Joseph Krist

Publisher

Once again, we face a consequential election. The big issue is potential property tax limits which can have real impacts on services, especially in Florida. There are also plenty of other issues on ballots across the country. Our summaries this week reflect items on statewide ballots. Next week, we’ll summarize the results of both the state and several significant local elections.

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THE BALLOT

It’s not like there aren’t other pressing issues on the ballot but this year’s list of initiatives ranges across three primary sectors. Tax limitations dealing with property taxes primarily but also limits on income and sales taxes as well. Here are some of the big ones.

Washington State voters will have a chance to reaffirm their support for this “millionaire’s tax” which was only enacted last year. Initiative 645 would repeal the tax on household income over $1 million and prohibit state and local taxes on individual income. Colorado voters will assess Amendment 87 which would establish a graduated income tax within the state. Proposition 136 would establish a 4.4% cap on individual and corporate income tax rates.

Florida’s Amendment 3 is getting the most attention. It would Increase the homestead tax exemption, decrease the cap on how much the assessed value of non-homestead properties can increase, and limit how municipalities can spend property tax revenue. As much as anything, the last provision is the one drawing opposition from a diverse group of interests. It is being viewed as a threat to public safety even if those costs are not directly limited by the amendment.

Wyoming’s Initiative 1 would create a homeowner’s property tax exemption that exempts 50% of a primary residence’s assessed value from property taxation. In North Carolina, ballot items seek to address both property and income taxes. The Property Tax Levy Amendment would require the state legislature to pass laws limiting the amount that property taxes may increase. The Reduce Income Tax Rate item would reduce the Cap from 7% to 3.5%.

In Tennessee, Amendment 2 would prohibit the legislature from enacting taxes on property. Iowa’s proposed Amendment 1 would require a two-thirds vote of both legislative chambers to pass a bill that would increase the individual or corporate income tax rate.

The sagebrush rebellion lives in Arizona. Proposition 141 would prohibit the government from imposing taxes or fees based on vehicle miles traveled and from enacting rules to monitor or limit vehicle miles traveled without the person’s consent. Proposition 316 would prohibit local government from imposing or increasing a tax on the sale of food items without voter approval and cap the tax rate at 2%.

And then, there is California. It leads the nation in the number of questions and initiatives on its ballot. Our focus here is on what we believe are the most relevant to the State’s credit. The one getting the most attention is Proposition 40. Prop.40 would levy a one-time 5% tax on the accumulated wealth of taxpayers and trusts with covered assets valued over $1 billion to fund state health care programs, food assistance programs, and public education.

Proposition 2 would Increase the Budget Stabilization Account (BSA) cap from 10% of general fund revenue to 20% and excluding deposits into the BSA from the Gann Limit. Proposition 3 would renew the additional income taxes enacted with the approval of Proposition 30 in 2012 that fund education and early childhood programs. Proposition 43 would require two-thirds vote by electorate to enact, extend, or increase local special tax initiatives and prohibit local governments and ballot initiatives from enacting ad valorem property taxes except those authorized elsewhere in the state constitution

Initiative Rights

After several voter initiatives generated results that made state legislators upset, efforts are underway to limit the ability of voters to change laws or amend constitutions. Several of those states are in the Plains and Mountain West where issues like Medicaid expansion and/or cannabis legislation have been controversial. The proposals all follow a basic template as is often the case with legislation in conservative states.

In North Dakota, Constitutional Measure 1 would require constitutional amendments to receive a 60% supermajority vote to be adopted. South Dakota’s Constitutional Amendment L mirrors the North Dakota proposal. In Utah, a more targeted Constitutional Amendment B requires a supermajority requirement of 60% by voters for citizen-initiated ballot measures that create new taxes, increase existing tax rates, or for a property tax.

In Idaho, HJR 4 would provide that only the state legislature has the authority to legalize marijuana, narcotics, or other psychoactive substances.

Montana is an outlier in all of this. Its ballot includes CI 133 which would add the power of initiative and referendum to the state’s Declaration of Rights.

Policy

In Missouri, Amendment 7 would create a permanent public endowment fund managed by the state to generate revenue, and use the earnings to eliminate state-imposed taxes when sufficient to replace them. In Massachusetts, voters will weigh in on Question 8. It would repeal laws that permit the sale of recreational marijuana and the personal cultivation of cannabis in homes. In South Dakota, Constitutional Amendment I would condition Medicaid expansion on federal funding continuing to fund at least 90% of the State’s cost.

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BLUEGRASS NUCLEAR?

The Nuclear Company’s Services division has performed maintenance at more than 40 percent of America’s current operating nuclear power facilities. With nuclear power coming back into favor, the Company is seeking to employ the working knowledge developed from its existing business to develop plants as well. This week, the Nuclear Company stated it is proposing to build six Westinghouse AP1000 reactors along Lewis County land next to the Ohio River. The proposed development would become the largest nuclear power campus in the United States and one of the largest in the world if fully constructed. 

The six nuclear power plant units, the entire campus called “Prosperity One”, could generate a combined 6.6 gigawatts of electricity. That compares to Kentucky’s largest electric utility’s entire power plant fleet which has an estimated generating capacity of 7.2 gigawatts, Earlier this month, federal authorities renewed the certification for the design of the power plants being proposed in Lewis County.

The plan has a willing host community. The Vanceburg, KY city council passed a resolution enable the county to submit an application for the county to be designated as a “nuclear ready community” through the Kentucky Nuclear Energy Development Authority. The Prosperity One Nuclear Campus is planned as a phased development. The first phase is planned to begin with two AP1000 reactors. Those are the models installed at the recent expansion at Georgia Power’s Plant Votgle.

This comes as a part of a DOE announced an effort to fund uprating at up to 11 nuclear plants. Eight facilities were announced by the DOE this week: the 2,317-MW Limerick power plant in Pennsylvania; the Braidwood, Byron, LaSalle, and Quad Cities plants in Illinois; and Calvert Cliffs. These facilities join plants already being uprated under agreements with Google and the like.

CHICAGO BUDGET

One of the most respected sources of commentary and analysis of Chicago’s fiscal affairs is the Civic Federation. It has released its thoughts on the budget proposal offered by the City’s mayor for the FY beginning January 1. Aside from the fact that the proposal was released later than usual, the comments focused on three sources of concern and one positive.

The hope that the Mayor would avoid short-term budget fixes was not realized.The budget proposal includes several one-time revenue sources that do not serve as structural budget solutions or comport with best practices in government fiscal management.

Another hope was that it would making meaningful progress on cost-cutting efficiencies.The Mayor’s budget claims to achieve $119.8 million in cost savings and efficiencies, but more than half of this figure—$68.4 million—is a reallocation of expenses from the Corporate Fund to other funds within the budget, and another $20.6 million is a police hiring freeze. Only $30.8 million is actually structural efficiencies. 

A third area of concern was the Mayor’s approach to taxation. The Mayor’s budget proposal relies heavily on several new taxes and tax increases to close the budget gap—notably, through a resurfaced “head tax” proposal and a large increase to the personal property lease transaction tax—while failing to engage with other revenue-generating ideas that could have far less harmful ripple effects, such as indexing taxes and fees to inflation or the actual costs of providing services.

The one primary positive cited was Continuation of the Supplemental Pension Payment:One positive aspect of the Mayor’s budget is a commitment to making a supplemental pension contribution to the City’s four pension funds, totaling $363 million above the statutorily required pension payments.

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