Amendments, Mandates, and Money:
Challenges Facing Florida Counties

By

Dr. Susan A. MacManus, University of South Florida
Dr. Mark S. Pritchett, The Collins Center For Public Policy, Inc.
Uri J. Fisher, University of South Florida

With the assistance of
Michael Keenan

For
Florida Association of Counties
Florida Counties
(appeared in the September/October 2002 issue)

May, 2001


Amendments, Mandates, and Money:
Challenges Facing Florida Counties

In 1998, Florida's voters approved 12 of 13 amendments to our Constitution. Four of the amendments were placed on the ballot directly by the Legislature; the other nine, referred to as revisions, the Constitutional Revision Commission put before the public. Many of these were designed to be implemented at the local level.

What has been the impact of these amendments on the operations and finances of Florida counties? Were the initial impact projections on target? How does their impact compare to other factors, such as mandates, changing demographics, and citizen pressures, which historically have put pressure on county finances? The Collins Center For Public Policy, Inc., in cooperation with the Florida Association of Counties, surveyed the state's counties in the Fall 2000 to get answers.

Amendments & Revisions Impacting Counties

Six of the 12 amendments that were ratified by the voters directly affected counties. These amendments and the proportion of "Yes" votes for each were:

1: Historical Property Tax Exemption & Assessment (54.5% "Yes").
3: Additional Homestead Tax Exemption for Seniors (68.5% "Yes"}
4: Recording of Instruments in Branch Offices (74.1% "Yes")
7: Local Option For Selection of Judges and Funding of
State Courts (56.9% "Yes)
11: Ballot Access, Public Campaign Financing, &
Election Process Revisions (64.1% "Yes")
12: Firearms Purchases; Local Option for Criminal
History Records Check and Waiting Period (72.0% "Yes")

Of these, Amendment 3 (additional homestead tax exemption for seniors) has had the most immediate fiscal impact and Amendment 7 is the most anxiously awaited.

AMENDMENT 3: ADDITIONAL HOMESTEAD EXEMPTION

This amendment authorized the Legislature to allow counties and municipalities to adopt ordinances that grant an additional homestead tax exemption not greater than $25,000 to persons 65 or older whose annual household income is $20,000 or less.

As of May 2001, 25 of Florida's counties had implemented this option. All but one county (Sumter) adopted the maximum allowable exemption ($25,000). Four counties (Bay, Brevard, Hillsborough, Holmes) opted to phase in the exemption.

A number of other counties have discussed the issue, some several times, but backed away from it. Most say they are waiting, fearing a downturn in their county's fiscal condition.

Many Florida counties, including those that have not yet adopted the exemption, expect this amendment will have a "moderate" to "large" impact on their finances, if enacted. (See Figure 1.)

Fiscal worries are the most intense among the state's larger counties (100,000+ population), as shown in Table 1. However, recent analyses of the amendment's impact have shown that the initial estimates of eligibility made by a state Revenue Estimating Conference were too high. But this could change, as more eligible seniors are made aware of the exemption.

Major Reasons for Passage
Three primary motives-political, economic, and social-led counties to adopt this measure. Pressures from the politically powerful senior lobby forced the issue to the table in some counties. In others, officials examined the "Yes" votes for the amendment and simply "enacted the will of the people." For some, the fiscal condition of the county was healthy enough to handle the exemptions with relative ease. For others, county officials simply thought passing the exemption was "the right thing to do" for deserving and needy seniors.

Major Reasons For Failure/Delay
Financial concerns have been the biggest drawback to passage of the exemption. But, intergenerational issues and equity issues have surfaced in many places. The chair of the Hernando County Commission says it well: "An exemption for one class of residents seems discriminatory, especially when young families in the same income bracket could use a tax break as much as or more than the low-income seniors…If we exempt more from the tax roll, that means those people are going to have to shoulder the burden…"

Concerns about the fairness of eligibility criteria persist. Some county commissioners want to "revisit the ordinance to close loopholes that could make well-to-do seniors eligible." As shown in Figure 2, almost two-thirds of the county officials surveyed find the income definition, as defined by the Legislature, "too broad."

