(Updated to further clarify that new sales tax revenue wouldn’t count against local governments for determining budget growth)
House and Senate negotiators worked late into the night Monday, tentatively agreeing to a deal on three major tax bills, including one intended to entice cities and counties to hold down spending and another moving the state to a single income tax rate.
The House-Senate conference committee also agreed to a third bill, a constitutional amendment capping property tax appraisals at 4% for tax purposes.
The conference committee is expected to finish off its work Tuesday morning as the Legislature races to wrap up its regular session this week.
Late Monday night, Republican lawmakers agreed on a bill requiring cities and counties to hold elections if they want to increase their budgets by an amount equal to inflation, new growth and voter-approved bonds or 4%, whichever is less.
The growth would not include new sales taxes generated by a local government.
Local governments would have to certify to the county clerk by June 15 their intention to hold the election, which would be held during the August primary.
If they fail to meet that deadline, they would not be allowed to adopt a budget in excess of the new spending threshold established by the bill.
If they don’t exceed that threshold, they would qualify for an allocation from a $60 million fund that the Legislature would create as an incentive to holding down spending and property taxes.
Local governments would only get a slice of that money if they decide on their volition not to hold an election to raise more revenue. They would not qualify for the money from the fund if they hold an election and lose at the polls.
There is an exception for counties that have a failed election to raise more money. They would get 25% of their allocation from the fund because they are required to pay for the elections regardless of who requests them.
The funding limits in the bill do not apply to school districts.
The bill agreed to Monday night is different from an original proposal that would have given residents the power to challenge any county or city spending that exceeded the rate of inflation with a protest petition.
The protest petition, if signed by enough voters, would have automatically vetoed the budget and forced the city or county to develop a new spending plan by October.
The protest petition was eliminated in the bill in favor of requiring a vote for local governments to increase their spending.
In other bills tentatively agreed to Monday night:
- The conference committee agreed to the House version of a bill that would gradually move the state to a single tax rate. The House passed a bill gradually cutting individual income taxes to 4% when the state generates $5.96 billion dollars that come from income taxes plus inflation. The House legislation also would subsequently cut the tax rates for corporations as well as banks after individual income tax rates are reduced. The House bill contains a clause that would keep taxes from being lowered if the state’s rainy-day fund, which totals about $1.7 billion currently, dips below 15% of state general fund tax receipts.
- The conference committee also agreed on a constitutional amendment that would cap property tax appraisals at 4%. The cap would not apply in cases where new construction or improvements have been made to the property. The cap would still apply when a property is sold. Voters would have to approve the amendment at the polls this November. The bill that will advance is different from a House bill, which called for capping property appraisals based on a rolling average over time.
