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Power to the people? Hancock amendment worked both ways

This article first appeared in the St. Louis Beacon, April 11, 2011 - After Illinois lawmakers woke up to the realization that they needed to raise taxes to help close the state's yawning budget gap, they met into the early morning hours in January, bit the bullet and increased income taxes by 66 percent.

If Missouri needed a similar solution, the buck couldn't stop in Jefferson City. The issue would have to go to the voters for final approval.

That requirement doesn't stem from the original Hancock amendment that was passed in 1980, at least not in all cases. Because of tax cuts and the growth of Missourians' personal income in the past 30 years, the state is nowhere near the revenue limit that amendment set.

But the impulse behind the amendment -- Missouri takes in too much tax money and voters need to stem the tide -- led to further legal restrictions. Perhaps more importantly, it nurtured an expectation on the part of the state's residents that before they have to send more money to the state's coffers, they get to have their say.

When governments are flush, that process might work well. In the kind of tough budget times that states -- and their residents -- have been going through for the past few years, it can raise questions about the purpose and the limits of representative government and how it can best be run.

"People who support a measure like the Hancock amendment think voters are not smart enough to make their own fiscal decisions," says Robert Cropf, head of the Department of Public Policy Studies at Saint Louis University. "They have to be told certain things are off-limits.

"To some extent, the logic is valid. But to say that people don't have the knowledge to make these decisions, and you have to have a law in place to force these decisions, is kind of like Prohibition. Essentially what we're talking about is how we should govern ourselves. Can we be expected to make the right decisions, or do we have to have a law or a constitutional amendment that forces us to do things? It says people can't be trusted to do the right thing."

And while the amendment and its aftermath have forced votes by the people on local and statewide tax measures, it has prompted lawmakers to find ways around the amendment. Paradoxically, that thrust has forced some decisions behind closed doors, like the increased use of tax credits, and given rise to an increased numbers of initiative petitions that can give disproportionate influence to rich individuals who are willing to spend their money to advance their political philosophy.

To David Valentine, who formerly directed research in the Missouri Senate and now teaches at the school of public affairs at the University of Missouri-Columbia, the result is a kind of straitjacket that sharply curtails the options the state has to pay for operations.

"We elect people to do the things that we can't do," Valentine says, "and when we do things like the Hancock amendment -- and particularly the amendment to the amendment --“ we limit their ability to do the things they have to do.

"The legislative branch is the only place that directly represents us, and when we limit their ability to act on our behalf, we are really limiting ourselves."

Letting Voters Decide

To longtime lawmaker Wayne Goode, a perfect example of how the Hancock amendment has affected Missouri governance and finances is the state's cigarette tax. At 17 cents a pack, it is the lowest in the nation, and at a time when officials in Jefferson City are scrounging around to find every possible dollar to run the state, raising the cigarette tax is frequently discussed as an obvious part of the solution.

But when the issue went to voters -- twice -- it was narrowly rejected, both times by a vote of 51-49 percent. In 2002, a proposed increase of 55 cents went down to defeat. Four years later, an increase of just 4 cents met the same fate. Whenever proponents of a higher tax raise the issue these days, the echo of those two votes is a powerful reminder of how voters feel.

To Goode, though, the election returns don't necessarily reflect true feelings about higher cigarette taxes as much as they reveal a sobering truth about modern campaigns.

"If there was a truthful discussion and debate on what the needs were, and if voters could analyze, then make a decision on the arguments that were made, taxpayers would probably support it," said Goode, who retired from the Missouri Senate in 2005 after serving as a legislator for 42 years.

"But that's not the way campaigns are run these days, whether they are campaigns for people running for office or campaigns for tax assessments or dealing with issues. It's a matter of ads and half-truths, or outright untruths, and people make their decisions based on who can say the most on TV, as opposed to having a really accurate, thoughtful debate on the issues. That pretty much makes it impossible."

Are lawmakers sorry they have had such tax decisions taken out of their hands? Donald Phares, emeritus professor of economics and public policy at the University of Missouri-St. Louis, isn't so sure.

"There's probably some relief on the part of some legislators, a sense that now it's in the hands of the voters if they want to raise revenue, which nobody wants to do anyway," he said. "They can say: 'We didn't do it. If anything gets screwed up or goes wrong, it's not our fault.'"

To get taxing questions before voters, the use of initiative petitions has increased in recent years. One that garnered a lot of attention last year was Proposition A, on whether St. Louis and Kansas City should be able to keep levying earnings taxes. It was put onto the ballot after a petition drive bankrolled by wealthy businessman Rex Sinquefield, who donated more than $11 million to the cause.

The money funded a campaign that to some had an ironic slogan: Let Voters Decide.

To Phares, the problem with such a route toward legislation is twofold. First, as the original Hancock petition drive has shown, the resulting law could be ambiguous and subject to years of interpretation by the courts. Second, it lets individuals who are willing to fund expensive campaigns have disproportionate influence over the public agenda.

Proposition A passed handily statewide in November, prompting votes this spring in St. Louis and Kansas City on whether the earnings taxes should continue. Now, Sinquefield has begun circulating petitions that would do away with the state income tax and institute in its place a so-called "fair tax" -- an increase in the state sales tax, and a large change in how the state pays for basic services.

"One person who has power through his wealth can control what, if he is successful, would be a quantum change in the fiscal structure in the state of Missouri," Phares said. "That is not in keeping with Hancock."