To qualify, a homeowner must be at least 65 years old and have a household income of $20,000 a year as shown on the adjusted gross income line of federal 1040 tax forms. The definition adopted excludes certain types of pensions and annuities and up to $25,000 in Social Security benefits for a single person and $32,000 for married couples. IRA contributions, medical savings accounts, moving expenses, a portion of self-employment taxes, and alimony payments are excluded from the figure.

This situation has yielded numerous pleas from local officials for a better, fairer income definition.

How to Make Up Lost Revenue?
A calculation critical to the decision about whether to go forward with the exemption is how to replace the lost revenue. Just 38% of the counties see their current rate of revenue growth as sufficient to cover the loss. The rest believe they would have to increase fees or taxes or reduce services. (See Figure 3.)

Over half (52%) of the counties that have adopted the senior homestead exemption reported that their projected rate of revenue growth was large enough to cover the lost revenues. In contrast, all of the counties rejecting it anticipated having to raise property taxes to make up the loss, a highly unpopular alternative. (See Table 2.)

REVISION 7:
LOCAL OPTION FOR SELECTION OF JUDGES
AND FUNDING OF STATE COURTS

This multi-part amendment promised to impact Florida counties significantly if all its options were ultimately adopted. One option, the appointment rather than the election of trial judges, was defeated in November 2000. The second, the shifting of the major costs of funding the state courts system from counties to the state has yet to be implemented. A joint select committee of the state legislature is currently studying the issue. The funding shift must be completed by July 1, 2004.

Voters Choose to Continue Electing Trial Court Judges
Under the provisions of Amendment 7 as passed, the voters in each county and judicial circuit were given the right to decide whether to retain the current system of electing local Circuit and County Court Judges or to adopt merit selection of them by appointment and retention by vote. Voters in each of the state's 20 judicial circuits and its 67 counties overwhelmingly rejected the idea of selecting judges by merit selection.

Counties Nervous About State Funding of Courts

Revision 7, as described in a voter's guide, calls for "state revenues to fund the state courts system, state attorneys' and public defenders' offices, and court-appointed
Counsel. Revenues from filing fees and service charges are to fund the clerk's office." Initially, Revision 7 was projected to relieve counties of $200 million a year in current expenses. Expectations are that once implemented, it will be particularly beneficial to Florida's small counties.

Counties have high hopes for budget relief. Almost two-thirds anticipate "moderate" to "considerable" budget relief once this portion of the amendment is fully implemented. (See Figure 4.) But they are not holding their breath.

There is a great deal of uncertainty and skepticism about the details and timing of Revision 7's implementation. Some counties are worried that the relief granted to counties will be less than expected: "We know it will affect us positively but until refinements are made, we can't say for sure." Others fear the state will "Rob Peter to pay Paul," yielding little budgetary relief: "If the state takes our fees to fund this, we could be in the hole." But for most, the real question is whether the state will ever fully implement it. Says one county manager: "The impact of Revision 7 would be positive if the state actually ever implements it."

AMENDMENT 4:
RECORDING ON INSTRUMENTS IN BRANCH OFFICES

Amendment 4 authorizes counties to maintain and record official records, such as real estate deeds, at branch offices. Prior to its passage, all official records had to be maintained at the county seat only.

Proponents of this Amendment argued it would have two major impacts. First, in counties with large populations or land area, it would reduce travel time to file or obtain official documents and enable the fuller use of branch offices. Second, by enabling the use of electronic document storage and retrieval, it could result in greater efficiencies and convenience. Some efficiency gains have been realized, according to our respondents.

It is fairly common for counties to have branch offices. Among the 49 counties responding to the survey, 42% have branches. Six have one branch office, six have two, four have three, and three counties have four or more.

As of the survey, just 8 (20%) had adopted a resolution allowing their branch offices to file records. Among those, 53% say it has improved the efficiency of their operations "somewhat" or "considerably." (See Figure 5.)

When asked, "What has been the budgetary impact of branch office recordings?" one county reported it has increased revenues, but two others say it has increased spending. The rest have seen no significant budget impact from implementing Amendment 4.

