Maryland Taxpayers Association, Inc.
MTA FACT SHEET
RETURN THE TAX SURPLUS AMENDMENT

(A legislative note from Kenneth R. Timmerman, President, Maryland Taxpayers Association, Inc.)

Date: 12/8/2000

The top priority of the statewide Maryland Taxpayers Association for the 2001 General Assembly is to get introduced and to build public support for a Return-the-Tax-Surplus Amendment (RTSA) to the Maryland Constitution.

Why is MTA supporting RTSA?

When legislators arrived in Annapolis last January for the 2000 annual legislative session, the State forecast it would have a surplus of $816 million by the end of the fiscal year on June 30. That estimate was subsequently increased. At the end of the year, the real tax surplus approached $1 billion.
Maryland State Comptroller Donald Schaefer, a Democrat, called for tax relief. "How can the state justify keeping a $1 billion surplus without providing some relief to the taxpayers who made it happen?" he said in March. "This is money that belongs to the taxpayers."

By the end of the session, however, the entire surplus had been spent. The Governor proposed and the legislature approved $1.54 billion in new spending over Fiscal 2000, plus deficiency appropriations for FY2000 of $316 million. Together, this brought appropriations to $19.85 billion. That's an increase of 26.1% since 1998, the year Governor Glendening promised a 10% decrease in income taxes.

MTA believes that State spending has run amuck. One way to rein it in is by putting the surplus in a lockbox and returning it to the Taxpayers, before it gets spent. This is the whole purpose of RTSA.

What is RTSA?

The Return the Tax Surplus Amendment is a bill that would require the State government to refund the state tax surplus to Maryland Taxpayers on a pro-rata basis. This benefits all Maryland Taxpayers.

As currently drafted, RTSA requires the State Comptroller to issue Taxpayers a refund check in years when the Comptroller determines that general fund tax revenues have exceeded the revenue forecasts at the beginning of the fiscal year. (These revenue forecasts are generally in line with the budget as approved by the legislature). MTA's draft RTSA is based on SB 603, introduced during the 1998 session by then Senator David Craig.

Why a Constitutional amendment?

Article 52 of the Maryland Constitution gives the Governor sole authority for introducing spending bills. Since RTSA requires the Comptroller to cut checks to individual Taxpayers separately from the Governor's budget process, it requires Constitutional authority.

Amendments to the state constitution are frequent and appear on the ballot in virtually every state-wide election. In some cases, constitutional amendments affecting a single county also appear.

What are the procedures for passing RTSA?

A proposed amendment to the State constitution must pass both Houses by a three-fifths majority, but does not require signature by the Governor. After passage, it will appear on state-wide ballots in the next general election.

When would RTSA go into effect?

If approved by the voters in the general election of 2002, the RTSA would take effect in the next budget planning session (FY2004).

Role of the Voters

Ultimately, as a Constitutional amendment, RTSA must be put to the voters. We believe the question put to voters is very simple: Do you believe the State should spend excess revenues it collected from you, or do want your money refunded?

For Maryland to enjoy fiscal responsibility, state spending must result from government planning and legislative approval, not from windfall taxes.

How is the surplus calculated?

Under the RTSA procedures, the Comptroller will announce "as soon as practicable" after the beginning of the fiscal year (July 1) his estimate of the General fund revenues for that fiscal year, based on the Governor's budget as amended and adopted by the General Assembly.

That initial estimate is then compared to the Comptroller's report at the end of the fiscal year of revenues actually collected. If revenues exceed the estimate by more than 2%, then the Surplus is returned to the Taxpayers.
For the sake of argument, let us suppose that on July 5, 2000 the Comptroller estimated Tax revenues for FY 2001 at $10.2 billion (roughly identical to General Fund appropriations for FY 2001).

One year later, on July 5, 2001, the Comptroller finds that General Fund revenues actually reached $10.8 billion. Since the surplus exceeded 2% of the General Fund ($204 million), it would be refunded to the Taxpayers on a pro-rata basis by December 1, 2001. In this case, it would result in taxpayer savings of $600 million.

What funds are affected?

RTSA only affects the General Fund. The Transportation Trust Fund, Special and Higher Education Funds, and Federal Funds are distinct from the General Fund for state budget purposes.

Will RTSA limit all growth in government spending?

No. Tax revenues (and therefore, State budgets) will increase as Maryland's economy or population expands.
RTSA only affects Tax revenues in the General Fund. Approximately 50% of state revenues come from outside the general fund.

Will RTSA affect Governor Glendening's school construction plans?

No. The Governor made a commitment in 1998 to spend $1 billion for school construction from various funds, including bonds and Paygo arrangements from the General fund, in four yearly installments of $250 million. FY 2003 is the last year of that commitment. If approved by the General Assembly and by the voters, RTSA will take effect in FY 2004.

Do other states have RTSA?

Yes: Oregon and Colorado have similar provisions.

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YES, I WOULD LIKE TO CO-SPONSOR MTA'S PROPOSED RETURN THE TAX SURPLUS AMENDMENT (RTSA).

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