STATE OF GEORGIA SELECT COMMITTEE ON CONSTITUTIONAL REVISION Transcripts of Meetings 1977-1981 COMMITTEE MEMBERS: GEORGE BUSBEE GOVERNOR CHAIRMAN ZELL MILLER LIEUTENANT GOVERNOR THOMAS B. MURPHY SPEAKER. HOUSE OF REPRESENTATIVES ROBERT H. JORDAN CHIEF JUSTICE. SUPREME COURT J. KELLEY QUILLIAN CHIEF JUDGE. COURT OF APPEALS MICHAEL J. BOWERS ATTORNEY GENERAL MARCUS B. CALHOUN SENIOR JUDGE. SUPERIOR COURTS SELECT COMMITTEE ON CONSTITUTIONAL REVISION ROOM 23H 47 TRINITY AVENUE ATLANTA. GEORGIA 30334 404/656-7158 COMMITTEES MEMBERS: AL HOLLOWAY SENATE PRESIDENT PRO TEMPORE JACK CONNELL SPEAKER PRO TEMPORE ROY E. BARNES CHAIRMAN. SENATE JUDICIARY COMMIn:EE WAYNE SNOW. JR. CHAIRMAN. HOUSE JUDICIARY COMMITTEE FRANK H. EDWARDS SPECIAL COUNSEL J. ROBIN HARRIS EXECUTIVE DIRECTOR MELVIN B. HILL JR. ASSISTANT EXECUTIVE DIRECTOR MEETINGS HELD ON CONSTITUTIONAL REVISION COMMITTEE TO REVISE ARTICLE VII COMMITTEE Full Committee Full Committee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Subcommittee Full Committee Subcommittee Full Committee DATE October 9, 1979 June 26, 1980 June 26, 1980 June 26, 1980 June 26, 1980 July 16, 1980 July 18, 1980 August 1, 1980 August 4, 1980 August 12, 1980 August 15, 1980 September 5, 1980 September 10, 1980 September 11, 1980 September 24, 1980 September 24, 1980 November 13, 1980 # OF PAGES 162 30 65 60 44 73 58 87 54 94 74 III 9 92 145 36 39 o o o -..I CO~R1ITTEE TO REVISE ARTICLE VII OF THE GEORGIA CONSTITUTIOn (TAXATION AND STATE DEBTS) The transcript of the proceedings heard before the HONORABLE RANDOLPH W. TIIROHER, Chairman, commencing at approximately 10:00 o'clock a.m., Tuesday, October 9, 1979, in the Hays and Means Committee Room, State capitol Building, Atlanta, Georgia. -000- ----~ BKAl';J)ENBLJ RG & HASTY I SClI:i'\: mle REPORTING 3715 COLONIAL IRi\/I, J)OUCLASVILLE. CFORCIA 30135 I 942-0482 I DEPOSITION') . ARBITRA'lIOI"lS - COf\:Vb"lT\O;\JS - CONFERENCES I _______J 1-..- ,. , _ _.. ... _ APPEARli.HCES: c~mUTTEE HElmERS RANDOLPH H. THROHER, Chairman H. J. BAR'l'ON LARRY BLOUNT REP. DON CASTLEBERRY REP. H.l\.UCUS COLLINS CHARLES L. DAVIS I. OvlEN FUNDERBURG REP. CHARLES HATCHER CONSTANCE HUNTER Kt:mlIT KEENUH SElJ. JH1HY LESTER JN1:ES IlAHTIU ADIT HASSEY DR. CHARLES HcDANIEL ROBERT L. NASH HILLIN! NIXON DR. GEORGE O'KELLEY HENRY ROBINSON H.E. STRICKLAND GEORGE WILLIAHSON CLl'.RA \ lEST OTHERS PRESENT CAN'l'ER BROHN VICKIE GREENBURG J. ROBIN HARRIS H.ICHAEL HENRY MELVIN :lILL DAVID L. Kl\lJI: JACK HORTON CYNTHIA NONIDEZ CHARLES TID\'VELL HALTEH HINGFIELD i'AGE 2 I'A(~E 3 I NDE X 1. Introductory remarks Chairman Thrower page 5 2. Roll call David Kane 5 3. Comments: a. Robin J. Harris 10 b. Senator Jimmy Lester 14 c. Representative Barcus Collins 15 4. Hist.orical Constitutional review -- Hr. Hingfield 16 'J 5. Research sources available -- Mr. Kane 25 6. Local amendment problem -- !'is. Nonidez 30 7. Georgia Tax Reform Commis~ion -- Hr. Borton 37 ~. Edited restatement of Article VII -- Mr. Brown 41 9. Interrelationship of Article VII with other Articles -- Hr. Kane 51 10. Use of legal porsonnel of Sutherland, Asbill & Brennan -- Chairman Thrower 55 ~l. Policy issues requiring attention a. Speficity of detail b. Alternat1ves to local amendments 57 63 c. Authorizations and limitations on taxation 69 d. Taxation of intangibles 86 e. Exemptions 89 (i) Extent of delegation of authority 89 (ii) ~ypes currently allowed (a) Homesteads 102 (b) Inventory goods 107 (c) Personel property 112 (d) Implements of trade of laborers 116 (e) DOMestic animals 117 (f) Pollution reducing facilities 123 (g) Solar energy facilities 124 (h) Religious property, etc. 131 (i) Disabled ve~erans' vehicles 134 (j) Farm products 134 (k) Pension trust property, etc. 135 (l) Subsidiary corporation stock 136 I N D E X(continued) 11. Policy issues requ1r1ng attention(continued) e. Exemptions . (ii) Types currently allowed (m) Honprofit hospitals, etc. (n) Public property (0) Exemptions by local amendm1AN : Thank you. Robin, I misspoke. I should have ') indicated that Mr. Harris was the Executive Director of the Select Committee, not the Chairman, which of course is the Governor. I wonder if there are any questions that anyone has of our general purposes and directives ,..,hila ''I'e have nr. Harris here with us. MH. HILL: ('-\GE 13 Hr. Chairman, I'd like to point out the reimbursement policy. The Select Committee has been authorized to rei1l1bursc all of you, as you may have already heard, for your per diem. They give you a per diem as \vell as your mileage expenses. So in order for us to be able to do that, we have to know what your total mileage is, and we would also like your social security number. So I'm just going to pass around a sheet. I'll send one in each direction. If you WOUld, please put that information on the sheet. If your name has been omi"':.t.(:(1 Ii:' 3(');'!;~ chanca, please just turn over the sheet and write your name and that information on the back. Okay? Now, if you have any problems with reimbursement, we're going to do this once a month. So I'm not sure when \ve're going to be meeting again, but. if you find that a month passes and you haven't received a check, maybe you'll give us a call at the Select Conunittee, and lve'll try to take care of getting your reimbursement. THE CHl\IRHAN: Hay I ask, Hel, does tha~'.:. cover Subconunit.tee rneetings~ MR. HILL: Yes. Yes. Your per diem and your expense cover Subcommittee rnstings, and there's a telephone credit card number ...,hich is available for your use as well, and H.r. 'i'hrower put that information in the letter that he sent ;, 14 to you originally. I think that's it. THE CHAIRHAH: Okay. Any questions about the. ndmburse.1"1ent or the handling of that? (No response) The two Committees to which our recor.unendations will go fron the Select Committee, the Committees of the Senate and of the House having responsibility for tax matters, and the Chairmen of those tvlO Committees fortunately are on our Committee and a re here this li10rning. I'd lik(' to hear from each of them. ') SEN. LESTER: First, Senator Jimmy Lester. Thank you, Mr. Chairman. It's a real pleasure to be here and to serve on this very important Committee. I think out of all the Revision Committees, Robin, I think :1, we probably have one of the hardest jobs, because taxation !I is on the mind~ of every citizen of Georgia at the present time, and as Jack Morton can tell you and several others here that also serve with me on the Georgia Tax Reform Commission, it's a ve~J complicated, involved subject, but I think with the talent that \ve havG here in this room, I think we can get the job done. I would like to say to you that if the staff of the Georgia Tax Re~orm Commission can be of any assistance to this Committee in furnishing data or furnishing the information, that they will be happy to do so. We have Jack Morton here I see or Jack is going to be on the program a little bit fater. Jack is the Director of the Tax Reform Commission. We are hard at work at the present time. He have made a revision. He have made a study, I should say, of the tax laws of Georgia, and we're now in the process of formulating recommendations to the Georgia General Assembly in January. So if we can share any information with you, we will be happy to do so. THE CHAIRMAN: That's fine. Hs're already working with your staff, as you know, and we'll be in close collaboration as we go along. Also the Chairman of the Ways and Means Committee in the House, Representative Barcus Collins. Mr. Chairman~ ". REP. COLLINS: Thank you, It's a pleasure for me to be able to serve with you on this Committee too. I'd like to re-emphasize, as the Senator has, about our Tax Reform Commission and its staff, and when I look around this Committee, it looks like to me like it's sort of an enlarg~d Tax Reform Commission. I see some seven or eight members that I am serving on that Commission with, which I think is good. Of course Robin mentioned something that I think needs to be called to all of our attention, and that's what 1',\ 1-_ 16 happened in '69. Now, if we're going to try to come out of here with something, we've got to come out with something that can be sold to both bodies, the House and the Senate, and something the people will buy. If we don't, we've wasted the taxpayers' money and \vasted a good bit of our time. So my suggestion would be for us -to look at this thing and look at it closely because there's u lot of times that some of us might have some petty thing that we would like to see changed in the Constitution, and if we go to trying to rewrite it in its entirety and come up with a new one, we might have problems with it when it gets to the floor of the General Assembly. Thank you, sir. THE CHAI IU4AN : Hell, it is important that we act ,.,ith a historical perspective, keeping in mind the experiences of proposals in past years, and also the development of our Constitution over the years. Some of you are deeply steeped in this, others not. I have asked Walter Wingfield, one of my partners, to give us a brief review, if he would, of .-::; the Georgia Constitutional provisions ragarding taxation and State debt before 1877 and then the 1877 Constitution and its development up to date. Walter? MR. WINGFIELD: ('AGE 17 Thank you, I1r. Chairman. Randolph indicated it sort of would be helpful to try to put -the matter in some historical perspective by giving you at least a capsule summary of how the Constitution of this state has developed ove~he years as it relates to taxation and public debt. The early Constitutions of this State, those of 1777, 1789 and 1798, there was fairly regular rewriting apparently in those days, but all of them contained really no specific reference to taxation as such. They contained very general language, which apparently gave the General Assembly authority. For example, there was a 1789 provision that said simply the General Assembly shall have the power to make all laws and ordinances which they shall deem necessary and proper for the good of the State and which shall not be repugnant to this Constitution, period. Similar language was contained in the other 18th century Constitutions. , i I In 1861, when Georgia became a part of the Confederat~ I States, the Constitution was rewritten again, and this '! occasion was the first reference to taxation as such. The provision still was very ~oad and simple. The right of taxation can be granted only by the people and shall be exercised only to raise revenue for support of government, to pay the public debt, to provide for the defense and for -\', 18 such other purposes as are specified in the named powers. Again, very general provisions. Similar language, very general language relating to taxation was contained in the 1865 and 1868 Constitutions. '; The big break with the past trend of very general Constitutional language that gave a good deal of authority to the Legislature came in 1877, and this is the reason for this date. It's sort of a break point between the old type Constitution and the type Constitution we have now. 1{) The 1877 Constitution. is the genesis of our present Article VII. It's really found in that Constitution. The 1877 approach was to place pretty specific and detailed limitations on the General Assembly's authority with :1 respect to the power to tax and pretty severe restrictions i ') on the authority of the State to incur debt of any kind. 1.u '" 0. ."<0 11 Now, this was -- I think it needs to be understood that these Constitutional provisions were really a reaction to the fiscal mismanagement, the excesses or perceived j ') excesses of the Reconstruction era of State government. In large part the Bullock administration, the administration ;" of Governor Rufus Bullock in the late 1860's, early 1870's was rife with a lot of fraud and fiscal mismanagement. There were particularly apparenffy a lot of unauthorL:od fraudulently issued State bonds that created a lot of problems, and in particular, a number of bonds were issued ;'AGE 19 for essentially private purposes. The proceeds were used to construct railroads. There was even one instance in which the same railroad, the Cartersville and Van Hart, a wOl~nown railroad line, got the proceeds of some State bonds under illegal conditions where they were unauthorized and improperly issued. They didn't get the railroad built with those bonds. so they changed the name and came back again as the Cherokee Valley Railroad and got the proceeds of some more bonds. This is reported in Professor Saye's book on the history of the Georgia Constitution, and it is the sort of dealing that appears gave rise to the great concerns on the part of the Constitutional Convention in ":::' 1877 and a felt need to put some pretty severe restraints on the State and on the General Assembly's authority, both with respect to debt and with respect to taxation. It was recognized at the time that this detail in a Constitution was contrary to at least traditional concepts of Constitutional draftsmanship, but it was felt important to put this in there in the nevl Constitution. The 1877 revision apparently was -- I mentioned that it was done by a Constitutional Convention, a representative body all over the State. Robert Toombs 'olaS quite influential in the development of the 1877 Constitution. He apparently seized the opportunity of a lot of confusion in the proceedings, in the debates to impose a lot of his own personal views on the Constitutional provisions, particularly relating to taxation. lIe had very, very conservative views with State financial matters, and he even -- it's been report.ed in a very interesting historical footnote that when this'Constitutional Convention in 1877 used up its appropriation and was running out of money and still hadn't finished its work.and had spent the $25,000 it had been givel! ~:o rewri.':r the Constitution, that General Toombs advanced another $20,000 of his own 1,) money to get the Constitutional Convention's work complete. ,; He was later reimbursed for this, but the basic approach of the 1877 Constitution, which is still reflected in th~ document we have today -- THE CHAIRNAH: 1:; That's a precedent, Robin, you might call to the I p "z, Governor's attention. \ 'i MR. HARRIS: i ~: I will. 1() rom. WINGFIELD: 20 It imposed limits on the power of taxation. ~~ -":. -~ specifically enumerated purposes for which taxes could be 22 collected. This applies both to State and County taxes. 23 It generally prohibited the occurrence of any new State 24 ,debt except for the defense purposes, to repay existing :~ debt or up to $200,000 to supply casual deficiencies in the revenue. PACE 21 --1 I There also was a provision for a sir~king fun4 ; to begin to fund the existing public debt. There had been: i a lo\: of debt created of course in addition to the problems with the Bullock administration. Dur~ng the Civi~ Har, there had been a lot of debt created, financing the war effort. A bunch of this debt was repudiated. Buch of the debts relating to the Bullock administration was repudiated, but still there was a substantial amount of debt outstanding in 1877. lj Between 1877 and 1945, Article VII was amended 188 '1 times, and mo.st of these were local amendments to take car~ of some particular local situation. There were some genora1 amendments, about ten or 15 percent of the total, some of them expanded the purposes for taxation over the years. It became necessary, since you had enumerated I, purposes, to add new ones. For example, some of the significant ones were in 1926 to permit expenditures for a public highway system, in 1937 for welfare benefits, 1945 the advertisement and promotion of the state and its resources, and in 1943 for the teacher's retirement system. Also some of the amendments added further restrictions. For example, the 1904 amendment that limited the total tax levy or ad valorem taxes to five mils per ., dollar of taxation value. There were other amendments in '37 to permit the classification of property to tangible P/\(;/-:. 22 ;! and one or more classes of intangible property, the same provision we now have, permitting the enactment of a separate intangibles tax. There were a couple of expansions of the State limits in very narrow circumstances in 1926 to permit the State to borrow $3,500,000 to pay the school teachers' salaries and in 1931 to permit the assumption of some county incurred highway construction. As best I can determine from reviewing the Constitutional authorities, the State debt provisions, lU although very, very restrictive in the 1877 Constitution, j1 were really not adhered to, at least in the late 19th and early 20th centuries. There was often more debt outstanding than the limits would have permitted, but ..,' 1 ..t by the 19~0's, a more conservative approach had taken hold, and the State had enjoyed more prosperity in the World War II years than it had known since before the \'lar, and great strides were made to reduce the State debt, so that by 1946 all the State bonds had been paid off. Of course 19 it's been mentioned that there was a Constitutional revision in 1945. I was interested to learn that this Constitution was the product of an appointed CoItlF.lission similar to the present Commission and that Georgia was the first state in the nation to adopt a new Constitution by this mechanism, not using a Constitutional Convention, but rather using an appointed Cornmission. PAGE 23 The '45 revisions, in particular to Article VII, did not really make any significant substantive changes' in the document. It was primarily a revision of formulization. There continued to be numerous amendments to the Constitution in the period after 1945. Of course the further efforts to revise the Constitut~on I in 1963-64 and in 1969 have also already been referred to. Neither of them ultimately came to anything. The '63-64 Commission did report a new Constitution, which was apparently about half as long as the 1945 document, and it was approved by the General Assembly, but a three judge court enjoined it from being submitted to the voters i because the Legislature that had approved it was not properly apportioned. So it died that way. Reference has already been made to the 1969 situation.! Thera has been a couple of significant developments since that date in the area of State debt. I mentioned that the State bonds were paid off by the mid-1940's when the State was in very good financial condition, but the authority system began to develop, which really constituted a means of circumventing the very severe limitations on State debt in the ~tate Constitution. This idea began with the State Hospital Authority in 1939, and the concept was that the State would really be creating a non-profit authority, which would be authorized to issue !,-I,ib 24 its own bonds to finance construction of hospitals or schools or whatever it might be, rural roads, and then the authority would then lease it's property to the State so that the lease payments would be what the bond holder.s would look to for the payment of the bonds. Now, in some cases this had to come not because the facilities might not be revenue producing facilities as such, it had to come from State appropriations, so that you had a situation where the State was really being looked to for the payment of these bonds, and yet it was 11 not formally incurring a debt because this kind of lease I' was not considered a debt of the State. These authorities proliferated as a way of having the State engage in financing indirectly throughout the 1950's, and in 1960 there were some amendments to the '"'" "' (; t Constitution to limit these lease authority appropriations and to limit the extent to which new contracts could be entered into; and finally in 1972 there was a major revision of the State debt provisions, overhauling them 2n completely, taking away the severe limitations that had Jj existed since 1877 and adding an authoritzation for the State to issue general obligation bonds or to guarantee revenue bonds. The total amount of debt outstanding was being limited based on a percentage of the revenue of the State for previous years. Debt service could not exceed PAGE 25 15 percent of the previous year's revenue. At the same time, the Georgia State Financing and Investment Commission was created and given general authority over the issuance of public debt and over the investment of sinking fund monies that were required in connection with the retirement of the public debt. Finally in 1975-76, there was a non-substantive revision of the Constitution, simply a reorganization of it to some extent, an editorial revision of it, which was approved as preparatory to the work of the present. That's sort of a capsule summary of how the Constitution has developed to date ., THE CHAIRl1AN: Fine. Thank you, Walter. I think you also will be interested in some of the resource sources, research sources that we have available, and I have asked David .c i I Kane to review those, and then wehave some other staff ,. " comments that I think will be of interest to you on the work being done in this area. First, to cover what our research tools are or may " be, would you brief that for us, David? MR. KAUE: Yes, sir. Some of the personnel which are available to the Committee have already been identified, but I'll summarize what we have identified so far as being available to the Cornmittee. 