petition drive by “Citizens for Tax Reform” Certified for the November 2006 ballot

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Ohio’s TEL/TABOR: Closing the Door to Public Libraries?

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  1. Ohio’s TEL/TABOR:Closing the Door to Public Libraries?

  2. What is TEL?What is TABOR? • Ohio’s TEL is a state-wide ballot issue to amend the Ohio Constitution • Originally planned for November 2005 petition drive by “Citizens for Tax Reform” • Certified for the November 2006 ballot • Ken Blackwell, Ohio Secretary of State • Chair/Spokesperson of “Citizens for Tax Reform” • Secretary of State • Candidate for Governor

  3. What is TEL?What is TABOR? TEL = Tax Expenditure Limitation TABOR = TAxpayer Bill Of Rights Colorado passed its TABOR in 1992 • What is the same • Constitutional Amendment • Limits tax expenditures based on formula • Requires approval by voters to exceed limits • What is the difference • Mechanical details and additional restrictions

  4. Limits state government spending using a formula Also applies to local governments and public libraries Requires ballot approval to override limits Any increase in state taxes requires a ballot referendum Creates a Budget Reserve Fund for the state’s unspent funds Earmarks 5% of state funds for local governments Prohibits unfunded mandates by State Government Requires a majority of registered voters to approve a local levy What’s in Ohio’s TEL?

  5. TEL: How it works Limits spending increases of tax dollars to 3.5% annually or the sum of inflation plus population change; which ever is higher. • Example #1: 3.40% 2000 CPI-Midwest (Consumer Price Index) inflation rate -0.51%2000 population change (down) for Montgomery County 2.89% Limit on tax spending for 2001 would be 3.5% higher than in 2000 • Example #2: 3.40% 2000 CPI-Midwest (Consumer Price Index) inflation rate 0.90%2000 population change (up) for Clermont County 4.49% Limit on tax spending for 2001 would be 4.49% higher than in 2000

  6. Spending Limits • Exempt • Gifts • Grants • Federal money • Not exempt • LLGSF and other local government funds • Investment income • Overdue book fines and charges • Any fees for materials or services

  7. Overriding the Limits • Voted overrides are required annually to exceed limits • Expense of running the elections • Election fees – charged against library • Advocacy costs – must come from other sources • Library Boards cannot place overrides on ballot • Taxing Authorities can only place levies • Elected Library Boards?

  8. Majority of Electors? TEL’s language is mixed. Courts generally interpret mixed language as intentional. State spending, new taxes and tax increases “majority of electors voting at such an election…” Local Government spending, new taxes and tax increases “majority of electors in that political sub-division…”

  9. Recent Voter Turnout

  10. A budget reserve fund (BRF) is created for State of Ohio funding not required by local governments Requires annual transfers of funds collected that could not be spent any unencumbered money in the General Fund 10% of any unencumbered money in other funds Budget Reserve Fund

  11. Budget Reserve Fund • Any time the Budget Reserve Fund exceeds 10% of total expenditures for the previous year the excess money must be refunded on a pro ratabasis to all individuals who paid Ohio income tax in the preceding calendar year. • Sales, tax, business, or other taxes and usage fees do not share in the refunds.

  12. New Local Government Fund • Currently state funding for local governments and libraries through the local government funds equals about 6.9% of state budget (but expect debate about this) • Cities and villages • Townships • Counties • Libraries

  13. New Local Government Fund • TEL earmarks 5% of state expenditures to counties. Funds must be shared by: • Cities and villages • Townships • Counties • Libraries • School districts • Transit authorities • MRDD and mentalhealth boards • Alcohol and drug addiction services board • Soil and water conservation districts • Park districts • Sewer districts • Children services boards • Health boards and districts • Sanitary districts

  14. Source: State of Ohio Budget Highlights, Fiscal Years 2006 and 2007

  15. New Local Government Fund • No guarantee of library specific funding • Legislature must decide who gets to decide on how funds are distributed • County Commissions? • County Budget Commissions? • Doesn’t replace LLGSF or the other two local government funds • But will there be any money left to fund them?

