HANCOCK REFUNDS SPAWN LAWSUITS

The Missouri Association of Counties has filed a class-action lawsuit against the state in an effort to preserve money the association says belongs to local governments.

The lawsuit is yet another effort to clarify who pays for Missourian's Hancock refunds. The question becomes even more pressing as the state gears up for another round of refunds this fall.

Last week a restraining order was issued by the trial court to stop the state from appropriating money earmarked for local roads and bridges. The state has collected the money and held a portion of it to help pay for Hancock refunds.

Similar lawsuits are pending concerning Conservation Department tax revenue and riverboat gambling receipts.

At issue is which revenue sources will be calculated as "total state revenue" for Hancock refund purposes.

Not all money collected by the state becomes part of total revenue for purposes of triggering the Hancock Amendment, a constitutional amendment that links growth in state revenue to growth in Missourians' personal income.

For example, the Hancock Amendment states that when voters -- as opposed to the Legislature -- approve an increase in taxes or fees, the extra revenue is excluded from the calculation of "total state revenue."

Counties say the money earmarked for road and bridge improvements shouldn't be tapped because it was approved by voters in 1979 and clarified by voters in 1992.

In June, the Department of Revenue withheld $2.8 million from counties and cities with plans to withhold more as the state gears up for more Hancock refunds.

The money comes from vehicle sales taxes and vehicle license fees and is earmarked for local roads and bridges.

"We got hit," said H. Weldon Macke, Cape Girardeau County auditor. "We had to give up a little more than $2,000 out of sales tax for roads and bridges and a little over $2,000 for fees. They did that for two months, so we were out about $10,000."

The conservation commission filed a similar lawsuit in January saying money from its one-eighth cent sales tax and hunting and fishing licenses shouldn't be tapped either.

The trial court decided the money was part of state revenue and could be tapped for refunds. It is being appealed to the state Supreme Court.

The riverboat money from admission fees and reimbursements made by gambling companies for highway patrolmen stationed on boats is at issue. It is before the Missouri Court of Appeals.

The state auditor's office says the riverboat money would increase Hancock refunds due by $80 million.

Keith Thornburg, legal counsel with the state auditor's office, remembers a time when few people cared which funds were labeled as part of "total state revenue."

"But once the refunds are triggered it makes a big difference," he said.

Thornburg said everyone is looking for an answer before calculations begin for the second round of refunds.

State revenue comes from lots of different sources: state income taxes, state sales taxes, fuel taxes, licensing taxes and fees.

The Office of Administration cut refund checks from the state's general fund, but appropriated money from special funds to reimburse itself for the refunds.

For example, if a sales tax makes up 30 percent of state revenue, then that fund should pay 30 percent of the refunds, Thornburg explained.

The money at issue is part of the Hancock calculation that triggers refunds, Thornburg said. The Office of Administration said it seems fair that those same funds be tapped to pay the refunds.

The state hasn't filed an answer in the most recent lawsuit filed last week by counties.

In the lawsuit, counties say their money was never intended to be part of the "total state revenue."

The Legislature intended for the funds to be paid directly to counties and cities and not deposited in the state treasury, the counties contend.

Franklin, Callaway, Randolph, Gentry, Henry and Pettis counties, with the cities of West Plains and Jefferson City and the association, filed the lawsuit.