AMENDMENT 1:
HISTORIC PROPERTY TAX EXEMPTION & ASSESSMENT

Amendment 1 appears to have had the least success relative to its projected benefits. It was intended to be an incentive to owners of historic properties to make improvements to "help save Florida's historic heritage from falling into disrepair or being demolished."

The amendment was heavily supported by organizations such as the Florida Trust For Historic Preservation and local historic preservation boards and organizations. It eliminated the requirement that owners of historic properties must be rehabilitating or renovating those properties in order to receive tax exemptions from a county or municipality. It authorized the Legislature to allow counties and municipalities to adopt ordinances to assess historic properties solely on the basis of character or use. It was estimated to apply to some 3,900 of the 26,500 properties in Florida listed on the National Register of Historic Places.

Regretfully, this amendment has not increased the number of requests by owners of historic properties for an ad valorem tax exemption for the property in any of the 49 counties responding to the survey.

REVISION 12:
FIREARMS PURCHASES; LOCAL OPTION FOR CRIMINAL HISTORY
RECORDS CHECK AND WAITING PERIOD

Under Revision 12, each county has the option of requiring a criminal history records check and waiting period of three to five days, excluding weekends and legal holidays, in connection with the sale of any firearm occurring within the county on property to which the public has the right to access.

Where adopted, it closes the gun show loophole that had existed prior to its passage. As shown in Figure 6, few counties have exercised their option to pass such an ordinance. Those that have did so rather quickly after passage of the Amendment.

Both the counties that have adopted the ordinance and those that are considering it have sizable senior populations. Senior citizens tend to be more informed about issues and more concerned about crime than other age cohorts. They are also more likely to appear before county commission meetings to argue for their preferences.

REVISION 11:
BALLOT ACCESS, PUBLIC CAMPAIGN FINANCING, &
ELECTION PROCESS REVISIONS

Amendment 11 has many components. Those related to ballot access and primary elections were expected to have a direct impact on the budgets of county supervisor of elections offices due to increased workloads and cumbersome ballot formats.

Passage of this amendment made ballot access requirements for minor party and independent candidates the same as for Democratic and Republican party candidates. Prior to that, the requirements for minor and third party candidates to get on the ballot had been considerably more onerous than for Democrats and Republicans.

The amendment also mandated that all registered voters, regardless of their party affiliation, should be allowed to vote in any party's primary election where the winner would have no general election opponent. This is known as the universal primary.

Widespread Incidence of Universal Primary Contests
One-third of the counties anticipated an increase in the number of independent and minor party candidates filing to run for office in the Election 2000 cycle. In contrast, nearly three-fourths (74%) projected that their county would have some universal primary contests on the September 2000 first primary ballot. (A recent study of all 67 counties reported that 66% had at least one countywide universal primary contest in the September primary.)

Impact on County Supervisors of Elections' Budgets

The budget impact of the voters' mandate to open up and alter the electoral process varied across the counties, but overall was quite modest. (See Figure 7.)

Florida's smaller counties were the hardest hit. One-third of those with less than 100,000 population experienced "moderate" or "considerable" increases compared to 21% of those over 100,000. Conversely, over half (54%) of the large counties report "no significant impact" compared to one-fourth of the small counties.

STATE MANDATES TOPS LIST OF BUDGET STRESSORS

To determine the degree to which other factors (political, demographic, socioeconomic) are also putting pressure on county budgets, we asked the survey respondents to identify the various factors that are putting "the greatest stress on your county's budget."

Nearly two-thirds of the respondent counties cited state mandates. Over half also mentioned jails and detention facilities (60%), employee health insurance costs (58%), population growth (56%), and transportation needs (56%). (See Table 3.)

Growth-related factors, such as infrastructure- and socioeconomic-driven needs, have impacted larger counties the most whereas employee-based factors, like health insurance costs, have tended to hit smaller counties harder.

Counties in worse fiscal condition are most likely to point to jails and detention facilities, employee and indigent health insurance costs, and rising litigation costs as wreaking havoc on their budgets. (See Table 4.) These counties tend to be the smaller ones (See Figure 8.)

Political pressures, namely anti-tax sentiments, are the same, regardless of size. Almost one-fourth of both small and large counties identify the anti-tax mood of the public as a major budgetary stress factor.

