Hancock refunds likely extinct

JEFFERSON CITY, Mo. -- Several years have passed since tax revenue was so plentiful that state government was constitutionally bound to return the excess to taxpayers. It still appears unlikely that it will ever happen again.

A recent report by State Auditor Claire McCaskill says that as of June 30, 2004, state revenue collections were $1.5 billion under the Hancock Amendment's cap on revenue growth. When revenue collections -- excluding those from voter-approved taxes -- grow at a higher rate than Missourians' personal income, refunds are triggered.

Even if Missouri experienced a sustained an economic boom it is extremely doubtful state revenue collections could come close to cracking the Hancock cap, said Jim Moody, a lobbyist and former state budget director.

"It would have to be a super-extraordinary growth in tax revenue collections that I just don't see happening," he said.

A key reason, Moody said, is voter ratification of the Farmahan Amendment in 1996. The amendment -- named after its main supporters, then-Gov. Mel Carnahan and the Missouri Farm Bureau -- requires voters to approve any substantial tax increase.

Since such tax revenue isn't subject to the Hancock cap, it basically means that only unrealistically high growth in existing revenue streams not endorsed by voters could put the state over the top.

Missourians have rejected all four proposed tax increases placed on the statewide ballot since the Farmahan Amendment's adoption.

During the robust 1990s, collections busted the Hancock lid five straight years. As a result, about $1 billion was returned to taxpayers for fiscal years 1995 through 1999. To avoid yearly refunds and the processing costs they entailed, lawmakers cut taxes by a like amount.

Missouri's faltering economy during the early years of this decade also helped push state revenue collections well under the cap.

McCaskill spokesman Glenn Campbell said the results of the audit, which is required annually to determine if taxpayers are due Hancock refunds, came as no surprise.

Because of Missouri's rebounding economy, however, the state wasn't as far below the Hancock cap at the end of fiscal year 2004 as it was following fiscal year 2003. At that time, according to an earlier auditor's report, the state was $1.9 billion under the Hancock lid.

Between those two years, applicable state revenue grew from $7.2 billion to $7.7 billion while the revenue threshold climbed from $9.1 billion to $9.2 billion.

mpowers@semissourian.com

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