Sinquefield was not available to respond. But his spokeswoman, Laura Slay, sent this comment via e-mail:

"Prop A provides a perfect example of raising a policy issue with the voters and letting them decide what they think is right. If enough people believe in an issue, sign a petition and successfully place that issue on the ballot, then every voter will have the right to vote on it. No matter what the issue, the process is the same. Each of us only has one vote."

Revenue Limits and Tax Credits

Another result of Hancock cited by observers of Missouri government -- and one that is getting increased attention as the budget grows leaner in Jefferson City -- is the growth of the use of tax credits.

During better financial times, as the state's revenue collections began to inch up toward the Hancock ceiling, lawmakers had a choice in how they wanted to fund programs such as the rehabilitation and restoration of historic buildings.

They could set aside existing revenue for that purpose. They could go to voters and ask them to raise taxes to bring in the money needed to pay for such efforts. Or they could devise ways to come up with the dollars without having to use the mechanism required by Hancock.

The result, notes political science professor Terry Jones at the University of Missouri-St. Louis, was the growth of tax credits.

"If someone came to you and said they need to do more to preserve historic buildings," he explained, "to provide grants for the projects, you would then in all likelihood increase revenue. But if you do tax credits, you don't have to worry about Hancock. It accomplishes the same thing."

Adds Jim Moody, former state budget director and now a consultant in Jefferson City:

"When we were over the limit, tax credits were a no-cost way to fund programs. Later, when people were getting refunds, it simply reduced the amount of the refunds. Only when we get under the limit does it become a tax expenditure."

Last summer, Gov. Jay Nixon -- concerned about the growth of tax credits over the years -- named a 27-member review commission to study which programs should remain, which should be cut back and which should be eliminated altogether. It also weighed whether the conditions under which the credits are granted should be changed.

In its report released in February, the commission said that the 61 tax credit programs it studied had grown from $102.7 million in 1998 to $521.5 million last year -- an increase of more than 400 percent. As a share of the state's net general revenue, redemptions of the credits had grown from 1.7 percent to 7.7 percent in the same time period.

The commission pinpointed which programs should stay, which should go and which should be trimmed. Lawmakers are wrestling with those decisions now.

To some, the fact that voters are cut out of those deliberations is one more indication of how Hancock's original goal has shifted.

And the argument that many have used against term limits -- that when lawmakers are forced to leave after a certain period of time, the most knowledgeable people in the Capitol will be lobbyists -- may also apply to the effect of Hancock as well, when decisions on issues such as tax credits move out of the public sphere.

"This may well put more power into the hands of lobbyists who are wired in," Phares said.

Danger - Do Not Touch

With all of the discussion about how Missouri government should be funded, will there be any talk about changing the Hancock amendment, or doing away with it altogether?

No one seems to think that such a debate is likely any time soon.

"Whether or not Hancock is a good thing would depend on one's view of what the state ought to be providing in the way of services," Goode says.

"If you go back 25 or 30 years ago or more in the Missouri legislature, there was a feeling that you had to provide services, particularly in the areas of education and other related fields, the basic services. Now there's a loudly heard minority that says no, we're spending way more than we ought to be spending and we need to cut back."

To Tom Kruckemeyer, now the chief economist for the Missouri Budget Project after spending many years in the Department of Revenue, it's a Missouri thing.

"Missouri has long been a very conservative state," he says. "I'd like to see the legislature have the authority to deal with budget problems, or more authority than it does now. The legislature has become powerless to deal with a major budget crisis, except to decide what to cut. But that's the way people seem to want it. The Hancock amendment was voted in by the people, and who's to say they are wrong?"

Goode notes that for many politicians in Jefferson City, it's a question of survival.

"Basically, no one is looking at dealing with the revenue problem this state is facing with any kind of tax increase," he says. "One, it's difficult to pass, and two, it's another third rail that no one wants to get close to. It's going to be a long time."

At least one member of the Missouri House, though, seems willing to touch what others are shying away from. Rep. Jeanette Mott Oxford, a St. Louis Democrat, is once again sponsoring what she calls Tax Justice for a Healthy Missouri, House Bill 637.

It would change tax tables, reduce the burden on lower-income Missourians and keep more tax dollars in the state that otherwise would go to Washington because of how the state's tax structure is set up.

Oxford isn't counting on winning a majority for her plan, but she wants to make sure it gets a hearing.

"Rex Sinquefield can make sure we can discuss a so-called fair tax bill," she says, "but I don't have a sugar daddy to make sure we can discuss the kind of bill I have, to create a more modern, fair and adequate tax system."

And she doesn't consider Hancock to be all that scary that it can't be dealt with.

"I'd be glad to touch that rail," Oxford says, "but I don't think most legislators would. And I don't think that would pass in the current legislature."

Dale Singer began his career in professional journalism in 1969 by talking his way into a summer vacation replacement job at the now-defunct United Press International bureau in St. Louis; he later joined UPI full-time in 1972. Eight years later, he moved to the Post-Dispatch, where for the next 28-plus years he was a business reporter and editor, a Metro reporter specializing in education, assistant editor of the Editorial Page for 10 years and finally news editor of the newspaper's website. In September of 2008, he joined the staff of the Beacon, where he reported primarily on education. In addition to practicing journalism, Dale has been an adjunct professor at University College at Washington U. He and his wife live in west St. Louis County with their spoiled Bichon, Teddy. They have two adult daughters, who have followed them into the word business as a communications manager and a website editor, and three grandchildren. Dale reported for St. Louis Public Radio from 2013 to 2016.