2 First of all, Helvin Hill, who is the Assistant 3 Executive Director of the Select Committee, and his staff 4 will be available to assist the Committee in any way they can. Secondly, two members of the staff of the Office of 7 Legislative Counsel have been assigned to attend the meetings of this Committee and also to assist the Committee. They are Canter Brown, Junior, who is here, 10 and Virlyn Slaton. Also from the ~ffice of Legislative JI Counsel, Cyrtthia"Nonidez has indicated that she will be available also to assist us in any way possible. She will be making some cownents later on today. Senator Lester indicated that Jack Horton, who is .;;: 15 the Executive Director of the Georgia Tax Reform Commission, :~ Ii: OJ 2~ () I)"J~point, is Dr. Albert Saye, \'lho is a retired professor of political science at the University of Georgia, and who has authored numerous books and articles on the Georgia Constitution. I have spoken with him several times, and hJ has always indicated that if we need .to call on" him for any assistance, he \'1ould be glad to help us. !I There are several books and documents which may provide some background data, information and historical perspective in particular to the Commission. These ",f;H ' primar1' documents are the records and reports of previous Constitutional Commissions and Conventions, which have bee~ held in this State. I have been in touch with the. State (I. Archives and have in fact procured copies of the records of the Constitutional Con~ission from 1943 to '45. This is an indexed set of minutes which provides some indicatio~ of how the deliberations went when the Constitution was revised in 1945. The State Archives has also told me that they have available records of the 1964 Con~ission and reports of various Con~ittees \lhich were published, and finally, this is probably more of a historical document than anything else, but there is a book by Samuel Small which is entitled A Stenographic Report of ~ Proceedings of the , 'i Constitutional Convention ~ in Atlanta, 1877. This may provide some historical background as to why some provisions that are in Article VII are included. In my work so far, I have identified some secondary sources, which I have found extremely helpful. I have already mentioned that Dr. Saye at the University of Georgia has authored a number of books, and I will mention ') a few of his. One is called A Constitutional History of, Georgia, which was published in 1970. The second edition :1 was published in 1970. A second book is a brief book ,i. called The Handbook ~ ~ Constitutions of the united States and Georgia, and this provides a summary of the provisions of the Georgia Constitution in very concise form. , ~! x. :- it:: k On the history of state debt, a pamphlet was publisheq by the Institute of Government at \~orgia by Donald ii) Escarraz entitled "A History of State Debt," and it provides a r~gorous treatment of the history of the debt, particularly on the development of the authorities. An old hook which is helpful is McElreath ~ the . , Constitution of Georgia, Annotated. I, don't know if there are many copies available sinGe it was published in ,the early 1900's. Finally, as someone has already indicated, several PAGE 29 other states have recently undergone Constitutional revisions, and we are trying to obtain whatever documents or reports of committees which may be helpful to this Committee for review and study. In particular, Florida has a new Constitution which was adopted in 1969, and NortH Carolina has a new Constitution which was adopted in 1973. Both of t.hese Constitutions, as they relate to Article VII I of our Constitution -- in other words, the same subject matter -- are very brief and may be used as some reference point. !J ~ Ct c I; , \) I' .I And finally we have a copy of a report of a Consti tutional Revision Comrni ttee for the state of Virginia and have reviewed it. In summary, that's some of the sources available, at least as far as docUIl'\ents go. I think the staff summary is pretty complete, but you may find that these documents may be helpful in gaining some understanding of the background of Article VII now. ,t. THE CHAIRHAN: Thank you, David. And we'll be calling others to '1 your attention as they are developed. One of the certain problems which we face on the Committee and I think the other Constitutional Revision Committees are facing as well, but probably particUlarly acute in taxation is the matter of local arnen&nents, and I think Cynthia , '.\i 'J'; 30 Uonidez from the Office of Legislative Counsel is one of the world's greatest living authorities on Georgia's local .' amendments, and will you share that with us now, Cynthia? 'I I'iS. NONIDEZ: Yes, sir. I think probably everyone can hear me from here, and I'll just brief you on a particular project that the Office of Legislative Counsel is attempting to complete in the very near future, which hopefully ..Till be of some assistance to your staff as the Committee begins 10 its study. i1 Georgia is among a very unique set. I think there are only four other states which allow this animal that we call local Constitutional amendments, and consequently, II in looking at the whole goal of Constitutional revision J5 ." :.':l ::> 16 r.:;' Z C. ." 1'/ IX front a two-fold angle of, one, trying to reduce the long ballot of amendments, the need for amendments in the future, amendments of a general nature. Of course a very J8 serious study of our current provisions is made necessary, 19 but secondly, from this standpoint of the fact that ~o ; Georgia's ,Constitution permits local exceptions or 21 exceptions to the general provisions, which apply only to 22 a particular local entity or political subdivision, this also makes or gives rise to the need for your serious 24 examination of current provisions with a view towards what is it about the rigidity or the nature of the limitation which has created problems, i.e. 80 or 90 or however many local amendments, if it's on the part of' local government to get out from under this particular or that particular limitation. The 1945 Constitution carried forward all of the local amendments to the 1877 Constituti~n. i He are currently trying to identify all of those 0) amendments. We're going back to the Archives to really look at the gubernatorial proclamations as to the results of those elections. In addition, of course we have all the amendments to the 1945 Constitution. So what the Office of Legislative Counsel is trying (;" to complete is an identification of these local amendments so that this Committee and the three other Committees which are scheduled for completing their revision by '82 will have this material to study, to examine as you work over the language of the current .,( ;r. provisions in your Article, and we hope to pass this on to Hel and his staff in the very near future. i : THE CHAIlUWJ: How are you finding these? What do you have to scan? ! MS. NONIDEZ: The methodology is such that prior to, actually prior to about the 1960 general election there is no official docUMent that identifies the results of the general election. That is capsuling or any kind of reference to the particular proposed amendment and whether or not it was ratified or rejected. So \-,hat we're having to do is go back through the gubernatorial proclamations. The Constitution has always, at least since 1877, since we've had these local amendments required that the 6 Governor proclaim the results of the general election balloting on these maendments to the Constitution. So r; we're going back to the Archives and pull these q proclamations from the executive minutes, and we're to tracing on back from there to the particular Georgia z 1! ") -l,. 12 " . (t~))(- ~',.:;:~.li''1 ~,~~ ~~ laws, so as to capsule in some 'way what this amendment spoke to in terms of the subject of the provision in issue. '''','::-.:../ / '" ,~. THE CHAIRMAN: <. J: 15 '" So you're going back to l877? h? MS. NONIDEZ: .. , ]" r . .~:: Yes, sir. 18 THE CHAIRMAN: 1''\ And bringing the law forward? 20 MS. NONIDEZ: 2: Yes, sir. .) THE CHAIRHAN: Did any exist before l877? MS. NONIDEZ: \( Our current Constitution only recognizes those from PAG}<~ 33 1877 forward. TIlE CllAI RMAN : Forward? HS. NONIDEZ: Through the '45 and now the '76. REP. COLLINS: Hr. Chairman, I have a question. THE CHAIRMAN: Yes. REP. COLLINS: In generalities we're talking about local, Constitutional amendments. I'm going to get on one now. . \. \~ , ." For instance, homestead exemption. That's going'to effect ed).lcation. He' ve got an equalization_ fund that. we charge 16 3 ," out to the schools, based on the amount of wealth they have per child. to support this child in school. Now, when. a county comes in through a local Constitutional amendment and raises that homestead exemption, then that cuts the amount of wealth they've got to support that student. I mean the amount of dollars they've got per student, because you get. part of it off on homestead cxemp-:'ions. So in reality \.,hen one county does it, it raises the amount the other 158 counties that didn't do it has to pay because their wealth didn't decrease as the one did that it was put on. Now, that's sort of the way that I - .-1 works. So what you have when you get into a growing area where they have pretty good income and they decide that they want to give theirs the extra homestead exemption, they'r pushing their tax back off on the poor ) counties with a local Constitutiona1 amendment tha t ' s o affecting the other 158 counties. '7 THE CHAIRHAN: (~ Does anyone have any idea of hoy; l::e-"my of these arc , in existence? 10 HS. NONIDEZ: Well, right now we think there is in the neighborhood 1.:' ., in ten\lS of those that have been ratified, in the (~,,:\;.S)Y)l(r<~i ~'2"!" " neighborhood of 800. ~-:~// 11 THE CHAIRHAN: ii Do we know how many counties have special homestead If> I; .., exemptions? ;; ~ 17 MS. NONIDEZ: ];) No, sir. I couldn't identify that for you right now. ]9 THE CHAIRMAU: 20 But you will have? 2.1 MS. l'JONIDEZ: Yes, sir. In fact that is exactly \-lhat we hope to be able to bring to the attention of ~he Committees, to group them so that you will have some feel for the provisions of the current Article VII which have given PAGE 35 rise to local Constitutional amendments. I, , " :i THE CHAI RHAN : Are there conditions that would seem to justify or require a higher homestead exemption in one county than in another? I; I, REP. COLLINS: .., I think if the auditor would check and see if the homestead exemption -- in other words, if this wealth is " figured before or after homestead exemptions, it could help to clarify this for us. 1; t'z-' Jl.1R. NIXON: ',)- " I thought it was gross, but I'll check on it to make 1 VI v sure. v. 4 ~ DI~. r'lcDl\.t~IEL: .r<" lI I was under the impression gross, but undoubtedly i(,l. I'll bet you know. :ii REP. COLLINS: It; Ho, I really don't, but I was under the impression i'l it was net. :.'t,'- HR. NIXON: I'll find out at lunchtime. 'l'HE CHAIRI1AN: Good. That would be interesting. REP. COLLINS: If it was gross, all you would he doing then is movin9 ! PA~;E 36 it off on the others in that county; it wouldn't be affecting the other 158 counties. : THE CHAIRMAN: Yes. REP. COLLINS: If it's net, it will be affecting the other 158 'j counties. : MR. BROWN: Mr. Chairman, I might mention one thing in relation to the number of local amendments relating to homestead 11 ~ exemptions. Although the present Article VII does provide ,.1 for homestead exemptions for county purposes, state purposes and school purposes, there is no general authority for any homestead exemption for municipal 15' c~ ',:: ';;'.;.. ] f> O,:J: 0 ,< 1 1,..:..:.; , purposes. Every single municipal exemption in the State is granted by a local Constitutional amendment, and there are a good number of them, and in addition, there are some 1~ of them that purport by a local Constitutional amendment 19 for municipal purposes that purport to also increase the 20 r exemption for State purposes in that municipality. Some of them were voted on state~wide, and some of them were just voted on locally, but there's a tremendous mishmash involved, but the great number of these amendments I think 24 you will find relatinq to homestead exemptions relate to municipal amendments because the constitution does not PAGE: 37 anticipate in any sense any general municipal homestead exemption. THE CHAIImAN: Anything else with respect to the local amendments? (No response) Hell, Jack Morton has been referred to, and we've been in touch with Jack, and it would be interesting to hear from him a report on the Georgia Tax Reform Commission. MR. t<10 RTON : Thank you, Hr. Chairman. I I appreciate the opportunit~ to meet with you this morning, and since the Chairman .' and Vice-Chairman of my Commission both have volunteered my services, let me hasten to reaffirm that. '; . THE CHAIRMAN: You've got that in the record. Jack. MR. MORTON: I do appreciate the magnitude of your task, first, .1"' from the perspective of being involved in a bureaucratic administrative function for several years in dealing with tax issues, and then for the past several months being involved from a research and analytical standpoint with the Tax Reform Commission, and you do indeed have a significant task ahead of you. Hhat I'tl like to do is give you a very brief summary PAGE 38 of the work of our Commission and where we might stand, particularly as it relates to the Constitutional revision. As most of you no doubt know, particularly since a lot of ~i you are on our Commission, we've been in existence for about a year now in an active sense. We were cre~ted by the 1978 session of the General Assembly, and we have been geared up and active and actively involved since about September of 1978. So we have been working for a period of about a year, and our charge that was given . , ~ .- \ to us when we were created is basically as Senator Lester said, and that is to perform a comprehensive and in-depth .-,' study of our State and local tax structure as it exists today, with an idea to insure that it is in fact equitable and to make whatever recommendations are necessary to achieve that position. Hith respect to our work as it relates specifically "',i.; ~"( to Constitutional revision, we have not created any specifi~ subcommittee or task force to deal specifically with the Constitutional revision and Constitutional issues. This was done for a couple of reasons. First -; 1 of all, we knew at the time \ve were creating our own work forces, task forces that you indeed would be coming along shortly. Secondly, we vlere somewhat I imited in the anount of time and the rESources that we had available to devote to particular issues and particular problems. PAGE 39 COnSe(IUently, we have structured ourselves and our work efforts more along tax issue or functional lines as opposed to Constitutional versus statutory issues. \le did hope that toward the end of our work we could in fact create a reasonably small working group to at least do some non-substantive editorial work with respect to the Constitution. x To give you an idea of how we are structured, we are creating basically six task forces and subcommittees which '- .0 have been actively working as such for a period of several [i ~ ,C2o 12 '~: ,~. >- Iuonths. For example, we are working -- one of then is working specifically in the area of State revenue sources, one in the area of local government revenue sources, one 14 in the area of inter-governmental relations, that is the 'J ." \.1 J ,~ J. relationship betvleen the, federal Ijovernment and our local governments and our State government and our local governments. One is working specifically in the area of business tax issues as they may have crossed tax lines, and one is specifically working in the area of property \; tax assessment and administration. The last one that was _i created is technical in nature. It is our tax incidents and tax impact task force. I think from this that you can see we are attempting to \vork from functional perspectives, and I have, no doubt, however, that several of our task forces will have specifi~ PAGE 40 i' recommendations, suggestions on recommendations for possib~e Constitutional change, and we are hopeful that you will give those the proper consideration, as I'm sure you will. Possible examples, and these are mere possibilities of some of the areas that some of our task forces have identified, but not yet solidified, most of you are no doubt aware of the problems that were generated with respect to the $75 million surplus that was desi~ned to provide tax relief and some of the Constitutional problems involved in getting that $75 million grant fund back to ~ 1. 