  16. Other Provisions • “…the provisions of this section shall be liberally construed for the purpose of effectuating the purposes thereof.” • Supremacy clause, trumping any conflicting provision of the Constitution. • Self-executing as opposed to waiting for implementing legislation. • Requires General Assembly to repeal any laws that conflict. • Gives standing to taxpayers to sue political subdivisions and/or state to force compliance with TABOR.

  17. The Impact of TEL • The “Double Whammy” for local governments and libraries • The trickle-down of state cuts to the local level • The restrictions on local funding decisions

  18. The Impact of TEL • Fiscal Management Issues: • Capital investments must fit within limits • New circulation system or bookmobile? • End of year spending up to limit • Motivation to spend it now! • Timing of override elections? • Maintaining multiple accounts: • Exempt and non-exempt revenues • Exempt and non-exempt expenditures

  19. 30 State Tax and Expenditure Limits Source: National Conference of State Legislatures, 2005.

  20. Colorado’s Experience • Funding for higher education dropped by an inflation adjusted 38%. State Ranking for funding of public schools fell to 50th in the country. • The percentage of low-income children lacking health insurance in Colorado rose from 15% in 1991-92 to 27% in 2002-03. During the same period, the national proportion of low-income children lacking health insurance fell from 21% to 19%. • Reflecting funding cuts, Colorado’s ranking on access to adequate prenatal care dropped from 23rd in 1992 to 48th in 2002. Colorado’s ranking for on-time vaccination of children fell from 20th in 1995 to 50th in 2003.

  21. Colorado’s Experience • The percentage of Coloradoans with no health insurance rose from 12.7% in 1992 to 15.6% in 2001, dropping its ranking from 24th to 36th. • In 2000-01, Colorado ranked 49th in current expenditures per $1,000 of personal income for public K-12 schools. K-12 education spending per pupil in Colorado fell by more than $300 compared to the national average from 1992 to 2000. • Colorado’s ranking for average teacher pay compared to private-sector earnings fell from 30th in 1992 to 50th in 2001. • Colorado’s ranking for expenditures on higher education relative to personal income dropped from 35th in 1992 to 48th in 2004. • Colorado has no bond rating.

  22. Colorado TABOR:Bad for Business • “What the public didn't realize was that [TABOR] would contain the strictest tax and spending limitation of any state in the country, and long-term would hobble us economically.” — Tom Clark, Executive Vice President, Metro Denver Economic Development Corporation • “The [TABOR] formula . . . has an insidious effectwhere it shrinks government every year, year after year after year after year; it’s never small enough.” — Brad Young, former Colorado state representative (R) and Chair of the Joint Budget Committee • “…no business would survive if it were run like the TABOR faithful say…” — Neil Westergaard, Editor of the Denver Business Journal

  23. Tax Lawyers Employment (TLE) Amendment Litigation Topics for the Ohio Supreme Court • Define what is meant by elector? • Define what are encumbered and non-general revenue funds? • What is an unfunded mandate? • Can a new part of the constitution have precedence over an existing one? • Are schools eligible for the new local government fund? • How do library boards get elected or on the ballot? • Legal claims by local governments against the state • Suits by taxpayers against local governments

  24. What We Must Do? • Treat this like a levy campaign • Employ grass roots techniques • Speakers bureaus • Phone banks • Yard signs • Literature distribution • Personally contribute to supporting organizations to buy television time • Thank legislators/leaders who publicly oppose TEL/TABOR.

  25. Grassroots Campaign • Communicate with people one-on-one • Organize local block-by-block informational “knock and talks” • Speak to organizations to which you belong • Letters to the editor – especially smaller papers • Check in with all of your local government officials • Send letters and e-mail to friends

  26. More Information on TEL/TABOR Citizens for Tax Reform http://www.repealthetax.com Bricker and Eckler, LLP http://www.bricker.com Ohio Library Council http://www.olc.org Policy Matters Ohio http://policymattersohio.org Coalition for Ohio’s Future http://www.ohiosfuture.org Center on Budget and Policy Priorities http//www.cbpp.org

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