EX-STATE OFFICIAL UNHAPPY WITH HANCOCK II

A former high-ranking official in the administration of Gov. John Ashcroft told Missourians that passage of a constitutional amendment known as Hancock II would devastate state government by forcing staggering budget cuts.

Those budget cuts would also have major state policy implications, said the ex-official, James R. Moody, because more than $1 billion would have to be slashed from 18 areas of government to cover a refund that would be required in fiscal 1996.

Complicating the process of cutting, Moody explained, is that many parts of the state budget cannot be cut because of state and federal laws or constitutional provisions. Of the $6.666 billion of projected fiscal 1996 Total State Revenue, only $2.783 billion would be available for the cuts.

Based on what he termed conservative calculations, Moody said for example that $284 million would have to be cut from elementary and secondary education; $176 million from higher education; $134 million from highways; $98 million from social services; and $55 million from corrections.

"There are a myriad of issues raised by Hancock II and the proponents are not telling the people what the impact will be," said Moody, who explained his report at an airport news conference here Friday.

"It is likely that if the voters had to vote on the reduction of services of this magnitude on a ballot issue, they would reject all of the reductions. Indirectly, that is the very decision which Hancock II will have the voters make."

Moody has 19 years experience in state government, which includes nearly two years as Ashcroft's budget director and over four years as the commissioner of administration, who oversees the budget process for the governor.

Moody now operates a Jefferson City-based company specializing in public finance and governmental consulting. He was hired by the Committee to Protect Missouri's Future, an organization formed to oppose the Hancock II effort, to analyze the impact of the proposal on Missouri government.

U.S. Rep. Mel Hancock, R-Springfield, who authored the original amendment bearing his name that was passed in 1980 by state voters, has launched plans to place a stronger version of his amendment on the ballot this November. A statewide petition drive is under way.

The original Hancock places a limit on state revenues by establishing a ratio between personal income and total state revenues for fiscal 1980-81 of 5.6395 percent. If state revenues surpass the base limitation, plus a 1 percent tolerance, then Hancock I mandates a refund in a subsequent fiscal year.

No refunds have been paid since the amendment was enacted. Moody said in his report that the revenue-growth limits have not been exceeded.

But Hancock is angered that legislators have found loopholes to pass tax increases anyway. Supreme Court interpretations of the amendment have given citizens the authority to selectively exclude increased taxes, fees or other revenues from the limitation by a majority vote at a general or special election called for that purpose.

That exclusion has been exercised with the passage of Proposition C, a 1-cent sales tax for education; Proposition A, which increased gas taxes for highways; and the exclusion of revenues from the state lottery as part of total state revenue.

In launching the new petition drive, Hancock pledged to draft a revised amendment to close those loopholes and restore what he says is the original intent of his amendment.

Moody said Hancock II specifically includes Proposition C, Proposition A, and local use tax as total state revenues. In fiscal 1995, which begins July 1, that amounts to almost $698 million and in fiscal 1996 it is estimated to be $720 million.

Moody said that it is unclear whether an estimated $234 million in revenues for the next fiscal year, exempted from being part of total state revenues by constitutional changes, would have to be included as state revenues under Hancock II.

Those areas include $90 million in lottery revenue, $49 million from the state parks and soil conservation sales tax; and $95 million from the exemption of net proceeds of fuel taxes to counties and cities from total state revenue.

Moody said wording in Hancock II strongly implies that the intent is to also have those sources included as total state revenues, but he anticipates the issue would be resolved by a legal challenge.

Moody's warning that Hancock II would lead to an immediate $1.024 billion refund is based on the assumption that the constitutional changes would not have to be included as total revenues.

The report also excludes all federal funds from calculations. But again, Moody said he believes that Hancock II is drafted in such a way that a court determination could be made that federal funds should be classified as total revenues.

Moody and other opponents of Hancock II complain that proponents circulating petitions are only telling people that passage of the amendment would require public votes on tax increases.

"When people are out trying to sell Hancock II they are not mentioning how it would reclassify revenues," said Moody. "They are coming under the cover of darkness, asking people to make these kinds of cuts. If they want to make these kinds of cuts, they should say so. I think there is little logic in their case."

Asked what he feels the intent of Hancock and his followers are, Moody said: "It's either malicious or ignorant ... there is no middle ground. They are either trying to do harm to state government by requiring these huge refunds or else they are just ignorant. Some of the cuts that would occur are Draconian.

"People of Missouri need to know what they are being asked to sign. And right now no one is telling them the real impact of this amendment."

Moody said he believes the original Hancock Amendment has had an impact on limiting state revenue growth and there is no need for the new version.

He said that even with the large tax increases of Senate Bill 380 last year for education, projections are that Missouri will still be $240 million under the Hancock revenue limit in fiscal 1995 and $275 million under it in fiscal 1996.

Moody said his report clearly documents his findings and concerns about the proposal. If proponents want to challenge his conclusions, Moody said they should provide the same level of documentation he has to prove this would not lead to devastating cuts.