'l. ultimately the taxpayer for whom it was intended. He have looked at property tax exemptions from a definitional and clarification standpoint, and I noticed that you are going to talk about some of these this afternoon. You have already talked of some of the problems ,,-lith respect to homestead exemptions and the number of local amendments that are in place. Perhaps some definitional changes need i to be nade with respect particularly to the elderly, specialized homestead exemptions and perhaps even the amount of the homestead exemption. These are merely some of the things that perhaps our specific task forces will be making recommendations on, and perhaps even as our task forces complete their work in the next couple of weeks and report back to our full Cornnlission, then the full Commission might have additional recommendations for PAGE 41 Constitutional change. tle have, our staff has generated already some 15 or 18 informational or technical reports. They are geared principally towards the tax issue areas, and you will find Constitutional issues then interwoven throughout those reports. They do give reasonable (. , backgrounds with respect to most of our tax sources, both for State government and for local governments. They are certainly available to you, for either you and/or your (, staff, and I would be delighted to share them with you. As I said at the beginning, I am very hopeful that '," 7. (, perhaps we will be able to provide some assistance to this I" Committee, and I'm looking fonvard to doing that. >- " o:..",nfl'O L.,l you very much. , if ,- 'rUE CllAI RMAI1 : Thank Fine. Fine. Thank you, Jack. 1(, TIlE REPOR'l'ER: Mr. Chairman, I need to change tapes. TIlL CHAIRMAU: '- He can go off the record for this. (Discussion off the record) Are there any questions of Jack on his report with respect to the Reform Commission? (No response) ,i I'm sure we'd be interested Hith your technical papers, and ,ve might get a list and. circulate them. If [,\to! 42 there are any members of the committee that would like a ., particular paper, they can write in, and we'll work together I to see that they are made available. As indicated, Canter Drown, Junior, \vith the Office .J of Legislative Counsel, has been made available to work with d~~committee, and he's already at work, and I'd like 7 for Canter to review what he is doing in the editing of Art,:{.J.~? the restatement of Title VII. 9 MR. BRmm: I. iJ ':J 7.: I ! \-.. ;Y. Thank you, Hr. Chairman. If I might, for just a second for those of you \'1ho are not familiar with thE. General Assenbly, I'd like to mention that the Office of Legislative Counsel is the in-house law firm for the General Assembly, and in any comprehensive sense, the ) t Office of Legislative Counsel is the primary staff agency for the General Assembly, although o.u...f-- responsibilities generally are legal in nature rather than research or other types of resource staffing. In that capacity :: ".'(" buen assigned and work with Representative Collins as Counsel to the Ways and Means Committee and Counsel to Senator Lester and the Senate Banking, Finance and Insurance Committee. Also in that capacity, Representativ, I Collins and Chairman Thrmver had asked our office and me ~f in particular to prepare a draft editorial restatement of Article VII. FAGE 43 In the letter of request, it was stated that there we~e three goals in mind for that statement; one, to provide for better organizational structure in Article VII, to use correct grammar and modern present tense English wherever possible, and to delete material which would be more appropriately handled as statute law rather than Constitutional law. In that regard, we have prepared an extremely preliminary first draft, which we are now in the process of again reviewing and which isn't quite ready for your ;. use yet. It's our understanding though that the intent t, of this would be to provide you basically with a working document which would take for granted the need to meet J4 these three goals in 'any revised Article VII. Hy boss, Mr. Edwards, has asked me to point out to .....) 7. '.',) l I 7. you, however, that of course the Office of Legislative Counsel is a non-partisan agency and we're not pretending I' or desiring to attempt to make any basic decisions for you in regard to what should be in the Constitution and ,'f) what should not, but rather just to give you the'best effort of our work and assisting you with your work. With that said, we will be happy to do whatever we can for you, and we'll use our very limited resources in whatever,way ,, ,,'r will be helpful to you. THE CHAI ro,1AN : Would you estimate to what extent your redrafting reduces in size Article VII? MR. BROvIN : Yes, sir. The first preliminary redraft that I mentioned re~uced the bulk of Article VII by about 54 percent. It's a little bit less than half of what we started with in terms of number of words or pages. It's our hope to present a case to you that further drastic reductions in bulk in Article VII could be achieve4 \0 .? '1: ~I ~ ";: without any ill effects to the State and its legal structu~e. Particularly I think this can be the case in the bonding provisions, and David had already mentioned to you that North Carolina and Florida have recently undergone Constitutional revision. By way of example, Florida has one column on one OJ j :', ~ page as its total State bonding Constitutional authority, o" z; l1 ,1'1 and we are hopeful that you ,,,ill take a look at that to see whether you would feel that would be appropriate for Georgia. If you did, we feel the size of Article VII could be reduced without any major alteration in Georgia's Constitutional structure to possibly 20 or 25 percent of the present Article. 'THI: CHAIRMAN: Well~ we will talk later in -the meeting about our next date for our next meeting. What I would like to PAGE 45 q-- I' suggest. is, if we can get our calendars together, sometime in early December. I was very impressed by the work that Canter has done, and I would hope that beforo the next meeting that we can work together towards this objective and have in your hands a working document that does represent a condensed condensation of the present provision without any change of substance in thrnn. I think to get into that early will be very useful. Certainly we do not anticipate that we would try to meet during the sessions of the Legislature, so I think it is important to get that initiated, however, before the end of the year. .. ~~;'::.I',-:_" >' Are there questions or comments? i 1" - MRS. HES T : Yes. Hr. Chairman, I'm very interested in the following !', ;' up of that idea. Under number' five in deal;ng .with availal:jlle research resources, reference was made to the documents by Florida and North Carolina and Virginia. I wonder where is the source of their availability. Where may we get sucll to read and to use? You referred to one just there in Florida. Where may we get that? MR. KANE: Mr. Chairman, we have obtained a copy of the report of the commission from Virginia. ~'le have not obtained copies from Florida and North Carolina at this point. PAGt; 46 However, I anticipate that we will be able to get these. I'm t~Jing to develop the proper point to go to in each state now to get these materials available. MRS. WEST: Thank you. (, MR. KANE: And as soon as I do, they will be available. MRS. WEST: Thank you. MR. BROWN: Ij ~. Hr. Chairman, just by \'1ay of direct response, we can o make available, we have the Florida Constitution in our office, as well as copies of the Florida tax code. Just .., ,. \' as a practical matter, we tend to use. Florida law a lot Ifi 'z" w I guess to boil down what I'm saying is my background ~~:i Z <.: j7 ':.L' .~ and personal philosophy is that the least you have in the JK Constitution, probably the better, given the proper j 'J safeguards, and as also grown out of this structure in 2(,1 the general goals and procedures by which the Georgia revenue code arises. PROF. BLOUNT: To follow that just one step further, maybe our ~.+ i historian, your good partner, might speak to whether there are any historical or political reasons of note why for PA,GE 49 so long we've done it just the other way. It seems like everything that is worthy of a statute status is in the. Constitution. MR. lUNGF IELD : I think I have mentioned the only thing I have seen on it is the 1877 Constitution, which was a dramatic change in direction as far as draftsmanship and structure and approach from the previous Constitutions, and a lot of details relatnd to restrictions and limitations that were being placed on the General Assembly, and this was a reaction at the time to the immediately preceding ; ~l Reconstruction Era with their perceived excesses. They didn't want to leave it up to the General Assembly. 1.4 ~: PROF. BLOUNT: i:) <.'} Thank you. ,(; ;:,t.', MR. HINGFIELD: If that's still valid, I don't know. THE CHAIRHAH: :q Any other comments or questions? REP. COLLINS: Yes. I want to comment on that. I agree with that. We in the General Assembly, every time we wanted to do something and the Constitution restricts us from doing that, naturally w don't like that particular part, but those restrictions have protected the people of the State PA(;E 50 a lot of times, and \..hen we go to taking some of these restrictions off, I'd sure want us to look at them hard. , .> Now, I'll be honest with you, because I think the Constitution of the State of Georgia has done lots for the people here with these restrictions, and I don't want to see them all lifted. i THE CHAIRMAN: Well, I think that these drafts will be very helpful. REP. COLLINS: )0 Right. I agree. ," ! THE CHAI ID-1AN : In showing the language that is being considered for deletion, the new language that is utilized, and certainlyi lt > ~ the effort will be made in this draft to leave the basic authorizations and restrictions there, but to remove a h~ '<,J great deal of the petty, petty detail that I think from a "z, !, reading of it you \-!Quld probably agree was unnecessary and I unduly directive, but in these drafts, there will be no I' conscious change of the basic restrictions that are now found in the Constitution. 2J There are tax provisions in other Articles of the Constitution, some of which I believe we hope to have before, scheduled to-be before the legislature at the next session. I think we want to understand the relationship of Article VII with those, and wherever PAGE 51 , I harmonization is required, we want to provide for that. I'll ask David to review that for us briefly. MR. KANE: Yes. As Mr. Thrower indicated, Article VII of the Constitution is not the sole Article which deals with taxation and the State debt. Article VII is entitled "Statie Debt," but there are other provisions which relate to the debt of other political subdivisions which may have an l) effect on Article VII nonetheless. What I would like to do here is merely to identify and make the members of the Committee aware of some of the provisions in other Articles of the Constitution which: may have an impact on Article VII as it is revised by this Committee. Jack Morton I think indirectly referred to one of i Cl .:~ '.4' '"" these provisions, and this is in Article III, Section 8, Paragraph 9. This provision prohibits the General Assetu)ly from granting any donations or favors, donations 1.9 of gratuities in favor of any person. It's my under- 20 standing that has been something of a roadblock in " granting tax rebates to the citizens of Ge.orgia'and possibly even a roadblock to tying grants to a political subdivision to a re4uction in local taxation. So this Committee should be aware of this provision in Article III. There is another provision in Article III, Section 10, Paragraph 7, which deals from taxes derived from motor fuel, taxes on motor fuel. This provision requires that money collected from motor fuel taxes be appropriated in certain ways. I, Perhaps the Articles which have the most direct relationship to Article VII, however, are Article VIII and Article IX. Article VIII, Section 7 grants authority to school districts to le~l taxes. Article IX is a very [0 comphrensive Article dealing with counties and municipali- , ". ties. Article IX, Section 5 is a broad grant of taxing o " i -, ;} authority to the county governments, and Section 7 of Article IX contains provisions dealing with limitations on debts of counties and municipalities. Finally, Article X, Section 1 provides for taxation for the retirement system for teachers, so that this may have some relationship to Article VII. In view of the interrelationship of Article VII with these provisions which I have identified, I have asked Mel Hill at this point to at least make the staff aware of the proceedings of these other committees, when they \"1ill be held and what they will produce so that we can at least monitor their activities and report to this Committee on what they are doing. At this point, only staff will be involved in attending these meetings however. PAGE 53 '----'---, THE CHAIRMAN: Have there been any thoughts expressed'in the study groups that the several taxing authorities given in the Constitution should be grouped under the one Article? :) ~ HR. BROHN: 7 I'm not a\'lare of any. : HR. NIXON: Hr. Chairman, somebody has called me from Legislative 'j Counsel that had to do with the Article over here, Article III, Section 10, Paragraph 5, subsection 8, and they were asking couldn't they just move that over to Section couldn't they just strike that because it's covered in j i ; ;. Article VII. It has to do with the limitation about the authorities. '! HR. BRmiN: I forgot \-lho it is that called me. It wasn't me, but there is a duplication. l' HR. NIXON: -. 'l'here is a duplication there, if it has any relevance I I ~';) to it. ,. .. J THE CHAlru1AH: But it would seem to me tha~ spreading it around like this creates a problem of confusion and inconsistency. and I think we might look at it to see whether it would be feasible to group them all under one section. PA.CE 54 MR. NIXON: That seemed to be the idea, to strike this. tvould it be all right to strike that particular section since it's already covered in Article VII over there on bonds in the State debt section? THE CHAIRMAN: 7 tvell, we'll at least take a look at it. 8 MR. NIXON: (, I agree that it does personally. !0 THE CHAI Rl"1AU : "z 1t Thank you for that comment. Any other comments or questions in that regard? (No response) Mr. Tidwell is here from the Governor's office. He're: .:; r ,., glad to have you with us. Do you have any comment,s or wordls of advice for us today? ,r ::: MR. TIDWELL: Other than to reiterate the Governor's interest in j') your deliberations, to re-emphasize the Governor has a commitment to do whatever is necessary to try and bring , ~) d this revision project to fruition before he leaves office, and this is the last of the seven Article Committees that are meeting. I bring you no news to say that he is ".j particularly interested in what this particular Committee would do. It is the lifeblood of government and local PAGE 55 government, and I will try and serve the function to keep him advised of what you do, so that when the Chairman 6f the Select Committee reviews the final work product of -+ this Committee, there won't be that many surprises in there, that he'll have some appreciation of why certain decisions were made, and in connection with that, those that have seen me in other Committees know I make a ~ general nuisance of myself by being here and trying to 'j serve that function for the Governor. i. 0 THE CHAI RMAN : ~ I ,- Hell, we're certainly happy to have you. I can assurei "o you there will be no surprises. ,- "l' A' ',''tD L' \'Vhat I would like for us to do as a matter of course is when we discuss questions and where there seems to be a consensus and we take a vote on an issue, I would like {:I r;-; " i6 IX 7'. wo to have all 0 f those votes tentative with the propos.al to be written up and presented in writing prior to a meeting so that we will not act finally on any matters that are to) not first before you in writing before the meeting, and of course as we go along, we can retain the privilege of changing our minds until we put the final stamp on whatever is produced. Let me explain as to the next item on the morning agenda, and I'm glad to see that we're ahead of time and can go then into the afternoon agenda, if no one __ __ - --~ _.._...... ... - . . .~ .~- PAGE 56 objects, as I'm sure no one will . I understand that there i are funds available to employ staff for the Committee. It was indicated that the Chairman of the Committee, where he felt it needful and helpful, could utilize staff within their own firms, those that. were lawyers. I am. I want to be very careful in what we do, that we do it in a highl~ professional manner and that we do not create a decade of litigation over the meaning of what we've done, and this is going to take a lot of work with the staffs here !O that you've heard from related to the Capitol and also in ], my office, and also I'm not sure of what the provisions J .:. are, the extent of it. I understand that what was contemplated was some relatively modest standard per 'diem or hourly rates in limited amounts, and to the extent i 5 '0 "":' t: J C ,Z '-' that that is available and can properly be authorized, I'd like to ask the Committee's approval to utilize Hr. Wingfield and Mr. Kane, principally Mr. Kane, to assist 1; (/-' in our work. ! '/ SEN. LESTER: So moved, Hr., Chairman. MRS. WEST: Second .:: ( THE CHAIRMAU: Is there any discussion? (No response) PAGE 57 All those in favor, let it be known by saying "aye." (Ayes) Opposed? (No response) And that will begin following the close of the day. Now, I thought it would be of interest to have more than just an organization initial meeting, but while we're all ':..: together to talk through some of the questions that we might anticipate and might want to focus more fully upon at a later time, simply to get on the table for consideratifn ! at a later time matters that we will need to decide as we move towards our proposals. The fact that some questions or some matters are listed here does not indicate that any change "lith respect to them need be made in the present Constitution. They are simply some things that we listed that we thought in running through we would find questions that you would want to discuss at a later time. So we might start off with item number 11 (a) '," which "1 we've already discussed, thn degree of detail or specificitr ,.,:, in the revised Article. That has already been commented )1 upon, and there may be other thoughts that you have. Have most of ,you had the opportunity of reading through the Article VII? '-I MRS. \VEST: Yes. . ~f THE ClIAIRHAN: Well, you see what we mean. Anybody that's read through Article VII understands. Granted that we want to <1- be careful about the basic restrictions that are sort of ) the girders for Article VII. Did anyone have a serious / \} question about the desirability of limiting it or condensing it substantially? HR. BROWN: c\ ,I Mr. Chairman, I might mention somethinq with regard to those of you who have read through Article VII. If you come across a number of paragraphs that you can't make heads or tails out of, it's okay. They're not supposed to mean anything. There's an awful lot of obsolete material that was a direct result of the Reconstruction Act of :1",- ') the Civil War that's still in the Constitution and really i;, "' has no substantive present application. ;'0 if you do come across a number of provisions like that, I suppose they served a purpose at one time, but really don't any more. lCJ HRS. WEST: 20 I agree wholeheartedly. THE CHAIRMAN: And some overlapping within the Section itself, which raises ambiguities. MR. BROWN: Yes. PAGE 59 I' !I J I! THE CIIAIRHAlJ: I Now, if as we are discussing now a substantial portion! , of the details were eliminated, what would be contemplated . <+ that would be sufficient to preserve that in the general -' law rather than in the statutory law so that immediate 6 implementation would not be required? 