Budgets, Taxes and Revenue on 2010 Statewide Ballots

Nov. 3, 2010

Voters in 19 states considered measures relating to budgets, taxes and revenue in the Nov. 2, 2010, election. Key issues are summarized below the map.

Hot Issues

• Drugs, Tobacco and Alcohol
• Legislatures
• Elections and Redistricting
• Budgets, Taxes and Revenue
• Hunting, Fishing and Animal Rights

More Resources

• 2010 Ballot Measure Results
• 2010 Ballot Measures: Pre-Election Overview
• Ballot Measure Database 

Revenue-Cutting Measures

Voters in nine states weighed in on 16 measures that would have made significant cuts in state revenues.  Ten of these were approved.  In California, voters approved two measures with a combined fiscal impact of $2 billion annually.  The passage of Prop. 26 also makes it more difficult for the legislature to approve increases to regulatory fees.  Washington voters also approved I-1107, repealing tax increases that the legislature passed to help balance this year's budget, and I-1053, which returns the legislature to a 2/3 vote to pass tax increases, thereby likely making it more difficult to balance next year's budget too.  In Missouri, voters approved a step in the direction of eliminating local earnings taxes.  The approval of Prop. A means that voters in Kansas City and St. Louis will vote in 2011 on whether or not to keep their earnings tax.  In Kansas City, that tax funds about 40% of the city's budget, and about a third of the St. Louis budget.  And no other city in Missouri may now adopt an earnings tax.  Missouri and Montana voters approved a prohibition on real estate transfer taxes, even though neither state currently has such a tax.  In Oregon, voters have approved a set of new mandatory minimum sentences for sex offenders and drunk drivers that could cost the state as much as $29.1 billion annually by the fourth year of its implementation.

There was better news for state budgets in Colorado, Massachusetts and Oklahoma.  Colorado voters rejected a trio of budget slashers in Amendments 60 and 61 and Proposition 101.  While Massachusetts voted to repeal the sales tax on alcohol, they chose to keep the general sales tax rate at 6.25% rather than cutting it to 3%.  That would have cut $2.5 billion from the state's annual budget.  Oklahoma voters rejected an education funding measure that could have cost the state more than $1.5 billion a year.

The full list:

• California's Proposition 22 -- APPROVED -- This initiative prohibits the state from borrowing or transferring funds earmarked for transportation, redevelopment or local government.  It is estimated that it would reduce state resources by $1 billion in 2011-2011.
• California's Proposition 26 -- APPROVED -- California state and local governments already face a two-thirds vote requirement to pass increases in most taxes and fees.  Prop. 26 expands that requirement to include votes on regulatory fee increases, making it harder to approve fee increases in future years.  Prop. 26 also repeals recent fuel tax changes that were expected to bring in $1 billion per year for the next 20 years.
• Washington's Initiative 1053 -- APPROVED -- This initiative was similar to California's Prop. 26.  Washington voters approved a two-thirds vote requirement for the legislature to pass a tax increase back in 2007.  In 2010, the legislature temporarily suspended the supermajority vote requirement in order to pass increases on certain taxes related to food and drink sales.  This year's I-1053 immediately reinstates the two-thirds requirement, preventing the 2011 legislature from enacting any new tax with a simple majority vote.
• Colorado REJECTED a trio of ballot measures that packed a formidable fiscal punch.  Amendment 60 would have cut local property taxes in half and require the state to reimburse school districts for the lost revenue, repeal current voter-approved suspension of local revenue caps, and require an automatic expiration of any future voter-approved suspension of tax caps after four years.  Amendment 61 would have prohibited borrowing by the state, and severely restricted the ability of local governments to borrow.  Proposition 101 would have cut or repealed nearly all taxes and fees associated with the purchase, registration, lease or rental of vehicles, and all telecommunications taxes and fees except 911 fees.  The combined fiscal impact of these three measures would have required the state to spend 99% of its general fund on K-12 education by cutting state revenue by $2.1 billion while mandating increased spending of $1.6 billion.  The full impact on local governments would have been a loss of $3.1 billion annually.  The average annual taxpayer savings would have been $1,660 per household by the time all three measures were fully implemented.
• Public Question 1 in Indiana lends permanence to the state's property tax cap by placing it in the state constitution. (APPROVED)
• In Massachusetts, there was a pair of tax-cutting initiatives on the ballot.  Question 1 (APPROVED) repealed the recently-enacted sales tax on alcohol.  Question 3 (REJECTED) would have cut the state's sales tax from 6.25% to 3%, costing the state an estimated $2.5 billion annually.
• Missouri is another state where voters faced more than one revenue-cutting initiative.  Both were approved on Nov. 2.  Constitutional Amendment 3 (APPROVED) is propspective -- it prohibits the imposition of any real estate sale or transfer tax.  Missouri currently has no such tax, so there is no immediate fiscal impact if this measure is approved.  Proposition A (APPROVED) will impact local governments.  It prohibits any local government from instituting a new earnings tax, and in the two cities that currently have such a tax -- St. Louis and Kansas City -- residents will have to approve the continuance of the earnings tax in next year's election.  If voters reject the tax next year, those two cities will be prohibited from implementing a new earnings tax in the future.  If voters approve it, another vote will be triggered five years later.
• Montana voters APPROVED an initiative similar to Missouri's Amendment 3, prohibiting any future real estate sales or transfer tax.
• Question 744 in Oklahoma (REJECTED) was a citizen initiative that would change the way the state is required to fund public schools.  It would have established a formula to determine the average amount spent by surrounding states, and required the legislature to meet or exceed that amount.  This would have entailed an increase in state spending on K-12 education, although debate continues over how much of an increase.  The Oklahoma Legislature placed Question 754 (REJECTED) on the ballot.  It would have prohibited any initiative from requiring the legislature to spend a particular amount on any particular government service or program, and would have prohibited requiring the legislature to base spending decisions on how other states spend.  If both of these conflicting measures had passed, the question of which one would take effect most likely would have ended up in court.
• Measure 73 in Oregon (APPROVED) establishes new mandatory minimum sentences for repeat sex offenders and drunk drivers.  Estimates are that it will cost $1.4 million in the first year, increasing to $29.1 million by the fourth year.  The proposal does not provide a new revenue stream.
• Initiative 1107 in Washington (APPROVED) repeals several new taxes passed in 2010 by the legislature.  Estimates are that state revenue will be reduced by $352 million over the next five years, and local government by $83 million over the same time period.

Revenue-Increasing and Saving Measures

There were several initiatives on statewide ballots this November that have the potential to raise significant revenue for states, but every one was rejected by voters.  California stood to bring in an additional $3.3 billion combined in Props. 19, 21, and 24, and Washington's I-1098 would have increased state revenue by more than $11 billion over the next five years.  Voters were more receptive to the idea of saving for the future, approving increases in rainy day funds and giving the legislature jurisdiction over decisions on what to do with surplus funds in Hawaii, North Dakota, South Carolina, and Virginia.  A proposed casino in Oregon has been rejected, and a casino measure in Maine is currently teetering at 50%.

The full list:

• California's Proposition 19 -- REJECTED -- This initiative would have legalized the use of marijuana by any adult, and allow state and local governments to regulate and tax the sale of marijuana.  It's difficult to pin a specific number on the potential revenue this would have created, but the State Board of Equalization once estimated that a $50 per ounce tax on the sale of marijuana would generate as much as $1.4 billion per year.  The Board has since backed off that estimate and refuses to provide an estimate for Prop. 19.
• California's Proposition 21 -- REJECTED -- This would have imposed an $18 surcharge on vehicle registrations.  The revenue, an estimated $500 million annually, would have gone into a new State Parks and Wildlife Conservation Trust Fund.  As much as $200 million of the new revenue would have replaced current spending, providing a savings to the state general fund.
• California's Proposition 24 -- REJECTED -- This initiative would have repealed tax changes enacted by the legislature in 2008 that benefit business.  It would have increased state revenues by $1.3 billion annually beginning in 2012-2013, and by smaller amounts in years before that.
• Georgia's Amendment 2 -- REJECTED -- This legislative referendum would have added a $10 fee to vehicle registrations and directed the new revenue toward improving the state's trauma care.
• Hawaii's SB 2807 -- APPROVED -- This constitutional amendment proposed by the legislature will allow the legislature to determine whether excess revenues in the general fund should be refunded to taxpayers or deposited in a rainy day fund to be used in times of emergency or economic downturn.
• North Dakota's Constitutional Measure 1 -- APPROVED -- North Dakota is one of the few states still enjoying a budget surplus these days.  This measure establishes a new Legacy Fund to receive oil tax revenues, which are largely responsible for the budget surplus.  The Fund will remain untouchable until July 2017, and after that point willrequire a two-thirds vote for appropriations.
• South Carolina's Amendments 3 and 4 -- both APPROVED -- Amendment 3 increases from three to five percent the amount of General Fund revenue that is required to be held in the state's Rainy Day Fund.  Amendment 4 provides that the money in the state's Capital Reserve Fund must be first used to replenish the Rainy Day Fund.  Both measures were referred to voters by the legislature.
• Virginia's Question 3 -- APPROVED -- This legislative referendum increases the maximum size of the state's rainy day fund from 10 to 15 percent of the state's average annual income and sales tax revenues.
• Washington's Initiative 1098 -- REJECTED -- This initiative would have imposed a 5% tax on incomes of more than $200,000 for single filers and $400,000 for joint filers. The official fiscal impact statement for I-1098 estimates that passage of the measure would have brought in $11.16 billion over the next five years.  $250 million of that would have offset the loss created by an increase in the business and occupation tax credit.  Another $383 million would have offset a cut in the state property tax.  The remainder would have funded health and education programs.
• Casinos -- Initiative measures in Maine (too close to call as of 2:27am MDT) and Oregon (REJECTED) each proposed the authorization of a single casino.  In Maine, 46% of gross revenues would go to the state to fund various education programs.  In Oregon, Measure 75 would have directed 25% of gross casino revenues to the state, with half that revenue going to education and the rest split among counties, certain cities, and the Oregon State Police.  It is unclear whether Measure 75 could have been implemented if it passed, as a second initiative that would have amended the state constitution to permit a casino (currently the state constitution prohibits casinos) failed to achieve ballot status.

Efforts to Balance Budgets

In Arizona, the legislature referred to questions to voters that would have shifted money from special funds to the general fund.  Because voters REJECTED both of these measures, the legislature will have to go back to the drawing board to balance the budget.  The two questions to watch in Arizona were Proposition 301 (REJECTED), which would have ended the Land Conservation Fund a year earlier than originally scheduled and transferred the remaining $123 million in that account to the general fund, and Proposition 302 (REJECTED).  This question asked voters to cancel an early childhood health and education fund and transfer the money in it -- $345 million -- to the general fund.

In California, Proposition 25 (APPROVED) changes the current two-thirds vote requirement for approving the budget to a simple majority. While not exactly a budget-balancing measure, passage of this initiative will likely ease the process of approving the state's budget each year.

In Florida, Amendment 8 (REJECTED) asked voters to alter voter-approved class size requirements.  The Florida Legislature budgeted $2.9 billion for fiscal year 2010-2011 for the implementation of class size requirements, and estimates of future spending place the cost as high as $40 billion over the next decade.

Bond Measures

Voters in five states considered a total of $1.9 billion in proposed statewide bonds this November 2.  That total is down significantly from 2008, when a total of $18.4 billion in proposed bonding appeared on statewide ballots.  In fact, NCSL's tracking of voter approval of proposed statewide bond issues goes back to 1992, and this is the lowest total ever to appear on an even-year, general election ballot.  The total has been lower in a handful of odd-year elections, but since most states require that statewide votes occur in even-year general elections, that's the election that matters in this case.

Why was this year's total so low?  Most likely it was the lingering effect of the American Recovery and Reinvestment Act of 2009.  Many of the state infrastructure projects currently underway were funded by the federal economic stimulus package, and absent that federal money, many of these projects would have been funded by state bond sales instead.  If that theory holds true, look for the total dollar amount of proposed bonding to come back up in 2012.

Most bond measures were approved by voters.  This is typical -- voters have approved 90% or more of the bond measures on statewide ballots in every election since 2005.  The only measure rejected so far is Washington's $505 million for energy efficiency projects in schools.  New Mexico's higher education capital improvement bond measure is currently too close to call.

NCSL Contact

• Contact Jennie Drage Bowser in NCSL's Denver office for more information on ballot measures.