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Tax Law

State Net Capitol Journal – March 12th, 2012

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Budget & Taxes

FL JUDGE SIDES AGAINST STATE IN PENSION CASE: A Florida circuit court ruled last week that Gov. Rick Scott (R) and Republican legislative leaders' decision last year to cut public employee salaries to offset the state's contribution to their pension fund was an unconstitutional breach of contract.

"The 2011 Legislature, when faced with a budget shortfall, turned to the employees of the State of Florida and ignored the contractual rights given to them by the Legislature in 1974," Leon County Circuit Court Judge Jackie Fulford stated in her ruling. The three percent cut to public employees' salaries without renegotiating their contracts was an "unconstitutional taking of private property without full compensation" that violated the employees' right "to collectively bargain over conditions of employment," she wrote.

The ruling blows a $1 billion hole in both the 2011-12 and 2012-13 state budgets. It also puts local governments back on the hook for $600 million in retirement contributions.

The Florida Education Association, which had filed the lawsuit challenging the pay cut along with other state and local governments took the opportunity to chide Scott and lawmakers.

"This was a gamble that the governor and legislature made last year," said Ron Meyer, an attorney for the FEA. "They gambled taxpayer's money that they could balance the budget on the backs of the hardworking employees of this state. They lost that bet today."

 Senate President Mike Haridopolos (R), in turn, criticized Fulford.

"I think this is an example of judicial activism," he told reporters.

But Meyer countered that "judicial activism is when a court ignores the law" and that Fulford, on the contrary, had based her ruling in part on a 1981 Florida Supreme Court decision which held that although the Legislature had the authority to cut public employees' salaries, it could not breach a contract it had with existing employees.

"This court cannot set aside its constitutional obligations because a budget crisis exists in the State of Florida, Fulford stated. "To find otherwise would mean that a contract with our state government has no meaning, and that the citizens of our state can place no trust in the work of our Legislature."

Nonetheless Scott promised a "swift appeal" of the case, which has already cost the state $500,000 in legal fees. (MIAMI HERALD)

BUDGET COUP IN WA: Something unusual happened in Washington this month, an occurrence a Seattle Times editorial said amounted to "a political earthquake not seen in 25 years": The state's Democrat-controlled Senate passed a budget written by Republicans.

Three conservative Democrats, Jim Kastama, Rodney Tom and Tim Sheldon, joined with all 22 of the chamber's Republicans to do what Senate Majority Leader Lisa Brown had been unable to do, come up with the 25 votes needed to pass a spending plan. Democratic leaders initially vowed to ignore the GOP budget, but relations between the two parties had reportedly thawed last week ahead of the regular session's March 8 adjournment date and a possible special session.

"We're talking," said Senate Ways and Means Chairman Ed Murray (D), who noted he had sent Sen. Joe Zarelli (R), the chief architect of the Republican budget, a list of ideas for a possible compromise with the House, which has passed its own plan and where Democrats hold a 56-42 majority.

"The Senate passed a budget, the House has passed a budget, we need to reconcile those differences," Zarelli said. "The parties are going to have to work together or we don't get out of here."

They have their work cut out for them. The two plans differ by $1 billion, with the Republicans' version making deeper cuts and the Democrats' alternative relying on accounting maneuvers, such as postponing a required payment to K-12 schools. (STATELINE.ORG, SEATTLE TIMES)

BUDGETS IN BRIEF: A government-shrinking bill passed by the OREGON Legislature this month (OR H 4131) would require state agencies with more than 100 employees to reduce their manager-to-employee ratios each year by a factor of one until they reach a ratio of 11:1. The plan still has to be approved by Gov. John Kitzhaber (D) (STATELINE.ORG). • OHIO Gov. John Kasich (R) wants to impose a new tax on the form of oil and gas drilling known as horizontal fracking to give Ohioans a personal income tax cut (CLEVELAND PLAIN DEALER). • Also in OHIO, Gov. Kasich turned down federal disaster assistance for the series of deadly tornadoes that ripped through the Midwest over the weekend. Democrats accused him of playing to his base, but Kasich said he would not rule out asking for federal help later if the situation warrants it. (STATELINE.ORG, CINCINNATI ENQUIRER). • A $36 million tax cut for IDAHO's top earners is sailing through the state Legislature. The measure - HB 563 - is co-sponsored by a majority of the members of the House and also has the backing of Gov. Butch Otter (R) (SPOKESMAN-REVIEW [SPOKANE]). • FLORIDA legislative leaders reached a deal on a nearly $70 billion budget last week (HB 5001), highlighted by the creation of the Florida Polytechnic University in Lakeland (MIAMI HERALD). • Democrats who control the MARYLAND Senate are reportedly rallying around a plan to abandon Gov. Martin O'Malley's proposed tax hike on residents making $100,000 or more and instead seek a quarter-of-a-percent, across-the-board income tax increase. Members of the Senate's Budget and Taxation Committee, said O'Malley's plan has drawn too much public resistance (WASHINGTON POST). • Corporate tax credits cost LOUISIANA $3 billion between 2005 and 2010, according to a legislative auditor's report that raises questions about the lack of accountability in such incentive programs. According to Legislative Auditor Daryl Purpera, agencies that administer the programs aren't required to track their performance, making it impossible to determine whether a particular credit is a good investment for the state (TIMES-PICAYUNE [NEW ORLEANS]).

- Compiled by KOREY CLARK

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