7, MR. BROl1H: In terms of general Constitutional provisions, I think that you will find that very little would need to be It} done. The new revenue code in a number of instances (.'; Z ! 1 ~~ tracks present Constitutional authority almost verbatim, and I think you would find that most of the detail which would possibly be omitted is already in fact in the , ..~ statute law, and other matters, other task forces , ..... ,.; pursuing Constitutional revision have adopted the idea '.J of at the same time that the proposed Article is approved the General Assembly would be given a draft of proposed statutory change which would become effective only upon 19 approval of the revised Article, so that you can instantaneously have approval of the Article, the new 21 Article to the Constitution and the appropriate statutory :; changes. That has been utilized in some other states and '1 is currently being considered for use by some of the other task forces. I think the major area of problems in terms I of neeged statutory change you will find is based upon I ! ..... __ .__ .. __ _ __ -.J P1\ C;E 60 your decisions relative to local legislation. THE CHAIRMAN: But so far as general legislation, I guess I gather from what you say we have three categories; one, we would be striking material that is already in the general I' statute. MR. BRO\'JN': Yes, sir. ,,~ THE CHAI Rl4AN : Taxing provisions. Two, we would be striking materia~ i; ~ that is obsolete and not needed at all. MR. BROWN: Yes, sir. i ,j ,. THE CHAI RMAH : J"1 .... _ And then in some instances we might need legislation 16 ~ to pick up immediately what we are striking out? o z 'Ii MR. BROWN: 1.rn, Yes, sir. And as I say, I think you will find, if I 19 II there is something that I can personally encourage you 20 all to look at, is this problem of local legislation. It'~I ~' ) 'l just overwhelming in its complexity. . TIlE CHAIRMAN: That's the next question. REP. CASTLEBERRY: Mr. Chairman, I would like to ask if there are any PAGE 61 population Constitutional amendments. MR. BRO\-vN: There are in the finance Article. The only ones that I'm aware of are those which purported to amend the finance Article of the 1877 Constitution, to authorize pension systems in Atlanta and Fulton County. Those are not presently in Article VII, because another Article i relative to retirement was created in the 1945 Constitutio~ ! and because they're assumed they're really not part of that Article. There have been some amendments proposed, r j ,- .C for instance, the finance package for the City of Atlanta " and Fulton County that were defeated at the polls last year, in certain instances purported to be population amen&nents for Article VII. If there are presently any of those in there, there are very few. llost of them, what j'.l you had are local amendments that were voted on state-wide a lot of times because incidentally they would affect State revenues rather than a population act. MRS. HUNTER: .~ i,' Hr. Chairman, my long experience in the League of Women Voters and my recent association with other members ~- I'm not a member of the Legislature, but with members of ., the Legislature on the Georgia Tax Reform Commission, has neither confirmed nor denied my trust in the Legislature. Hevertheless and I appreciat~ what Harcus The average voter, when considering a Constitutional amendment, has very little information on which to decide the issue, and when there are so many restrictive clauses in the Constitution, then the amendments to the Constitutign generally are very detailed and complicated. Often the voter doesn't even know from reading the statement on the ballot which way he would vote if he understood the issues.l ;<, So I think this needs to be balanced with the fact that in the past we may not have trusted the Legislature. Nevertheless, unless the voter can find some way to be informed, it's rather futile to leave all these major decisions up to the voter. Issues that find their way f '"' to the ballot should be fairly simple rather than complex. The Legislature has the time presumably and the staff ",- to go into these things whereas the voter rarely has that opportunity. l 7 ;,~ TIlE CHAIRl-1AIJ: Well, I think it's pretty well recognized that the l ,~ I p~ople generally have lost patience with the detail that's required, not required, but the detail that is provided ;: with respect to Constitutional amendments, and they're at the point of simply refusing to participate any mor~. I>1RS. HUNTER: That's another problem. REP. CASTLEBERRY: li PAGE 63 People have tended to have more t-~us~--;n the i'l~w-=-----l I media than they do in the General Assembly. The news media can defeat any Constitutional amendment they want -I to. MRS. HUNTER: That's the other danger. THE CHAI RH1UJ : Well, we can't deal directly with that I guess in Article VII. r1R. BROWN: !j Mr. Chairman, if I could just reiterate one more time -- :. THE CHAIRlvlAH: How, Canter, do you contemplate -- we talked about the local amendments, and out there somewhere there are I' no doubt dozens, maybe a multiple of many dozens involving 16 tax, some of which have been acted on\ state-wide and some l/_ simply a local vote. We certainly 'Vlould have to have some I ,1,.' - kind of clauses to take them into account, and I think i_, it will probably be a parallel and separate study to find out first what we're dealing with and then to decide \.,rhat we're going to do about it. If \"1e've qot exemptions, I I don't know how many different counties will have I don't 1 know how many different exemptions and how that impacts upon distribution of revenues~ So it's almost a separate but parallel study that we'll have to make to qet a grasp PA(;].: 64 of the local amendments. MR. BRmm: Hr. Chairman, if I might suggest something for your consideration, as you go through thp.se local amendments, one thing -- and it's something I think you should keep in mind -- is I think you do have the authority as a task force to recommend inclusion in Article VII of a prohibition on local amendments to that Article or to the I .. ; Constitution as a whole. It'sbeen mentioned that there are only four states that do have such a creature, and so ,I far as I know, in Georgia no one has actually contested the legality of having local amendments to the Constitution. ! ..I ,. 1-'/' I " . ~. He've had local amendments upheld, but no one has ever gone to that issue directly. The second thing is, by way of example, right now there is an effort being undertaken to issue a new Code of ;" Georgia. There is a Code Revision Commission upon which some of you sit. In looking at the statutory equivalent of these local Constitutional amendments, there are 20 literally thousands upon thousands of population acts, which are exceptions to general law, that are now on the books. Those population acts go back to, as far back as 1870. At last count the Code Revision staff had found 2i some 13,000 of them. The Code Revision Commission has decided to repeal all of those population acts unless , Ii lU .J '" ;" < i', r~} ::J ;~! ) .:; iii 65 -1 the affected local government specifically requests that they be included in ,,,riting in th8 ne,,, Code of Georqia." That problem, the volume there has developed because of exactly the same thing that happened '''hen we adopted the new Constitution. they've just grandfathered these things in. I would like to suggest to you that of the 800 or so Constitutionalarnendments in Article VII, the bulk of them will either be obsolete and not desired to be maintained by the local governments affected or to be taken care of with some general authority permitting the General Assembly to accomplish it and by way of that, the possibility of some general authority to permit local homestead exemptions for municipal purposes. I think the more work your Committee can do in rel)ealing these local amendments, the better off the Stat.e of Georgia will be. That's my personal feeling. In any event, I think you could consider a mechanism by which you would repeal all of thos(~ that aren't presently desired by the present effected governments, and I would like to encourage all of you. That's a great task to undertake of value to the State, and it's legal system would be forever grateful I guess. It's almost impossible I guess to tell what the tax law is with regard to any specific local government in the State of Georgia by PAC!'; 66 I, looking at the Constitution right now. It's an areC' that desperately needs attention, and certainly you all are in the position to give it that attention. /i 'THE CHAI R14AH : Well, certainly we couldn't presume to suggest the h repeal of an amendment, a local am~ndment \vithout gett.ing in touch with the communi ~:y (m(~ gctUnq their appraisal of it I don't suppose. MR. BROWN: Jt: I certainly meant to suggest that. v <- 1j :;: REP. COLLINS: .:) o. Canter, on a population act, if somebody were to take them to court, how many of them would stand up? MR. BROWN: In terms of statute law, probably very few, if any. ~ One of the things that just as you don't want to repeal something in the Constitution that local governments are finding necessary, a lot of these local governments have I CJ , no idea whatsoever that they're under a Constitutional .2() amendment from 1878. Even in terms of the statutes in 'I doing the revenue code, there were some 178 population acts affecting Lord knows 500 and some odd different local governments in Georgia, most of whom didn't even know they were affected. We only kept 21 of those acts in the revenue code. All the rest were repealed, and I think you PAGE 67 would have a similar finding in terms of these local amendments, that most of the local governments have no . idea that they are subject to them anyway, and if they did find it out, would be grateful for anything you could ) do to help them out. () TIlE CIlAI RHAH : II .., Well, in those instances, with respect to the code, did you communicate with each effected community? C) HR. BROWN: :\1 Yes, sir. The Code Revision Commission has adopted CO 1: It to- substantially the same approach that Representative " Hatcher's Subcommittee did in drafting the revenue code. It contacted each member of the General Assembly I /~ ",'," concerning those provisions affecting his or her district. -1 j' ~ THE CHAIRMAH: c ::; i 6 '~l All right. ;' ,~' MR 'OJ; BRO\iN: 'In addition to directly contacting state-wide organizations representing local government officials, ,iJ ' and particularly in the larger counties and cities, i )' directly with the city or county administration. You find I 1 the bulk of them are in a relatively few jurisdictions. But kind of a cornphrensive approach, trying to get everybody involved that is affected, and I think you'll find that you'll have a great deal of cooperation from PACE: 68 local governments and the members of the General Assembly. The case of the revenue code certainly seemed to indicate that. J. THE CHAIRMAN: " Hell, I think we \vill have to set up a format for 6 operations in this area, and I think we'll have a little 7 time to do that while we're waiting on Cynthia to assemble ,'1, the material we'll be working with. q MR. HILL: 10 Hr. Chairman, this technique may be something the , 'Z Committee would want to consider at some point along the Co c.'. -.' way, but that would be to continue those local amendments c that you felt should be continued, but continue them as 14 ,_ ,~,., , 1\" 7. shall be the primary obligation of the State of Georgia, " the expense of which shall be provided for by taxation, and if that ever describes what an adequate education is and provided at a State level, and 50 p,:,;rccn 1 ..; was all he could use for his enrichment programs on ad valorem tax, I think you would tax revision. I think that would be the answer to the question we've been studying .:3 ,: REP. CASTLEBERRY: .., Uobody has got enough information to interpret what " adequate is though, have they? , ___ J: PAU~ 74 , REP. COLLINS: No. We've got to see if we can find out what adequat~ is. 1 MR. NASH: We know what funding is. It's hard to get a hold of. " ! MR. STRICKLN1D: ;1 1 Mr. Chairman, I think along what Canter was talking 8 about, I think we're going to have to look to Alabama to '} see the dilemma and chaos that you get into when you're 1(\ talking about the specific monies, funding specific J. i! services and that type thing. '.' ., I.' '" ;.,1 Canter, have you kept up with the situation in Alabama and their Constitutional revision? I know they've! got a state of complete chaos over there. o ,. !-1R. BRmm: ;':H l .. ; .'J 7. 1_ '" . l .~ the State going to education -- and rightly so I might add ~- we need to address that issue, because to complicate the matter even more, people are looking at where their tax dollars go, and so many property owners now do not have children in public schools. So the attitude toward financing adequately an educational program for children is not going to be ~ith property taxes. So having sources i'1 I of revenue available on a' more direct participation 10 !i appears to be part of the answer, but it's very complex. THE CHAIRMAH: You're right. Yes, sir. 'HR. NASIII 2,'+ i This also reaches on further back. It's causing a lot of revaluations of property in the State just in order PAGE 77 to raise revenue, and in many cases, going above, by factoring and all it's going above hundred percent value on a lot of property, and this is certainly causing an 4 inequity among property owners within a county, not betwee~ counties but within a county, and the reason for it is in order to raise taxes, you've just got to keep on raising the valuation above fair market value on property. This is part of the cause of it. MR. BROWN: '- 10 Mr. Chairman, you may want to note that this is one lz'J 1; ~ ~y. o of those areas that, as you mentioned earlier, is going to require coordination between more than one task force, beoause educational finance is in Article VIII rather than in Article VII. , ;) t:,THE CHAIRMAlI: J,:) Article VII. That Committee is on the same time schedule we are, is it not? !8 liMR. BROWN: J9 Yes, sir. I believe so. THE CHAIRMAN: 21 So we will have time to coordinate, and I will talk with the Chairman before our next meeting~ to see if in our efforts we can maybe coordinate it and see what direction they may be going in. MR. tULLIAHSON: :i i~ Hr. Chairman? , THE CHAIRMAN: Yes, sir? i+ MR. WILLIAHSON: : I think that i t do~s need to be ~entioned that a grea~ I deal of IGOney that goes into education is appropriated by the General Assembly, and the General Assembly in the State: of Georgia collects very little property tax. 110st of what l) we're appropriating for education is coming from the IU personal income tax and the sales tax, which I wouldn't 1- want the impression to be that all public education is funded out of property tax. I think it is generally true on the local level, but in terms of overall education ,-+ dollars, that money also comes from the sales tax and the ,I. income tax and the other taxes the State collects 3.OJ JI) REP. COLLINS: z" ,'" 1'1 a<:1:: To break it down into percentages, the State is paying about 50 percent of the cost, the local governments jtl are paying about 40, and the federal government is paying 20 about 10. Those are just rough percentages, but your local governments from property tax are paying in excess of $600 million on the cost of education, and it's all coming from property tax. There's no doubt to it, one hundred percent. THE CHAIRMAN: PAGE 79 \1'ell, I think it would be useful to have that distribution available. We'll pick that up and get it to you and coordinate with the other Committee to see what -I direction it is contemplated. MR. NASH: Mr. Chairman, in figuring, in getting that informatio~, I 7 I I'd suggest they check on the county taxes the percent of ad valorem taxes that is actually used for education ') IIiI as compared to other funding from property taxes. I :- think you'll find that some 60 or 70 percent or soon the ", , r average is spent for schools. <>, ,~ ~~t:: ,.~ THE CHAIRMAN: Well, I don't want us to get over to fully into another Article, but I do think these two are pretty j 5 ,~ '.:'$ lL III '\_1 ;.. :;, closely related, and certainly this is a matter of serious concern over the State. ~le mentioned the inequality of I: ~: assessments within a particular county. That's bad enough ! \" t" but then as between the counties, I guess that matter is wholly beyond our scope of Article VII, but does not that produce a lot of inequality so far as the sharing of the total load of the State of Georgia? As you say, some may be assessed at more than fair market value, which is a surprise. Property is going up so fast I didn't know anybody was assessed above fair market value, but some are much higher than others. I know t.hat. PAGE 80 MR. NASH: It's gone below the speculative market. THE CHAIRMAN: Well, let's move on, if there are no further comments on that general subject. I think we had scheduled a break at this point for lunch. So unless the Committee has -- I think we would not want to stay through all the rest. If we had just a few more to go, I'd say let's go on and then adjourn, but I think if it meets with the wishes 10 of the Committee, perhaps we'd better br~ak for lunch and ,.'), 11 then come back and finish these up early this afternoon. COLLINS: Nhat time are we coming back? ::; THE CHAlffiWJ: ,)0 1I' Z '" ,, -, t I.Y- r;' , I) He'll reconvene at 1:30. (Hhereupon, the matter \V'as adjourned for lunch.) -000- 19 I, 'i 20 ")"t " PAGE 81 AFTERNOON S E S S ION (1:30 p.m.) THE Cm\IRMAU: \~cll, we've suffered a slight attrition here during ,- the luncheon hour, but maybe it will fill up, and perhaps some had to go. Before we move on, let me check a couple of matters. First, if anyone has COMe in since the roll was called this morning at the opening, would you indicate this so that we can be sure that we have everyone present? (No response) Now, as to a meeting in December which we discussed esrlier this morning, I believe it was indicated that the Tax Refonn Commission will be reporting on the 7th of December, and that staff would be quite well occupied at or about that time. Consequently I would suggest the 13th of December, if that were not conflicting there with any occasion that would keep away any substantial number. If not, let's make it at 10:00 o'clock Thursday morning the 10th of December. IS HR. HASSEY: The 13th? THE CHAIRHAU: The 13th. 10:00 o'clock the morning of Thursday, December 13th, and subject to confirming this date insofar as the availability of the room. MR. HILL: PAl;}. 