SUMMARY

In a very diverse state like Florida, giving counties the local option to adopt certain policies at their discretion does not result in uniform implementation. Many of the expectations regarding implementation of the 1998 amendments and revisions were "off" considerably. The new question is "Will the projections turn out to be nearer the mark a few years from now than they have been in the short term?" Implementation often occurs incrementally at a rather slow pace.

Just over one-third of the counties (37%) have implemented Amendment 3 (Senior Homestead Exemption). Initial expectations were that once put in place, the Amendment would have moderate to large fiscal consequences for counties. That has not proven to be the case thus far. It appears that a large number of eligible seniors have not yet taken advantage of it where it exists. That could change with more publicity and less burdensome paperwork. But the eligibility pool could just as easily shrink if the state legislature narrows the definition of income needed to determine eligibility, as many county officials think it should. To date, most counties have not enacted the senior homestead exemption, primarily because of lost revenue fears and concerns about its generational unfairness.

Exercising the option to maintain and record official records at branch offices has taken place at a slow pace as well. While not all counties have branch offices, among those that do, just 20% have passed such an ordinance. Proponents of Amendment 4 had projected efficiency gains. The results have been somewhat mixed. While over half (53%) say implementation of this amendment has improved the efficiency of their operations at least somewhat, most say there have been no significant budget reductions or impacts. The scarce evidence we do have suggests it may actually increase revenues in some places but increase spending in others.

Historically, controversy often delays implementation. Such has been the case with Revision 12 that gives counties the option of closing the gun show loophole. In spite of the fact that the law enforcement community heavily supported the amendment, voter enthusiasm for it varied considerably across the counties, reflecting the state's rural-urban schism. At the time our survey was conducted, just five counties reported having enacted Revision 12. Most did so rather quickly after its passage. Each of the adopting counties has a higher-than-average senior-age population. Seniors tend to be more concerned about crime and more likely to express their views to county commissioners.

To date, Amendment 1, Historic Property Tax Exemption & Assessment, has had the least success relative to its projected benefits. Proponents expected an increase in the number of requests by owners of historic properties for an ad valorem tax exemption for their property, once the method of assessing historic properties changed and became more property-owner-friendly. Our survey results show no increase in such applications. Some say eligible property owners are simply unaware of this change and that counties have not aggressively promoted the policy.

Revision 11, Ballot Access, Public Campaign Financing, & Election Process Revisions, as written, applies universally; there is no local option. Two parts have directly affected county supervisor of elections offices: (1) ballot access, making it easier for minor party and independent candidates to get on the ballot and (2) an election process change, opening up primaries to all voters when only one party fields candidates for a position. One-third of the counties surveyed projected an increase in candidacy rates due to easier access. Three-fourths anticipated universal primary contests in their county in the Election 2000 cycle. The latter estimate was the most accurate. In actuality, two-thirds of the counties had at least one countywide universal primary contest. However, only one-fourth anticipated a moderate or considerable budgetary impact as a consequence of Revision 11-driven changes. (This Revision was never perceived as having a major budgetary impact.)

The portion of Revision 7 calling for the state to increase its funding of state courts, has yet to be implemented. Without question, it has counties the most optimistic, but also the most nervous. Almost two-thirds of those surveyed anticipate moderate to considerable budget relief once Revision 7 changes are put in place. At the same time, many are worried that whatever relief is granted will be less than expected. They also fear the state legislature will simply reduce other state funding (e.g. revenue sharing) and the net budgetary gain from Revision 7 will be reduced. Such uncertainties typically emerge when amendment language is vague.

To put things in perspective, other pressures on county finances have been more intense than those created by the 1998 constitutional amendments and revisions. State mandates continue to be the major irritant. But growth-related infrastructure and socioeconomic-driven demands and health care costs have also been major stress factors on county budgets. And anti-tax sentiments, while weaker than a few years ago, are still identified as alive and well in almost one-fourth of the counties, regardless of size.

Amendments, mandates, and money continue to challenge Florida's counties in the 21st century, just as they did in the 20th. "The more things change, the more they remain the same!"