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YELLOW SHEET Office of the State Auditor of Missouri |
July 10, 2001
Report No. 2001-54
The following is a review conducted by our office of
Article X, Sections 16 through 24, Constitution of Missouri.
On November 4, 1980, the voters of Missouri passed
Constitutional Amendment No. 5, which added Article X, Sections 16 through 24
to the Constitution of Missouri.� The
amendment, commonly referred to as the Hancock Amendment, requires that no
greater portion of Missourians� personal income be used in any future year to
fund state government than was the case in fiscal year 1981, except as
authorized by a vote of the people.
The State Auditor�s Office performs a review of the
state�s compliance with the provisions of the Hancock Amendment to verify the
accuracy of the revenue limit computation performed by the Office of
Administration, Division of Budget and Planning (OA-BP).� The auditor�s review agreed with the OA-BP that
no refund is due to taxpayers for the year ended June 30, 2000.
In regard to past notable court actions, on January
27, 1998, the Missouri Supreme Court entered a final decision in Kelly v.
Hanson, et. al., 959 S.W. 2d 107 (Mo. 1998).� This decision determined that taxes and other funds collected by
the state may not be considered revenue in the context of total state revenue
unless they meet a two-part test derived from an earlier judicial definition of
revenue: (1) the funds must be received into the state treasury; and (2) the
funds must be subject to appropriation.
On June 29, 1999, the Missouri Supreme Court entered
a final decision in Conservation Federation of Missouri, et. al., v. Richard
Hanson, et. al., 994 S.W. 2d 27 (Mo. Banc. 1999).� This decision determined that Article IV, Section 43 (b)
prohibits the disbursement of monies specified in that section for the purpose
of making the refund required by Article X, Section 18, and that revenue
derived from the one-eight of one percent sales tax imposed by Article IV,
Section 43(a) is not includable in total state revenue.
In December 1999, two lawsuits were filed in the
Cole County Circuit Court.� The first
case, Flotron v. Carnahan, et. al., 99CV323351, claims that the Supreme
Court held in Conservation Federation v. Hanson, 994 S.W. 2d 27 (Mo.
Banc. 1999) that all revenue from the conservation sales tax must be removed
not only from yearly total state revenues, but also from the baseline
calculation for 1981.� The second case, Missouri
Merchants� and Manufacturers
Association, et. al. v. State of Missouri, et. al., 99CV323530 claims that
the state has not included tax credits in the calculation of the revenue limit
and TSR.� These two lawsuits were
consolidated, and on March 8, 2001, the Missouri Supreme Court handed down its
decision in Missouri Merchants and Manufacturers Assoc. v. State of Missouri,
2001 WL 224725 (Mo.).� The court held
that the auditor and the OA-BP correctly decided to keep conservation sales tax
revenues in the baseline calculation while excluding them from yearly total
state revenues.� The court further found
that tax credits which exceed a taxpayer�s liability, resulting in a refund to
the individual taxpayer, should be included in the calculation of total state
revenue.