82 We'll take care of that. THE CHAIRHAN: All right. So far as you know, it would be available? MR. HILL: As far as I know. I'll check on it. If not, I'll let you knOttl what other room we would have. r1RS. HUNTER: Do you anticipate an all day meeting? rj 'TIlE CHAIRMAll: Let us advise you on that. I thinJ: i-:: d<~pul(1: . ('L what we have before us. I suppose it would suit everyone's convenience better to get it within two or three hours in the morning, and we will do that. 14 ,~ Senator, we were just looking at 10:00 m., Thursday, j') '~J \.J Co': December the 13th as the date for the next meeting. \6 ,~" SEN. LESTER: z,. All right. Is that the second Tuesday? : r; MRS. HUNTER: No. The second Thursday. SEN. LESTER: " Oh, Thursday. You said Thursday? THE CHAIRHAN: Yes, sir. We are proposing to set 10:00 a.m. Thursday morning, December the 13th for the next meeting. Is that clear so far? PAGE 83 SEN. LESTER: The only problem we've got, Hr. Chairman, with that Jack? Jack Horton? Has he come in here? He will meet, the Tax Reform Commission will probably meet on that 5 Wednesday and Thursday, the 12th and 13th. How about the 11th? THE CHAIRMAN: The 11th would be fine with me. I understood that the Commission reports would be in on the 7th. MR. HILL: I) t J,' ,- That's the Select Committee, the Select Committee ,, i i. on Constitutional Revision and the other Article .;. . ~ ... " .~u JJ.j ,1 Conunittees ! J : THE CHAI R11AN :, All right. The 11th. Where do we come down now? ,,' SEN. LESTER: George Hilliamson just mentioned that the Legislative Conference ends on Tuesday, on the 11th. I thought it was the week before that, George. MR. WILLIAMSON: I think it's the 9th. VOICE: It is the 9th, Senator. 2.+ ,SEn. LESTER: And you said you were trying to get it in before some PAGE 84 report? THE CHAIRMAN: I've got the report of the Select Committee and the other Constitutional Comrnittees that are winding up. I've got the wrong report, but that's due, those are due on the 7th. So I was keeping that earlier week because some of the staff I'm sure -- " SEN. LESTER: We'll meet after that. Jack Horton. 10 l1R. ~IORTON: Yes, sir? , -,'; SEN. LESTER: (~i,3c),v'-'L--'!~'U-" ': R~form Look at a calendar. The Tax Commission, \ "\,--':::>/ -/./ J -+ Commission will meet on the 12th and 13th? i) <) MR. HORTON: Of November? j' SEN. LESTER: December. 20 Of December. That's our regular meeting day, yes. =: 1 THE CHAIRHAN: Now, what did we find on the 11th? Is there a conflict there? )4 !i MR. lHLLIAUSON: That's the concluding day of the Legislative Conferenc~. _____.-J PAGE 85 : MR. MASSEY: Ii Will Friday work, Mr. Chairman? THECHAIRHAU: l It would with me if others could tolerate it. MRS. \'lEST: It's better for me. I could not be here that Thursday. TIlE CHAIRMAN: (1 Friday is better? Well then, if there are no conflicts and no problems ''lith Friday, the 14th at 10:00 a.m., we'll move to that. Is that all right? Good. I want to be fully democratic in this Committee. f: MRS. vlEST: :1 Good. THE CHAIRHAN: " ,) At least in its early stages. And I asked earlier if anyone had come in after the roll was called this J;. morning. I wanted to be sure that we got the names. I think we tried to pick them up as they came in. We may not have gotten everyone. Now, the listing of items beginning at the bottom of page 2 of the agenda with exemptions or with intangibles doesn't mean everyone of them needs to be discussed, but we do want to review those have related to them problems that we want to have in mind that we have noted or that PAGE 86 may occur to some of you. Do we have anything on taxation of intangibles? Does anyone have an eS,timate of the extent of compliance or non-compliance, as the case may be? REP. CASTLEBERRY: I., Don't ask the Commissioner over there. HR. STRICKLAND: v1ell, the rates are so low that we don't get much revenue. The rates are very low. I'm not sure what we J ,.... , ') have on compliance, but you're talking about a very, very low rate. Hhat does it produce, Jack? About six, seven million for county and local governments? J + 'MR. HORTON: "y I: t.', Annual returns are about seven and a half million now. MR. STRICKLAND: Well, the State gets a quarter of a mil, which is i'l about $30,000 or something like that. It probably cost ,), us about 300 to administer it. THE CHAIRNAN: I was going to ask you if you have a estimate of your costs of doing it. REP. CASTLEBERRY: We just passed a law last year for $5 and under, no return. HR. STRICKLAND: Three. It didn't get out. He put it in, but it didn't get out. HR. HORTON: It died in conferEnce. REP. CASTLEBERRY: Between the two houses. t.: HR. STRICKLAND: ;0 ~,- We did, Mr. Chairman, take some national data some '-"i.. 11 1-. ~, Q, time, and I don't know how accurate that is. We're u'" talking about national histories about profiles of income securities and that type thing, and trying to correlate ,. a percentage for Georgia, based on a multiple of factors, '" 1: population, personal income and things like that, which :t:- >: indicated that a fairly good percentage of the people ( were complying, if the national data is correct. There's a lot of ifs involved in that, but at least it didn't look too bad at that time. 1, I would say that compliance on that would probably be equal to some of the others. REP. CASTLEBERRY: It's still a source of local revenue that in my ,- t personal opinion we don't need to do away with. It's a source of ,local revenue that needs to be updated possibly and try to enforce it more. '! MR. NASH: There's two million people that's just not filing on it MR. STRICKLi\ND: Well, you're talking about a dOllar a thousand on stocks and ten cents a thousand on cash. Now, Jack Horton knows better than I what sort of enforcement possibilities that we have on stocks. '0 MR .MORTON: Vi i1 \..i '" i'~ (X_ ;) There's a fairly good enforcement on stocks and bonds that carries ,a dollar rate, but you have no enforcement on the ten cents a thousand on cash and so forth. 15 .~ MR. STRICKLAND: ",,t" But ten cents a thousand, how nuch revenue are we 'talking about? HR. HORTON: On those items, not much. 20 MR. STRICKLAIW: That's my point. Those rates are so low, particularly on cash, that there couldn't be too much revenue. MR. NASH: That's where a lot of your inequity is. A lot of people can have stocks and bonds at a low rate rather than PAGE 89 having property and property at a high rate. So why would i they want to own property in the first place? MR. STRICKlJ\UD: I was not going to discuss the equities or inequities i of it. MR. NASH: I'm just saying it needs to be addressed. REP. CASTLEBERRY: I think you've got to if he is going to discuss it. 1() MR. ST RICKLAHD: All we do is collect it. ) :~ REP. CASTLEBERRY: That's a matter of opinion. .lt,~ MR. STRICI1R. BRovlN: As you knmJ, by and large the exemptions that are PACE 98 authorized in the Constitution are permissive. Host of them come from that one long paragraph in terms of a numbel:1 of individual exemptions, and that's really a hold-over from the Constitution of 1877 or '78, whatever it was. Most of the rest, half of them that mandate I suspect were hI done that way just because whoever wrote it just ,-,Yrote "shall" instead of "may." It's'surprising. I'm not saying that all of them are that way. There are some that clearly the intent I think of the authors was that it be granted right then forever. I'm just suggesting to you that may not always been good public policy, but I don't think you i) should necessarily assume that all of them -- or that it was clear cut policy that they were to be permitted. It's j :~ just a lot of times you'll find people ~sing "shall" and v " ,' " using "may" interchangeably when in fact in the Constitutiqn " ~, they're not that at all. Host of them arG permissive, ~.) and as I say, I certainly encourage you all to look towards' the idea of making them all permissive, if you feel that's a responsible position, so that you do give the General 20 Assembly the flexibility to adapt to change in circumstanc~s )! rather than mandating them permanently. THE CHAIRMAN: \vhat about -- do you have any comment on the provisions to making exemptions available to the local taxing authority? .._.~ PAGE 99 BROHN: Hell really -- let's see. lve 'va got -- there's the freeport and solar. I'm not sure. I think Senator Lester 4 is the author of the freeport anendment, and I'm sure he could convey what his intent was at the tir.1e. Solar I think probably had much more of a political consideration there, and not everybody wanted to have those exemptions s' granted, but they did feel like an area ought to have that 'J flexibility, but I'd certainly defer to Senator Lester. jf) SEN. LESTER: Thank you, Canter. You're a great fellow. Well, of course the freeport exemption was to encourage industry to come in, particularly industries that had large ;1 inventories and your storage type industries, to come in I) '" and settle in a particular county. That was the sole \.:' !~ :;;) ; /) ~ purpose for it, and we thought that the lost revenue was '" more than made up by increased jobs and more homes, more money being spent for groceries and so forth and so on. i9 That was the sole purpose behind it. 20 MR. 13 ROHN : .'1 Here there considerations about the difference between just mandating it state~wide and having it on a local option basis? '.t ! SEI-J. LESTER: l'Jell, we felt of course you're talking about county revenue, and it should bf' left up to the voters in the 2 county to decide whether they wanted to defer that revenue or not rather than on a state-wide basis. 4 BROHN: I think you will find most of the exemptions that have been granted in the last 30 or 40 or 50 years, although they involve large amounts of money, really are not substantial percentage-wise in terms of cuttinq local , revenues with the possible exceptions of some homestead II I'.! exemptions. The freeport amendment is a substantial change in many areas, a tremendous change, and has the eff"c" "0 ,sId fting onto the homeowners and small businesses a good part of local revenue, and that may have been a particular 1; \ '-~ >- t.; < T. 11 .", .:..> ii' I ('Z ::,L~: circumstance there that the change could be so large in given areas that it ought to be treated separately on a local option basis. 17 ~ THE'CHAIRMAH: What was the date of that? 1') r-lR. BROWN: 20 , 7.4 '76: '.i. '1 LESTER: canter, a lot of water has gone over the dam. , 76 I believe. I think it was '76. REP. CASTLEBERRY: \le started in '74. i _J PAGE 101 SEN. LESTER: Yeah. That's right. It took us a couple of years to resolve it ..l THE CHAIRMAN: ~ We've got exemptions from intangibles. I: h loiRe BROl~l: Again, you have intangible exemptions in the \. Constitution because it is an ad valorem tax, and we do prohibit those exemptions unless they are specifically tU authorized in the Constitution, and intangibles because C) ] i,;: you can classify property with different rates. You can o make the rates so low on a given class of intangibles that in fact you do grant exemptions . I ~ HR. STRICKLAUD: Iv, <: :t: We just got through saying that. ;) :~ MR. BROWN: o L c i And again most exemptions for intangibles are ! ;.: permissive. You've got to look for them there in the middle of that big paragraph there. One thing Representative Collins mentioned this morning, let me -- the Tax Reform Commission has done some work in this area as has the Revenue Department, and that is the general shift in the forms of wealth which are possessed within the State. If I'M being redundant, pleas~ stop me. A hundred years ago when we set out Constitutional PAGE 102 tax policy, land was far and away the number one form of wealth in the State of Georgia. There was very little income beinq made and what stocks and bonds there were 4 really had been a fairly recent innovation in terms of , any magnitude, the railroad bonds I guess being the earliest and biggest in Georgia. That's not the case now. I think i the Tax Refonn Commission studies will bear out that if no-tl now, in the very near future both income and intangible 9 wealth will exceed the value of real wealth or wealth in 10 real property in Georgia, even though our whole zI:) :, Constitutional framework is still geared to property, c' real property. I know Mr. Collins and Senator Lester have been ! -,~ particularly sensitive to that in the last couple of years in .trying to evalute the tax structure in light of I:J ;r ." I t~ I. ... ; that change, but it is a change. Income and stocks and W bonds and cash are where the money is in the economy right now, but our Constitution is still geared to a system of value that is a hundred years old. =~~ ; [I THE CHAIRMAN: 2! All right. Any further comments along that line? (No response) Go to specifics. Homesteads. We talked about this ,I to some extent already. Canter, do you have anything with respect to that that hasn't been discussed earlier? PAGE 103 MR. BRO\'lN: In terms of any substantive impact, of course in the Constitution any time you usc a dollar amount in a Constitution, inflation just totally changes the character s of what you're doing ina very short amount of time, by setting dollar limits in all the homestead exemption provisions except for the schools. What your granting to homesteaders is far less now than what was ever contemplated when those things were originally passed. ! I think the first $2,000 was in 1937, and as I recall the 2. i, I figures, that took about 40 percent of the assessed value off the digests at the time. Of course $2,000 is absolutely nothing now. So you may want to consider not only the dollar amounts of the homestead exemption in the Constitution, but whether there shoUld be a dollar amount '. .1 1 1) Z "Z As I say, in the school exemptions there is no amount. [I Of, By statute it's been set up to $10,000, but inflation just takes a terrible toll any time you put dollars in the Constitution. The. other thing is, as we mentioned earlier, there ,I is no authority in the Constitution in a general sense for municipal homestead exemptions, and you could take a "~ big chunk of the local amendments out of the Constitution simply by providing general authority to the General Assembly to grant municipal homestead exemptions. ClIAlIU1AU: Subject to -- HR. BROWN: You could conceivably subject to a referendum if you prefer and want to have that same security that's there now. The same thing could be applied to homestead 7 exemptions in excess of a dollar amount stated in the Constitution for county purposes. We do have a goodly '_.) I number of those. Again, there is no reason why, if you 1'.1 are going to put a dollar figure in the Constitution, you couldn't authorize that to be increased subject to a local referendum or just increased, period. THE CIIAIRMAU: Or if we felt it advisable to put in a dollar i 5 ,~ '":;f. figure, would it be reasonable to provide at least that -J 1(- ~ ~ that could be adjusted by the Legislature to reflect CJ 7 " inflation, in fact inflation or deflation? J "(, r-1R. BROWN: 1\; There is, as many of you know, nationwide sort of 20 beginning -- I'm not sure it's a trend, but something II 21 ' called tax indexing, which is when you take your basic exemptions or standards deductions, things like that, you index them for inflation. There nre a goodly number '. ~ of states and other local taxing jurisdictions that do that already, and it's certainly something that's been PAGE 105 talked about a lot, and this is an example of that. THE CHAIRMl\H: Yes, sir. MR. DAVIS: Canter, I wonder in these places where this indexing has been studied, how do they account for the difference 7 between one place that has revalued and one that hasn't? :~ Are you talking about a generalized increase in exemptions between different counties where one would and one wouldn't and you would have a tremendous difference? i J ~; 14R. BI~OmJ: :) '1~ Usually when it's been applied, it's been applied to income taxes, to the basic deductions arid exemptions of jJ ~ income taxes. Bear in mind that most states don't have r" these dollar limits in their Constitutions, so they don't ' fT.' .:\ ?; have to worry about that. To do anything, you'll kind of ;: 1. z.:: have to buck the historical trend in Georgia. So I'm sure i ! many of you feel like the presumption is you have to have some sort of dollar amount in there, and the.re \'lou1d be some problems in applying the indexing idea to that, but I think it's something you all could work out. ), MR. DAVIS: Have you seen any other State that had a percentage figure of value of a homestead as opposed to a 2,OOO? That in itself would almost take into' account inflation if :'ACLG 106 everybody was keeping up with values. If it was a percentage of value and the value went up, the exemption goes up. Is that currently being done in any state that 4 you know of? ) HR. BROvlN: t, I don't knmv of any. Jack Horton? Hhere did Jack go? " HR. HORTON: I don't know of any. jn MR. BROHN: I: Right off the bat I don't know of any tax reason why r) you couldn't do that. There might be some other considerations .14 ,. MR. DAVIS: .~"~ One other question. If there \'1as such a thing as ;~ ,....: :1 i;l. If' an increase in exemptions based on a dollar figure, does ('1 I" ~;; the State or the General Assembly have the authority to IS mandate that the millage rate cannot simply be raised one I') to one to keep up with that? 20 HR. BROUN: 2f Clearly in the constitution you can mandate whatever you want on local governments. I think you will find that the trend in the General Assembly -- and certainly again I'm going to defer to all the Legislators in the room has been away from trying to mandate limitations o~ I .._--~_. __._! PAGE 107 local government. I think 'there's been a feeling that lot of these local governments are having to struggle to be able to adapt to changing economi,c circumstances, particularly in urban areas that are declining and" suburban areas that. are climbing so fast. In order to mee~ I tho growth or to meet the prOblems inherent in not growing has caused tremendous problems locally, and I think the trend has been not to impose arbitrarj limitations on local goverment, but to let the electoral process provide that break. 1! i ~ THE CHl\IRHAl1: o u. All right. Anything else on homesteads? ('~':' , _ ~ [) '..