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

Ken Blackwell, Ohio Secretary of State• Chair/Spokesperson of “Citizens for Tax Reform”• Secretary of State• Candidate for Governor

What is TEL?What is TABOR?

TEL = Tax Expenditure LimitationTABOR = 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

What’s in Ohio’s TEL?

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

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

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

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?

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…”

Ohio ElectionNumber of

Registered ElectorsNumber of

Electors VotingTurnout Percentage

November 8, 2005 7,684,320 3,093,968 40.26%

November 2, 2004 7,972,826 5,722,443 71.77%

November 4, 2003 7,138,932 2,614,354 36.62%

November 5, 2002 7,113,826 3,356,258 47.81%

November 6, 2001 7,153,796 2,574,915 35.99%

November 7, 2000 7,531,555 4,800,009 63.73%

November 7, 1999 7,146,985 2,467,736 34.53%

November 3, 1998 7,096,423 3,534,782 49.81%

November 3, 1997 7,022,866 3,128,446 44.54%

Source: http://www.sos.state.oh.us/sos/ElectionsVoter/electionResults.aspx

Recent Voter Turnout

A budget reserve fund (BRF) is created for State of Ohio fundingnot required by local governments

Requires annual transfers of funds collected that could not be spentany unencumbered money in the

General Fund10% of any unencumbered money in

other funds

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 rata basis 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.

Budget Reserve Fund

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

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 mental

health boards

Alcohol and drug addiction services board

Soil and water conservation districts

Park districtsSewer districtsChildren services boardsHealth boards and districtsSanitary districts

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

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?

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.

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

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

30 State Tax and Expenditure Limits

Source: National Conference of State Legislatures, 2005.

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.

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.

Colorado’s Experience

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 effect where 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

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

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.

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

More Information on TEL/TABOR

Citizens for Tax Reformhttp://www.repealthetax.com

Bricker and Eckler, LLPhttp://www.bricker.com

Ohio Library Councilhttp://www.olc.org

Policy Matters Ohiohttp://policymattersohio.org

Coalition for Ohio’s Futurehttp://www.ohiosfuture.org

Center on Budget and Policy Prioritieshttp//www.cbpp.org