From Ralph Lloyd; Petro's proposal: Citizens' Amendment for Prosperity

April 22, 2006

Ralph L. Lloyd called this to my attention today from an article he read in the Cleveland Plain Dealer about Jim Petro's proposal on The Ohio Citizens' Amendment for Prosperity (CAP). I could not locate the article, but this item from the Bricker & Eckler website (below) explains it pretty well. http://www.bricker.com/LegalServices/industry/polsubdiv/cap.asp ~ KBB

The Ohio Citizens' Amendment for Prosperity

The Citizens' Amendment for Prosperity, supported by Ohio Attorney General Jim Petro, would amend the Ohio Constitution to limit permitted taxation to 5.5% of Ohio’s total personal income. Both chambers of the Ohio General Assembly must approve resolutions in order to place the proposal on the November 7, 2006 ballot. These resolutions were introduced in the House (HJR 12) and Senate (SJR 7) during the week of February 20 and are identical. The House Joint Resolution was introduced by Larry Wolpert (R-Hilliard) and the Senate Joint Resolution by Gary Cates (R-West Chester).

In order to reach the November 7, 2006 ballot the resolutions would require a three-fifths majority of each chamber. Ohio law requires any ballot initiative be filed with the Secretary of State not later than 90 days before an election. In the case of the November 7, 2006 ballot the filing with the Secretary of State is required by 4:00pm August 9, 2006.

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Questions & Answers About CAP

What is the “CAP"?
The CAP, or Citizen’s Amendment for Prosperity, is a fiscal restraint proposal developed by Ohio Attorney General Jim Petro. The CAP would limit annual taxes to 5.5% of the total business and personal income earned in Ohio and would require the state to contribute to the Rainy Day Fund when state revenues are strong.

Is the CAP being used by any other states?
The CAP proposal is similar to the Headlee Amendment in Michigan. While there are many similarities between the CAP and the Headlee Amendment, the CAP would restrict state tax revenue to 5.5%, whereas the Headlee Amendment restricts state tax revenue to 9.49%.

Does the CAP apply to local governments?
No. The CAP only limits the amount of revenue the State can collect. The CAP specifically exempts local government from the tax revenue limit.

Does the CAP impact state mandates?
Yes. The CAP would prohibit unfunded state mandates on political subdivisions, unless the State and the political subdivision agree to share the additional costs, or the political subdivision makes no claim for funding within two-years of the new requirement.

What is a political subdivision?
Under the CAP, a political subdivision is defined as any county, municipal corporation, or township; any education, library, or other general special district; or any other taxing district of the state that is directly supported by tax funds.

Are there any exceptions to the limit on taxes?
Yes. If the governor declares an emergency and the legislature votes by a three-fifths majority to support the governor, the limit may be exceeded during the duration of the emergency. The emergency must be declared prior to incurring any expenses under that emergency request.

What happens if the state has a surplus at the end of the fiscal year?
The CAP requires contributions to the state’s Rainy Day Fund. General tax revenue collected by the state exceeding 5.5% must be transferred to the Rainy Day Fund. Annual contributions to the rainy day fund are capped at 2.5% above the tax revenue limit and the Rainy Day Fund may never exceed 5% of the general revenue fund. Any amounts that exceed the annual contribution limit or the total limit on the Rainy Day Fund are rebated to taxpayers in the form of income tax credits.

Is it possible for the CAP to be on the November 2006 ballot as a constitutional amendment?
Yes. A constitutional amendment can be proposed by either chamber of the General Assembly and must be agreed to by three-fifths of each chamber. Resolutions to place the CAP on the ballot were introduced in both chambers by Rep. Larry Wolpert (R-Hilliard) and Sen. Gary Cates (R-West Chester). Upon agreement by both chambers, the proposed amendment must be entered on the journals and filed with the Secretary of State at least 90 days before the November 7, 2006 election. This means that any attempt to place the CAP on the November 2006 ballot as a constitutional amendment requires filing with the Secretary of State by August 9, 2006.

For more information, contact Bricker & Eckler attorney Sean Mentel