>.I '.oJ (No response) Inventory goods. Do we have any special problems? Hell, \ie have discussed this. All right. Hith respect to the freeport bill and with respect to certain t ' co agricultural products, anything else that we need on that? REP. COLLINS: Ue had the Revenue Department get us some figures up here once last year or the year before on the personal property that's on the books and perc~ntage of what \vas being turned in, and at that time, it was closer than anything else being turned in. In fact a few businesses in most instancE;s was really getting a free ride on their rr------~- inventory. l'f\GE 108 -----1, It seemed like to me it was 20 or 30 pE,rccnt ,) of a hundred percent value was all that it \V'aS being turne4 in for, and it seems if our people back in the county i didn't have the staff and \',asn' t trainEd to get into personal property other than the things that the Hevenue Department sends down to then such as autor10biles and tracl:.ors that the farmers have -- they're the two big items that we're on 1rlln r1}'f',1 percent valuation. The rest 'I I of the inventories was only on a small perc~nt of hundred 10 percent valuation. :! '-: MR. BROl'1N: One of the task forces of the Tax Reform Commission, Representative Burress' subcommittee, has been looking 14 , generally into the question of personal property assessment procedures, specifically on inventory, but on all personal property. I think that they don't feel it's necessarily a problem right now with the Constitutional framm-lork on personal property assessnent \vith the possible exception of being able to move to an annualized 20 average type assessment on inventories. The Constitution now I think would probably require that it ought. to be ,; valued at a certain date, January 1st. If you wanted to permit the State to have sort of an average, perhaps a quarterly or even a monthly average of inventory, and tax i , on the basis of that, that \vould require some Constitutionch !'AGE 109 _- _. ---_.,,--.. ----, '- change I think, and it's something you may want to I I consider, whether you want to nandate I'm not sure, but yo~ I may find that it would be good to give the General Assembly the flexibility to move to that if they felt they needed to. One of the areas, just generally on this homestead exemption, but it applies to exemptions generally is I'd really like to caution you all about writing the tax law in the Constitution as opposed to providing theflexibilit~ to let it be done by law, for instance. If you mandate a greatly increase homestead exenption, the ef'fect on the local revenues are going to be tremendous, particularly where the schools are effected. Many of the urban \ districts with their homestead exemptions are already feeling this, but you kind of, when you do things like that, you have to have a package, and really the only place you've got the flexibility to do that is in the law rather than in the Constitution where you have all these different Articles you're looking at, and you need the coordination. , REP. COLLINS: Of course you've got one other thing with your homestead exemptions. I think if we ever get to the end of this thing and do what's right, we've got to decide what ad valor~~ taxes should pay for. \~e've got to decide ------,--"._--_ ..._- I ~ PAt~E 110 if the schools is its responsibility, the fire department is its responsibility. lie need to think what is the responsibility of ad valorem taxes, and you know, my house is what demands all, the services. I have to have the schools built, you have to have the hospitals built, you have to have1 the health department, you have to have the sheriff's' office, you have to have fire protection and everything for my house, but you only give me $2,000 off on that, but I've got a tractor out there or an old cow 11 [0 out there and you're going to tax her and on her I get I:' 7. 1] nothing off. You're going to make her educat~on those people's children, make her pay for the fire protection anq all, and I think somewhere dmm the line we' va got to decide what ad valorem taxes are supposed to pay. ,; .;, THE CHAIIDW1: '.:l u: :> 16 ~ Do you feel that this Committee needs to address that I:..~ ;: 1: You could have a'$lO,OOO diamond ring and be exempt. If you've got it in real property, it would be a 40 percent valuation, and if the State average 30 mils, you would be paying $120 a year, and on the diamond it's 1') free. The diamond is making more money, going up for .'i1 I I' you than the real property is . lmS. HUNTER: of course the intent of exempting that kind of property is the difficulty of a&ainistration and assuring equity. It's extremely difficult putting value on people's personal things. COLLINS: It wouldn't be hard putting it on mine because I .., haven't got none fiRS. HUNTER: I can hardly see my diamond ring. HR. BRmm: You find a lot of feeling in the General Assembly at times that exemption for personal property in fairly recent. Hhat was it? ,-'l .7 1j, :REP. COLLINS: '72? '74? Somewhere. i HR. HORTON: '71 I think. 1:"\0 MR. BRO\VN: C !\ 1-- A lot of people didn't think they \'lCrC exempting jewelry out on West Paces Ferry when thoy voted for that. A lot of feeling for the language there was that it was more broadly written than it was explained, and by no means are you necessarily limited to that exemptior as it .l."j' was granted. You will find states that, you know, in trying to get at this same problem do exempt personal clothing and furniture, but they don't exempt jewelry simply because it is something that you can put a fairly easily assessed value on, if you can find it, and it does represent a great form of wealth, a tr~n6ndous loophole i in the property tax law, but there \-laS a tremendous probleml i on the assessnent of personal property. THE CHAIRHAlJ: Fortunately He' re not that familiar with the ext,ent to which -- it is considered to be a great loophole. PROF. BLOUNT: Can we have a definition of loophole? You know I (, play "vi th that a lot. One man's loophole is another man's somethi~g else, right? u ~. HR. DROHN: r..:: .'J :: t ~~ c.: :~,; IIr. Collins \ViII tell you that the poor farmer dmm in Hh.:.chell County who is livin9 in a $20,000 house with .J a poor piece of land is paying school taxes and county taxes and city taxes and special district tax, that that nan is not receiving the sarae loophole as somebody that has a $20,000 diaI<10nd ring is receiving. PROF. BLOLUT: You nean bearing a fair share of thE. burden? MR. BRmm: Hell, they both represent wealth. They're fOrr:LS of wealth. rrhere is some question as to y{hather you should .;!. tax it and assess it the same as the other forms. It certainly is something you want to address one \'lay or the other, but as llrs. Hunter pointed out, there \-TaS a FAt j, 116 tremendous probleD, as Jack \vill tell ~/ou. Hs headed the Property Tax Division for ciqht years. Pnople have threatened to shoot assessors \/hen they COP.l. out to look ,1 1 at their house and see how Duch t.heir furniture is Harth. A tremendous problem is there. , HEP. COLLINS: Canter, they could catch them sort of. He're running rabi ts now, but it's sort of like it \vas when they comE (; out ,i.\l cmr /.'( '1m,::y and \>lere going to check everybody that I!; had a boat. So they put me down one., and I run up there 1i to see the nan, tell him I didn't have a boat, and he c. L' said, "Hell, ,-/e'll mark it off." I said, "Well, you kneVl I didn't have one." And he said, "Hell, we put everybody jej ,. down because \vs knew all of you who didn't have one \>7ould 1; .,') .come tell us." And if you're going to snt them all down on $20,000 for jewelry, they're going to tell you if th~y haven't got any. !8 :I REP. CASTLEBERRY: The, farmers left all their machines up there on the 20 day they cane looking; for t.hem, and they put all the implements down in my name. TIlE Clli\IHNAlJ: Hell, that gets us to the next item, implm'lents of trade of manual laborers. BROWN: PAGE 117 Her~ again you've got one of those dollar limitations of $300. HhfJn they granted it, $300 ''las ''lorth an awful' lot more than it is today, although it's important to me. 4 THE CHAIffi1AH: All right. Domestic animals. You mentioned the poor (1 old farmer and his cow being taxed. 7 REP. COLLIm;: She's two years old, she's taxed. HR. NASH: .- If she's 20 years old, she's taxed '.'J I] S MR. BROWN: .',:..:. ,~ 12 :: There's an amendment on the ballot this last November to exempt -- I think it said bovines and equines ...;I 1., cattle and horses from property tax, and it ,.,as overwhelmingly <' r defeated. '.c' :....:' :"1 iI, ,~"; H.R. NASH: Well, wouldn't you expect it to be? MR. BROHN: Mr. Collins is here. I can't tell you which way I voted onOit. HR. NASH: IF, Less than four percent of the people out there own them and 96 percent of the people out the,re don't mom any .',j of them. How would you expect the:,m to vote? It, was a waste of paper and time to put that kind of amendment on tax to a vote. rm. STRICKLAUD: The question is are they paying now. MR. NASH: Are th6y paying now? HR. STRICKLhlm: PAC1: 118 HR. NASH: I can assure you ours are. j q REP. COLLI!'1S: I) tJ SOQe of them are. HR. NASH: A few counties might be letting them by, but I can 11 assure you they're checking them mighty close right nmtl. In fact, some of them today, a year ago was worth $150 and they had them on tax as more than that, and today the same animal might be worth $500 and next year might be back to $150 again. ] ,~-;. THE CHAIRHAN: Well, what is the extent of the present exemption for domestic animals? \ ' MR. HILL: ...._,, $300. THE CHAIRMAN: 25 It's just up to $300? MR. NASH: PA(;Ic; 119 --, ------_. - ! It's up to the county. Each county sets their own. THE CHAIRHAN: Okay. UR. NASH: Isn't it, Marcus? I REP. COLLINS: (nods affirmatively) I REP. CASTLEBERRY: 1" \) A $2,000 dog isn't exempt. 'D ] I 2: MR. NASH: But they're not included ."""'.' REP. CASTLEBERRY: I) It's domestic. ~ "t' ~, MR BRmm: .:J .1 () ~ '~ c~ l ,. to having it go through the process to repeal it. It's much more difficult to repeal a tax exemption than to have to re-enact the same amendment. It really kind of switches th~ weight, of the problem. l'AG1<: 126 PROF. BLOUNT: Mr. Chairman, that utilization of the sunset provision ,"ould seen to me something in tho purview of the General Assembly than a Constitutional provision. I think you get yourself back into the business that you're hI trying to get out of when you start littering up the Constitution with a lot of the sunset laws. I think to 8 the extent that it's desirable, the General Assembly '} already has the authority to do that. HR. BROHN: II The problem of doing it by statute is that as soon as you pass a statute requiring a sunset, you can pass another statute exempting from it. As you gentlemen know, the latest expression of the legislative intent governs. So you just start exempting yourself from it, and I think as a practical matter if you attempted statutorily to sunset tax exemptions on a broad basis that that's what would happen. PROF. BLOUNT: Well, don't you think that even if that occurs, you've got the collective wisdom of those persons that ,occupy those seats in the General Assembly and that's exactly where those decisions should be made, good, bad or indifferent? I don't knmv how we could anticipate the future with such exactitll(}e that ''Ie could v_rite in '- PACE 127 relatively speaking and submit we're going to put something I i to rest unless somebody res:urrects it. I think it's 'good. I know on the federal level Congress does it all '1 the time with laws that impact income tax liability, but it's special purpose limited duration legislation. I Ii think it's something \Ie should do more of in the. General Assf'..mbly and stay totally away from as we ,.,ork on the ;, Constitution. q MR. BROvm: Ii One other thing. You don't necessarily -- now, if !: you think in terms of the sunset provision, that ! >.> provision doesn't necessarily have to set a number 0 f yearJ for all exemptions. It could mandate that each act creating an exemption specify the duration of it., so that you could tailor it to the individual needs, but ,z as you know, particularly those that have served in the -~ General Asse~bly or those who do now, every year you can get about eight to ten tax bills on the calendar in Doth ! ,. houses of the General Assembly as a practical matter. The calendars are so crowded you cannot as a practical matter go through and periodically review these tax exemptions, because even if it were agreed that it were proper to repeal them, as a practical matter you can't get them up for a vote, because there are so many of them. We're not talking about property tax. I'm talking about sales PAC;!': 128 tax. I'B sure there's a good 40 exemptions from sales tax. MR. STRICKLAND: Or more. " HR. BROHH: (, ! Or more. Maybe 50. H:'ve got numerous exemptions from motor fuel taxes, from cigarette taxes, from Every tax you could conceive of, and when you think of a responsible program of periodic review of all tax exemptions, you're talking about a minimum review of ]J ' maybe 30 to 50 exemptions per year, and to say that you can responsibly look forward to getting that many bills on the calendar in the House and Senate, even after a careful mandated review, it just doesn't happen. js ,~ o PROF. ,BLOUNT: ',":t 1(, i~' I'd rather have them on the General Assembly ]7 ~ calendars than on the bal'lot as a Constitutional amendment. !8 MR. BRmm: l(J In saying about sunsetting, I was really trying to stress that if you desire to take the exemption process .. j , out of the Constitution, that that type of provision dOBS provide you an additional check and balance against the unbridled authority of the Goneral Assembly to grant 24 ! exemptions. I was looking more at it as a protection for people rather than as a grant of any sort of power. HRS. lImITER: PAGE 129 -------.-.- "1 Would it be, for instance, possible to say take ail I the prohibitions against eXJl\ptions out 0 f the Constitutiorl, i 4 but require, say, an extraordinary vote to pass one in the Legislature and require that there be a sunset provision, not to specify what it may be, MR. BROm~: :< Yes, ma'am. I think it might go a long way to (' provide the check and balances. I sure do. MR. HARTIN: j] r" c. Hr. Chairman, I think there VlaS another reason for this particular sunset date, and that was that solar energy until just recently \V'as a very, \ve11, was an ! S '} ;). '::J l:' ""(' unheard of type adventure, and the thought I believe at the time this was enacted was that since there were no solar energy type heating facilities_ in existence, that there would be no revenue lost, that this would be an exemption during that time when solar energy \"as coming on line as a source of energy. So I think that was an additional considerat.ion when this particular sunset law was added to the Constitution. PROF. BLOUNT: Hhereas the ohe for cotton and tobacco, which we know will always be with us, is something you cou1d:write with a little more permanence about. !'..\(,E 130 REP. CASTLEBERRY: Some of them didn't want to exempt it at all. 3 PROF. BLOUNT: Solar energy? ReP. CASTLLBERRY: Yes. :' HR. BRO\-JN: It was very much of a political qUestion. " REP. CASTLEBERRY: lU I \"Ias one of them. That's why I had five, but they changed it to ten. ," .1.:. MR. BROHh': One of the things, in looking at this exeMption asain, 1'; ...t T ,:J :.) 1(] Q.l Z " '" 7 j :::J ; ;'\ ,(\ !U ! '; I J. when you specify all the detail in the Constitution on the exemptions for pollution control equipment, I don't know if the Revenue Department is granting exemptions, but many businesses who use wood chips as a fuel now are claiming an exemption from sales tax and ostensibly from property tax on the wood chips because otherwise they would have dumped them in the river, and that ~"lould cause pollution. It sounds funny, but under the language, why not? It's stopping pollution. Again, ovenvriting in the. Const.itution is with you everywhere. It's like bad breath. MR. KANE: PAGE 131 I don't understand why thp. Legislature can't deal with that type of definitional probJ.em. MR. BRO\'lN: Hell, the document I think certainly should be flexible enougn to allow the General Assembly to deal with it, but it's not now. You can't even -- to give you the best example that everybody loves to do, you cannot say in granting homestead exemptions to senior citizens for school purposes that you can pick up an application form ",lith the City Clerk or County Clerk because in the Constitution it says where you pick up the form, at the Tax Con~issioner's office. '- '~~'''''7' TilE ClIAIIU1AU: It's just absurd. : :1 " .:T : .> ~) '.") ,':n':l 'i h ,- " ! ,x n \1ell, I think we have some thoughtful comments there that we will find useful. The next item, property of religious, charitable and educational institutions. He've had the comment 1 already about the income producing commercial property. ; ') 11R. BRONN: "\ Hr. Chairman, did you discuss the recent Supreme court case t\10 years ago? The Georgia Supreme Court a year and a half ago decided that this exemption could apply to vacant land as well as to any structure because ostensibly vacant land used for non-commercial or used for no purpose could be used for religious services. I l'AGE 132 think it was a Cobb County casc. So the present Constitutional authority has been interpreted to apply to just presumably any vacant land mvned by a church, as long as it can't be shown that there's a contrary non-religious use of the property, and in some areas of the State t',hat can have and does have a very tremendous impact. TH:C CHAlillmU: But under present la"l, say, a commercial parking garage mvned in the city by a church or an educational ;I) institution or some other charity would be taxed? Yes, sir. And not be exempt? h dIR. BROWN: ,~, ,~ ') "f: 1(, Yes, sir. The problem comes, there are great ji :t restrictions on how by 1m,; or the Constitution He can define \lhat a church is. Freedom of reliqion pretty 19 severely limits the authority of the General Assembly to ?li meddle in religion, as it should, but a byproduct of that is that it's so easy to found a church and then buy it 3,000 acres of property where you thlnk a shopping center is going to go and go out there once E;very six r.lonths and have a sunrise service, then that property is exempt fror:l 25 taxation in the State of Georgia under the present language PAGE 133 .-----------1 of the Constitution, an,} I 110 ":L i,,1 it's proper for you all to look and see if that is the type of exemption that's intended there or if you prefer to hav~ some stricter language if you wanted to grant that exemption. MRS. HEST: , Do we have the facts in terms of a study of the abus~~ i 1 of such? I'm askinq really for information. I . MR. BROHN: Jack 'vould have it if anybody does. IL HR. Jl0RTON: ! 1 ,.... c I didn't hear the question rms. ''''; .::: ''lEST: Do we have the facts in the case really is the :1 ,- question regarding the abuse of such privilc;qe by religious institutions? ~, ( r1R. i-10RT011: He do have the statutory requirement that the county has got to list every piece of property that it declares to be tax-exempt, and the statute further states that the Revenue Cornmissioner is required to review that listinq on an annual basis and provide information to the local assessor on any piece of property 'vhich has been exnmpt 'vhich he thinks should not be Dxenpt, and My personal impression ,",Quld be with respect to religious exemptions that most of the abuse now is as a result, if you will, of 134 sort of a broadening of th~ attitude of the Supreme Court " in ruling that some of these vacant properties would 3 qualify. HR. BRONll: And that is a fairly recent phenomena. So really my example is intended more as a speculative thing, that under the exemption the iilustration I gave you I think could happen and sooner or later will happen. ,TIlE CHAIRliAH: j I.~ All right. ., . ! 7- I J ';: SEN. LESTER: Disabled veterans' vehicles That's the least we can do. I ~ ~ MRS. WEST: ~~ -""-'.' Yes. You're right .c 1j ~ THE CHAI RHAU : 1;,::; :> .1;\ ~; We'll go to farm products. lhat \le' re talking about insofar as Georgia owned securities? . Jack, have you done any stUdies on that? HR. HORTON: Not in dollars, no. HR. STRICKLAND: Okay. In other words you don't have what it. I11ight represent as a percentage of the tot,al, you know, of \vhat we're getting now? MR. HO RTON : !'AGE 139 I don't really know, Bill. !-iR. BRO\'1N: Jack, if I'm not mistaken, Steve Vaughn prcs~ntcd some figures like that at one of your task force rneet.ings. HR. HORTON: He only had an item of deposits from one bank, you know, as opposed to stock. IYlH.. STRICKLAHD: I think it's important to the Committee. I know .J you think about something as a principle too, but. if we're talking about a million dollars or ten or a hundred, I think it's important, and I'm just simply saying when we get into the counties, it's good revenue, but they're .1, getting six, soven million dollars now in total, which excludes Georgia stocks. HR. Y-AIIC: I1r. Chairman -- TIll: ClIAIRHAU: Yes? HR. KANE: I just have a question. Hhy within the present framework of this Constitution, why is this a Constitutional problen? It SS61l1S to me it's a General AsseMbly problem, since they are given the authority to classify property and to set rates. HR. HORTon: I think this problem you're talking about now is. HR. KANE: Okay. To me it's come up several times so far. MR. NASH: It's still a political problem. As he said, the wealth is in the other hand now. So it's a political problin. THE CHAIRMAU: Id I guess a Constitutional problem is that the Constitution permits that element of distinction or discrir.1ination, I suppose. Next, non-profit hospitals and homes for the aged. HR. BROUN: Hr. Chairman, just one second before we go to t.hat .(, ,t 'l'HE CHAIHHAll: " Yes? HR. BROHN: The one exemption vie talked about, and the reason I , bored you all with that long tirade is that it's a mandated exemption of the Constitution. THE CHAImiAlJ: The SUbsidiary corporations? MR. ERmiN: Yes. jl " THE CHAImIAN: PAGE 141 I noted it was a nandated provision. NH. EROiIN: It is a constitutional issue as o~)osed to statutory. 'NRo STRICKLAllD: Well, I guess his question was should it be? 'HR. BROHN: Oh, yes. HR. STRICKLAUD: )1 There's no question about that. It is, but ho saying, you know, why. Am I correct? ': 1ill.. KANE: No. By quostion was general. Realizing that this is a big exmnption or one of the. big loopholes in the intangibles tax now, aside froT.1that., I' r.1 not. sure: what 1\; the loss in revenue is because. of this provision, but if you look at ~hc classification of intangibles under th6 gEne.ral provisions, it seens to me that the problem of low income from the int~nCJibles now is because; of classification and because of classification and because of the rate structure. 1m. STRICKLAND: That's right.. MR. l~AI1E: That could be rGffiedicd at:thf: General Assm'1bly. 142 HR. STRICI~Ll.rJD: I agrCG. THE CHAIRI1'\.1I: llcll, maybe I Taisundcrstood what you \lc.n;, sayinq. I,H" you indicating that.':his particular provision, (1), or an:, you "talking about. tht-c general -- I'm. ~~.l\NE: I ILl ';:,:alking about thG goneraL rrIlE CHAIRH2\H: exemption of securities of GGorqia corporations. Yes. I vloula think t:.hat (1) \V'ould b~:; a fairly narrow, I iredted eXGIilption. TIR. Ki\NE: Yes. 1 would too. TIlE CHAIRH.lUJ: All right. Non-profit hospitals and homes for tlw agGd. Do you have any problem there? (lJo response) Public propert.y. HH. 13HOlJlJ: You had an inst.ancs where, a particular ins .,1,/, uhere Atlanta had bought. property in some sul'mrban counties, fores0~'in( amendment. It could be that if there hadn't been local amendments, the General Assembly would have been forced to approach it on a state-wide aspect earlier, but these amenmaents in many cases have provided some desperately needed flexibility. SEN. LESTER: Hell, can I t \'16 do without writing it in the Constitution? Can't we provide a mechanism? I mean we could provide another mechanism for local legislation to be passed by referendum without writing all of them in our Constitution. (''\ 148 HR. BRmVN: Yes, sir. T think we could, and not only that., I think with the time that's available to your task force, 4 if properly applied, that you could take care of all the present exemptions that are needed through a mechanism like that and prohibit any additional ones. SEN. LESTER: I think it's very important. II THE CHAIRl-1AlJ: to I hope we can. lj SEN. LESTER: Otherwise we're not going to accomplish anything. THE CHAIRJ.iAU: All right. The next is the State debt. We've got ii, some experts around here on the State debt. i'.~; HR. STRICKLAND: I'm an expert on personal debt. 1;, . THE CHAIRMAN: I'm waiting for you two to speak up. 'J ; MR. STRICKLAUD: \ve' re experts on personal debt. THE CHAI RHAlJ : Give us an appraisal of the efficiency of the operations of the provisions and whether they seem a little more detailed than necessary or substantial modifications PACE 149 in substance that seem desired or what your views would .be on this . HR. NIXON: Essentially it was brought out earlier this morning. In the early 50's, late 40's and early 50's, they went ,) to the authority type of debt. That was done away with in the Constitutional amendment of 1972, which ''las the general obligation debt law.at that stage. ,G.O. bonds are much cheaper to sell than authority bonds by the way 1\.1 because you're pledging the full faith and credit of the u z - State government, and you are also pledging your taxes to ':. " payoff these bonds. These are the cheapest mechanism for State governments or municipal governments that I know of.to finance anything. 1:;" There's a Georgia State Financing and Investment , ::> ;(, .~ Conunission, which must approve the sale of the bonds. 2" \7 , The Legislature must first approve any bonds, because they' must make the appropriation to payoff th bonds. The Finance and Investment Commission at the present time is composed of the Governor, the Speaker of the House, the Lieutenant Governor, the Attorney General, commissione~ of Agriculture, Director of the Fiscal Division, Department of Administrative Services, which is essentially the State Treasury, and myself on that. At the direction of the General Assembly, we will PAGE 150 sell the State 1)onds in the amount that they so specify. As it goes now, they have the projects and they enumerate what vie sell the bonds for. The Commission more or less just receives the bids on the 1)onds, opens them and sells them to the lowest bidder. Hhen you really get davin to it, the Gensral Ass6rably has to come up with th-e plan for construction. He just sold the bonds to build the biliri towers over here, as a good example of what State bonds were sold for. Of course the authority bonds are being H' retired now as there are no more authority bonds being I! ,- issued, other than Georgia Residential Finance Authority, J i. ; Yes. That was another one. I think that one is "VI? I' /~?--"'1\ (\'-"l',...-!~-a-~:-~,b:<.:"_J\~',>)<\JiI-"'~'''-''~(.."..~. MR. covered already BROWN: in other places, don't you, Canter? Yes, sir. Clearly in statute. ;:; MR. NIXON: j"i It's covered in statute. ;.,'1 i. ]1" '"-i HR. BROWN: J" Throughout here you also find again in the law 19 establishing the State Financing and Investment Commission a lot of administrative detail. Understand that the 21 State debt provision, as Mr. Nixon will tell you, was written this way in 1972 as a transition from a completely different way of financing State debt, and that's why ..'4 you've got all this detail, so everybody knew just how ") we were going about it. \lell, it really doesn't apply any PAGE 153 more. We've still got some bonds out, you know. Well, we really don't. I think that we could change this in the Constitution. This was done this way so that people could see every step of the way how we were going to change over, and they wouldn't be real concerned that the I, General Assembly is just going to have unbridled authority., MR. NIXON: Well, what the General Assembly did and what the () people did when they voted on this, they guaranteed the Ii old departure debt. Really the authority bonds have the '.:J Z 1I I first lien on the tax collections of the State. TheG.O. '.' bonds have the second lien. They're next in line, and ,~ ..,, they delighted the people who held the bonds because they ')- il <": " \ 5 .::J ;'J ':.l .p ih ~ I ...... .:. ~ I went from AA to AAA overnight when the State did that, but that was the only way you could really handle it and guarantee these people they would get their money when they bought a bond . MR. BROViN : i 19 ,.,- There was some concern at the time that it be written I so that, you know, every single step of the way was just pointed out so everybody knew how this money was going I') to change hands. I think now that the State has had some experience in issuing general obligation debt and has had a very successful experience at it, that you just aren't going to find the need for that type of detail, plus PACE: 154 all these transitions really are just no longer relevant at all. The current limitations of debt are, but all 3 that other stuff is just not. It's again a remnant of how we did business prior to 1972. MR. NIXON: Hell, that's right. The authority was the only \vay 7 to finance something over a long time period. It was really just a circumstance in the Constitution, but you had to do something. I can understand that. JiJ THE CHAIRMAU: 11 - \vould it be well for the lawyers in the Attorney General's office that work ~n bonding and the finance area to work along with us so that there are no surprises to the bonding fraternity? i ~ "MR. NIXON: :J :"--) i () .:.0 I 'would strongly suggest that. " <: '7; THE CHAI RMAN : U I thought we would get that early and not have any [') last minute surprises ..10 MR. NIXON: 21 I know Perry Michael iS,head of that division. 1 1 m sure you could call him and ask Hr. Hichael. THE CHAIRf.1AN: Perry Michael? MR. NIXON: PAGE 155 Perry Michael, yes. THE CHAIRMAN: All right. MR. DRO\"lN: And I hate to keep bringing up Florida, but this is the last time. SEN. LESTER: We're going to send you back there. 9 MR. BROWN: , (, l.! But in terms of what's necessary for a Const~tution, 11 Florida has even more restrictions on general obligation :C', ~ Co ,~ ]) ".. debt than Georgia does, but even with that, all of their bonding provisions for State and local governments -- now, J4 S,l is .:.: 'x" ::J l'tl J. (I Z. 'C"\ Z ;'..I.' ';:(l this is on State government. It runs about a column and a half in their Constitution, and the State of Florida issues far more debt, State and local, than Georgia ever will, and yet the bond market there feels no problem whatsoever. Ij MR. NIXON: ,?tJ Well, of course the specific Section here is only dealing with State debt now .HR. BRO\'lN: That's right. MR. NIXON: ':; In another Section you get the county debt. p""- ._.__.- ..- " :~. ~R()WN.:. _- . PAGE 156 I And the Georgia Constitution in terms of debt is about:I twice as long as what you're looking at. There are almost 4 the sarne provisions for local debt. 5 MR. NIXON: Yeah. II .., I MR. BROWN: In talking about how much Florida had in the last (j ten years, experience has proved all they needed for State and local is just a column and a half. '.... :<. 1] ~ THE CHAIRMAN: "o. l.l~ c< Okay. ~. l- 7. ~'.' 'MR. NIXON: I agree this Section could be condensed quite a 15 ,'J bit. There was a lot of specific direction. I understand .,(. ;:; "';l 16 why the direction was there at that time, but there perhaps is no need for that specific direction any more. I'm sure it could be, a good number of words could be 1~) 'deleted and it could be drawn down and say the same thing really and say exactly the sarne thing. I'm not advocating ?1 changing it, because I think you've got a good law concerning it, but I think you could say it in a lot less words and say it the right way. THE CHAIRMAN: With no basic fundamental changes? PAGE 157 MR. NIXON: I'm not aware of any fundamental changes that need j to be made in it. i) MR. BROWN: ~ I think the one difference that you would find is G whereas in 1972 there was a great deal of concern how this thing was going to work, and a need to have it all in the Constitution, and the seven years experience that we've had with it, you're just not going to -- most people .- are going to say most of that can just be handled by law, J :.1 ~ because most of it is just procedural, a lot of it. o.~.. L ; MR. NIXON: ~ \'Jell, it is. ;". MR. BRmm: We can keep the substance and just really leave a srna~il :~ 'Xz,: :~, amount of this without changing the substantive guarantees.i i: <. '1 - < ;r I ,- 1 ':"''1 ~, i (\ .7..., c,' CHAIRHAN: All right. Anything else" on that subject? (No response) Any other questions that need to be raised before we conclude? MR. STRICKLAND: It's Friday the 14th. Did you get a time? Do you have a time? THE CHAIRMAN: 10:00 o'clock. MR. STRICKLAND: ijere? THE CHAI:RMAN: PAGE 161 In this room, and we'll try to wind up by 12:30, 1:00 o'clock. Since it is Friday and some will be wanting to go home, we'll try to wind up before lunch. \"lell, I thank you all for what I think has gotten off to a good start. Anyone previously in doubt is satisfied that we have some work to do and that it can no doubt be constructive. One of the members did not get any notices thr09Qh the mail, and I don't know whether that was through misdirection of mail or an erroneous address, but if anyone else has had any difficulty of that sort, why be sure to let me know. 'I assume everyone else has got i: proper notices. Well, thank you for your time and attention and enjoy I" 'C the we~kend. ~ (Whereupon, the above-entitled matter was concluded.) -000- ,I<. C E R T I F I CAT E GEORGIA 'I' CLARKE COUNTY ,:1 I hereby certify that the foregoing transcript was taken down, as stated in the caption, and the statements and discussion thereto were reduced to typewriting by me personally; that the foregoing pages 1 through 161, inclusive, represent a true, correct and complete PAGE 162 transcript of the matters discussed upon said hearing. This the 16th day of October, 1979. LEMMER (SEAL) Na1iJ.ry ~Ul,,;,~, ~; M1 Co_inion Expirlils June ! 9, 19U "', JI} i! ? is '(\ TNDEX Committee to Revise Article VII Full Committee Meeting Held on Oct. 9, 1979 FULL COMMITTEE MEETING (Procedural), 10-9-79 Proceeding. (Including Co-opting of Personnel.) pp. 5-9, 55-57 COMMENTS ON ARTICLE VII Robin J. Harris, pp. 10-14 Jimmy Lester, pp. 14-15 Marcus Collins, pp. 15-16 Georgia Constitution - Historical Perspective (Mr. Wingfield). pp. 16-25 Research Resources Available to Committee. pp. 25-29 Relevant Local Constitutional Amendments (Homestead Exemptions). pp. 29-37 Georgia Tax Reform Commission: Role in Constitutional Revision (Taxation Matters). pp. 37-41 Legislative Counsel Draft Editorial Restatement of Article VII. pp. 41-50 Tax Provisions in Other Articles Related to Article VII. pp. 50-54 ISSUES REQUIRING SPECIAL ATTENTION Specificity in Revised Article VII. pp. 57-61 Local Constitutional Amendments. pp. 61-69 Authorization for and Limitations on Taxation. Taxation of Intangibles. pp. 85-89 pp. 69-80 Exemptions Delegation of Authority. pp. 89-102 Homesteads. pp. 102-107 Inventor)' Goods. pp. 107-112 Personal Property. pp. 112-116 Implements of Trade of Laborers. pp.116-117 Domestic Animals. pp. 117-123 Pollution Reducing Facilities. pp. 123-124 Solar Energy Facilities. pp. 124-131 Property of Religious, Charitable, and Educational Institutions. pp. 131-134 Disabled Veterans' Vehicles. p. 134 Farm Products. p. 134 Pension Trust Property. pp. 134-136 Subsidiary Corporation Stock. pp. 136-142 Non-Profit Hospitals. p. 142 Public Property. pp. 142-145 Exemptions by Local Amendments. pp. 145-148 Limitations to State Debt. pp. 148-160 Scheduling of next meeting. pp. 80-85, 160-161 :: ,1 7 lU l ,~_ :r 7'.' '.,1 I: PAGE STATE OF GEORGIA COMMITTEE TO REVISE ARTICLE VII of the CONSTITUTION OF GEORGIA Room 337-B State Capitol Atlanta, Georgia Thursday, June 26, 1980 10 :00 a.m. PRESENT WERE: COMMITTEE MEMBERS: RANDOLPH THROWER, Chairman SENATOR AL HOLLOWAY 1 MS. CONSTANCE HUNTER KERMIT KEENUM JACK IDRTON SENATOR JIMMY LESTER MS. CLARA WES T LARRY BLOUNT ROBERT L. NASH JAMES DAVIS DR. GEORGE O'KELLEY REPRESENTATIVE MARCUS COLLINS WILLIAM NIXON CHARLES DAVIS I. OWEN FUNDERB URG SELECT COMMITTEE STAFF: MELVIN HILL MI CHAEL HENRY MS. VICKIE GREENBERG ROBIN HARRIS OFFICE OF LEGISLATIVE COUNSEL: , ~, CANDLER BROWN DR. CYNTHIA NONIDEZ OTHERS: JAY RICKETTS ELDON BASCHAM 1.1 JACK MORTON BOBBY LENIHAN I ,.. I ROB SUMNER RICKY LANE -----, I f'AGE _.. 3._ PRO C E E DIN G S CHAIRMAN THROWER: Let me open the meeting and welcome each of you here. I certainly appreciate you coming, particularly on the first bright, sunny day welve had in some days. We have an agenda of the meeting which has been distributed. If you do not have one, why hold up your hand and weill see that you get one, which may help us get through the proceedings of this committee. We have other materials that you will want to see 1, .. and I believe they are on the back of the table here on my ,'.'.-~ i" Weill now ask Mel Hill to call the roll, and for the :.J ;;benefit of those that may not know everyone here l will you >'.just old up your hand when your name is called, so we can ') ;,help identify each other. Mel, would you call the roll for us. MR. HILL: Okay, Randolph Thrower. CHAIRMAN THROWER: Here. '" MR. HILL: W. J. Barton. ), (No response.) MR. HILL: Larry Blount. (No response.) MR. HILL: Representative Don Castleberry. (No response.) , I , "j '~l 1" ; ~: "r ) ,C .. :.:) ih l )_1'J' MR. HILL: Representative Marcus Collins. REPRESENTATIVE COLLINS: Here. MR. HILL: Charles Davis. MR. DAVIS: Here. MR . HILL: Jim Davis. MR. .DAVIS : Here. MR. HILL: Mr. I Owen Funderburg. (No response. ) MR. HILL: Representative Charles Hatcher. (No response.) MR. HILL: Senator Al Holloway. SENATOR HOLLOWAY: Here. MR. HILL: Mrs. Constance Hunter. MRS. HUNTER: Here. MR HILL: Mr. Edward D. Irons. (No response. ) MR. HILL: Mr. Kermit Keenum. MR. KEENUM: Here. MR. HILL: Senator Jimmy Lester. SENATOR LESTER: Here. MR. HILL: Mr. Jim Martin. (No response. ) MR. HIL!.: Mr. Abit Massey. (No response. ) MR. HILL: Dr. Charles McDaniel. PAGE (No response.) MR. HILL: Mr. Robert Nash. (No response.) MR. HILL: Mr. William Nixon. MR. N'IXON: Here. MR. HILL: Dr. George L. O'Kelley. 7 DR. O'KELLEY: Here. ?-', MR. HILL: Charles B. Pressley. (No response.) MR. HILL: Senator John Riley. (No response.) MR. HILL: Mr. Henry D. Robinson. (No response.) ) .. ~ MR. HILL: Mr. W. E. Strickland. (No response.) MR. HILL: Ms. Martha True. (No response.) MR. HILL: Mr. Lyndon Wade. (No response.) .~ \.; MR. HILL: Ms. Clara West. (No response.) MR. HILL: Representative George Williamson called to say he couldn't attend today's meeting. And I would introduce at this time, Mr. Chairman, some of the staff that are here. .....-J 6 CHAIRMAN THROWER: If you would, please. MR. HILL: The staff of the Select Committee that .' are here in addition to myself are Ms. Vickie Greenberg and ", ~"~ things happen. We looked about for the minutes of the meeting \-. l: tyesterday afternoon, of our first meeting. We've had so much ; material, soon we can begin to count it in feet rather than 1'"~~ '.~, inches, but while we h.ad a transcript of the meeting and we 'u " :~ had a brief summary of the meeting, we did not have and had 1 j'.' ~, not distributed minutes of the meeting, but we will so that before our next meeting you will have two sets of minutes to '- 1') look at. A lot has happened since our last meeting. As you know, we had scheduled our second meeting to fall shortly after the session of the legislature, the General Assembly. By reason of events occurring there, the entire program was held in suspense for a period, and I think that the Executive Director of the Select Committee on Constitutional Revision can 8 bring us up to date on the total program. Robin. MR. HARRIS: Mr. Chairman, as most of you probably are aware, we took to the General Assembly at the last session six new Articles. It was combined -- unfortunately had to be I., combined as a total document because of a quirk in the method of approving Article-by-Article revision. The House passed a relatively good document with three or four judgment errors incorporated in it. It went to 10 the Senate and I think it sort of bogged down over there. 11 ~,. There were -- this is my own surmise and observation -- that '.10; (~t(~~',., ~ J 7"~'there have been a lot of Constitutional Amendments passed by the Senate over a period of three or four years that sort of t~t ~languished in the House and during the last two or three days r. 1S ~of the session, the Senators sort of stacked on these 16 ~':-:'; Constitutional Amendments that had not received favorable I,' < c_ "treatment, and ultimately the document fell under its own . weight. Which led me to the conclusion, of course, that when the pink flamingoes grow up and become successful, they probably buy statutes of Georgia Senators and put them in their yards. (Laughter. ) ,, SENATOR HOLLOWAY: Don't look at me, boy. ~- ,", (Laughter. ) SENATOR HOLLOWAY: A bunch of lawyers screw up anything. MR. HARRIS: The Governor has determined, PAGE -------- -9------, I subject to I iapproval of the Select Committee who is meeting this coming I i Monday, to move forward with the program, to have this next 1 session of the General Assembly create a sort of Super Select ) Committee comprised of members of the Senate and House Judiciary II .Commi ttees and other leadership persons, to hold public hearings on the results of what you produce and the other :,~ Article Committees produce, in June-July-August and include q Constitutional revision in the call for a special session which will probably come about in August or September of 1981, 11 ~for the purpose of reapportioning the General Assembly and the ::> "~"' congressional districts. The current plan, as I understand i t , L ~is to do those things in a special session and by doing this "t ~;the Governor feels that he can devote a substantial amount of I.') :,. ~ttention to the progress of a new Constitution through the ::J '!l l~,General Assembly that he cannot otherwise do in a regular j i 'session because of his pre-occupation with the budget and the myriad number of legislative matters that come up in that forty (,..' day period. But he appreciates your efforts and what you will do and we would hope that you can finalize your work product by November-December of this year, so that the whole thing can move forward expeditiously and carefully and thoughtfully with appropriate public input on the proposed document about a year from now. 10 CHAIRMAN THROWER: Thank you, Robin. Are there any questions? -' (No response.) CHAIRMAN THROWER: Appreciate you coming and we will ) get about the task of doing this. Jack Morton, the Executive Director of the Georgia -, Tax Reform Commission can bring us up to date on that project. SENATOR HOLLOWAY: Mr. Chairman, one thing I would l) like to mention -- ](J CHAIRMAN THROWER: Yes. SENATOR HOLLOWAY: Robin, I think, mentioned August :.; roughly as the anticipated date of the special session. MR. HARRIS: That's my understanding from the Governor ::- is that it will probably be August or September of 181. 14 SENATOR HOLLOWAY: The main thing we've got to II, .~ watch, we've got to be sure that there's plenty of time for t -, I the reapportionment to get to Justice and back because we have ,.1\' got to take some action on i t the following year, and I 1') question whether that -- that's a rather late date, but we'll -"\) work that out. 21 MR. HARRIS: I'm not setting it, I was just told that. SENATOR HOLLOWAY: I understand. CHAIRMAN THROWER: Jack. MR. MORTON: Thank you, Mr. Chairman. I appreciate PAGE 11 the opportunity to meet with you again this morning. I shall be brief and attempt to do a couple of things this morning. Number one, to give you an idea of some of the things that the Tax Reform Commission recommended with ) respect to proposed legislation in the 1980 Seesion of the " General Assembly and secondly, to give you an idea of the direction that the Commission intends to take for the balance x of this year. ) There were some 32 general bills and resolutions iii that were favorably enacted by the General Assembly in the > f 1: 1980 session relating to tax issues and tax policy. There ;.::; were probably over 200 bills and resolutions introduced. At /~;?:'!:{1\ (~';\ '!""!O'j any rate, 17 of those implemented either partially or totally <: ~_~;><,I I . ~ :. recommendations that the Tax Reform Commission made. We r: ~ ourselves, in our package, introduced some 28 bills and 17 }of those were favorably approved by the General Assembly. To give you a little further idea, the Commission ,made to the General Assembly some 65 or 70 recommendations. Now not all of those were of the type that would naturally evolve into either statute or proposed Constitutional Amendments. About 42 or 45 were of a nature that you would suspect that immediate legislation would proceed, and the General Assembly adopted some 25 of those 42 to 45 recommend~,tions. With respect to Constitutional proposals, which you P,\Z' , 12 are most interested in certainly, there were only three or so :? three or four which passed. A couple of those were sort of 3 . evolved from the work that we had done. 4 The first instance, House Resolution 526, dealt with the elderly homestead exemptions that are currently in /, place, and this Resolution increases the income qualification / , threshhold for the elderly persons to qualify for these exemptions. House Resolution 563 is another proposed Constitutional 10 Amendment which proceeded from the recommendation which we ":i I' II ~made, which would authorize county governments to tax o. .~/~"., . ~~\ i ~insurance premiums in the unincorporated areas of the count-. Senate Resolution 282 is another proposed Constitutional q .. Amendment which proceeded somewhat from the work that we had 1) ~done, and i t authorizes the General Assembly to create a 16 .~" situation whereby the State Revenue Commissioner in his annual t:\ 17 ~Property Tax Digest Review can factor those digests by classes of property as opposed to applying a single uniform percentage increase in each county. 20 In addition to that, there will be some 65 proposed local Constitutional Amendments relating to homestead ;. exemptions on the November ballot. These will affect homestead .> exemption provisions in some 35 counties and 17 municipalities if they're all ratified. Also with respect to Constitutional proposals which 13 passed by the General Assembly, but which will give ') you an idea of some of the recommendations that the Commission .1 made. f First of all, House Resolution 75 would have ) implemented a recommendation the Commission made to increase (, by Constitution the state sales tax and then to require the proceeds of that tax to be used for education purposes ~Jl throughout the state, for the reduction of property tax. 9 Senate Resolution 266 was a proposal that the ,o-_ [() Commission made which would authorize the General Assembly I ! ~to be able to target funds that are set aside by the State ~\;fi' :j for tax relief purposes. As you know and as you will proceed (~3>2!~"''!o ~ through Article VII, the General Assembly is quite limited --- "'~...._~,..../- // ., 6' now in that respect. Senate Resolution 267 was another proposal evolving :, .1i \",\ from a recommendation that the Commission made, which would ;: have provided a sunset for all tax exemptions that are I" statutorily granted. Those did not pass. ; ~I Most of the recommendations that the Commission .') made, of major dollar import at least, to the 1980 Session dealt with either the sales tax area, the income tax area or the property tax area. For example, in the sales tax area, ," I have described to you our recommendation relating to increasing the sales tax. In addition the Commission recommended an exemption from sales tax for prescription drugs. They recommended the imposition of a sales tax on casual sales of automobiles, boats and, airplanes, and they recommended a statutory sales tax bracket structure. That structure is now ,I established by regulation. In the income tax area, the large money item was a proposal of the Commission to gradually widen the personal income tax brackets over a three-year period to account for the effects of inflation over the past numbers of years. With respect to property tax, there was one major tel proposal which had a number of our recommendations in it, :..:1 z: II ~~ primarily efforts designed to clarify and improve the -~, ~~r~~:L? .~ property tax assessment appeal process and to put in place , standardized and uniform procedures for the appraisal and J4 > assessment of tangible personal property in our state. That 1:; .~.' ) was approved by the General Assembly but it was vetoed by :':1 1 11) I ..; "::1 the Governor. J7 ;; Other tax area -- other property tax recommendations !> including a recommendation to allow local governments for the 19 first time to levy the property tax on railroad rolling stock, 2U I which is owned by railroad equipment car companies, not the .~ i railroads themselves, but railroad equipment car companies. 1) And then finally a recommendation in the property tax area ,. I dealing with the State Revenue Commissioner's oversight function and his factoring of county tax digests. That did not pass. .. ' PAGE . .~._. _~-~--_ ...~--_.-l-S--. In the general area I described to you, for example, the proposal to target tax relief, to sunset exemptions; in J addition, legislation was enacted to provide for minimum local government financial management reporting procedures, which would first of all require the local governments to do an (. annual budget, perform an annual audit, and to submit a copy of that audit to the state agency for review. In addition, ><, a proposal of the Commission to authorize local governments 9 to participate in a voluntary investment pool utilizing the larger resources of the state to invest temporary idle funds 11 ':,was enacted. Also, a proposal of the Commission to standardize and uniform interest rates for all delinquent taxes was also t,: ,approved. That interest rate was established at one percent 2per month, twelve percent per year. The Commission for the balance of this year will be 'continuing to work in the income tax area. We have a rather :major study that we're just beginning with , respect to severance l'l taxation in our state. There are a number of property tax :1,' questions that still remain to be resolved and we will be continuing to work in that area. -;.', This perhaps will give you an idea of what the !.,., Commission has done and its proposed work for the balance of ,, " ;the year. I do have, Mr. Chairman, a chart which take~~!-h~~_6~._QLJ 16 70 recommendations that the Commission made and then outlines 2 ii whether or not that proceeded into legislation and if so, ), whether or not it was favorably approved by the General 4 Assembly and the action that the Governor took with respect 5 to that. I shall be glad to make that available to the staff () or the committee or any way you would like to use it. 7 If there are any question I'll be glad to answer ~ them. Otherwise, perhaps that will give you an idea of what we've been doing. IU CHAIRMAN THROWER: Yes, that does give us a good 11 ~ insight and I'm sure we would like to have copies of that :> ., 1' \~ chart. I~SV~ et,: Are there any further comments or questions on the 14 .~ work of the Commission? .j ! (" (~ ~ () 1. (No response.) Do you have the chart here? MR. MORTON: I can bring it back before you quit. CHAIRMAN THROWER: That would be -- I think a number of us would like to have them, and thank you very much. :w As you know, we have had some ongoing work in the-- with respect to the mysteries of the local amendments and how many there were and when they came about and whether they are dormant at the present time or being utilized, but the first job was to identify what they were and Cindy has worked on this Nonidez and if she would give us a report now we'd appreciate it. PA (;J~ 17 DR. NONIDEZ: Beginning last summer, the Office of 3 i Legislative Counsel started to officially compile a listing ~ of all of the local amendments to the 1877 Constitution and ~ the amendments to the 1945. We have completed that primary () i research of going back and looking at, examining all of the 7 :: official proclamations. I would hope that by the end of next week we can provide :to. the staff of the Select Committee and your staff a list of those that are applicable to the '- Ii) Taxation Article. '..,:." It Through the years a number of those which -- a i"' number of the local amendments which initially applied to the TAx Article really applied to local government tax limitations f.' 'and to the extent that your staff might also be interested in 15 ," knowing of those with the notion of at least understanding 'J " :(~ I perhaps or perhaps even having some suggestions to make to the ':' '. :i Article IX Committee, we will make those available to the staff as well. ['i The number of local amendments is indeed quite staggering and continues to increase. In fact in November .! while there will be 13 -- i t appears that there will be 13 general amendments, there will be some 128 local amendments ;. I affecting of course different jurisdictions.. So the problem continues to grow and indeed I share I think the Committee's interest in trying to certainly examine those with a view towar~ i ,-'!.. . : , 18 understanding what Article section and paragraph or set of ) paragraphs in Article VII have really been the stumbling block, 3 if you will, to local governments. 4 As to procedures that we might use to remove them , or resolve them or perhaps turn them into statutory provisions with an appropriate change in the general text, I think that -; at this point probably the staff is going to meet to sit down k and analyze them and try to come back to the committee with 'I some digesting of what they feel has in fact been the real 10 barrier, the problem with the general text, the limitations that are currently expressed therein. At the same time, many of these local amendments, certainly those to the 1877 Constitution, I think we will clearly find are at least surplus at this point and are really .<": 1: 1r:: ':, of no effect because of various changes that have occurred J 3::> [(J through the years, both with the '45 document and with the Cl i '7 ~ amendments that have taken place. 1.',. We will make that available to the staff. Fl CHAIRMAN THROWER: That will be helpful. I believe 20 the last time you spoke to us, you mentioned that there were 21 also amendments prior to 1877 that DR. NONIDEZ: No, it's actually the 1877 amendments 23 which were carried forward by the 1945 Constitution. There ", .~ was express language -- CHAIRMAN THROWER: But we have no sea of unknown n---- :1 amendments prior to l877? PAGE 19 DR. ,NONIDEZ: That's correct. CHAIRMAN THROWER: At our meeting of the committee chairmen yesterday afternoon it was suggested that as soon as your work is completed that we send out at least a preliminary inquiry to the re~pective counties and cities, ask them to -- ask them a few questions maybe on a form or something that they could readily answer as to whether the particular ') provision is actively being utilized, maybe other questions with respect to -- leading toward eventually finding out from ,'- l! ~ them whether there's an interest in continuing th~rOVision. i2 : But I assume that our subcommittees this afternoon will -- ~)r'" ; ~~~" .. or after this meeting will give attention to that. It may be ...._ , / 14 that you could spend a few minutes with that subcommittee, if 15 ,"-0 you had ,.r. the time it would be helpful. ;J ,~ DR. NONIDEZ: Sure. a CHAIRMAN THROWER: Any other questions or comments on that report? 1'! (No response.) CHAIRMAN THROWER: Several have come in since the 2! roll was called and we'd like to be sure and get your names entered as being present. Also, we may have some additional persons who are not on the Committee who have an interest here we'd like to recognize. I know Mr. Funderburg came in over here. If you'd I . .--1 20 hold up your hand and identify the, first the members of the 2 Committee who have corne in since the roll was called. 3 MR. NASH: Bob Nash. CHAIRMAN THROWER: Bob Nash. MR. BLOUNT: Larry Blount. CHAIRMAN THROWER: Professor Blount. 7 MS. WEST: Clara West has the information to be here ~ at 10: 30, am I wrong? CHAIRMAN THROWER: Well you're half right and you're 10 half wrong and so are we. We have, I think the majority of ~) 7. 11 ~places where we entered it we indicated ten o'clock, but at a .J. (~~) ~ L)eJone point my secretary made a mistake -- I'll blame it on her ."." since she's not here -- and put it 10: 30. !.1 ~ MS. WEST: I feel better. CHAIRMAN THROWER: ~ j() '~" they call it. Thank you. That will be an excused whatever 1I ~ Then, visitors that are here that have an interest? MR. LANE: Ricky Lane. i9 CHAIRMAN THROWER: Are you here ~u I MR. LANE: Georgia Farm Bureau. CHAIRMAN THROWER: Good. For our visitors, if you have a comment at any point, why we'd certainly be happy to recognize you and we want to hear from you at any time and get the benefit of your input. We have circulated among the committee -- members of PACE --2_.1__._-_., committee first our suggestions about subcommittee organization I i and appointment. We received some responses to the -- our' ii : I , suggestions, and we followed those and we have appointed now ! the several subcommittees and I think that has been distributed 5 among you. I will remind you that the first subcommittee is on Section I, Power of Taxation and that Representative Don ,- Castleberry is the Chairman and Professor Larry Blount is the Vice Chairman. Mr. Castleberry could not be with us yesterday and Larry Blount served in his place. That committee 10 will meet following the conclusion of this meeting in Room l: l~ /~/ ~\..~/l~',A~,\ ~Cb)))rY''''''' "~~:==~~~'// 14 l~ t i1 401-A. Members of that committee are Senator John Riley, Dr. '.L >,~; George O'Kelley, Mr. W. J. Barton, Ms. Martha True, Henry " :~; Robinson, Abit Massey and Clara West. And of course those :;:, v~. sitors here having an interest are invited to join whichever ,.' l' :;: subcommittee they might wish. ", :J ~~. The second subcommittee on Purposes and Methods .. of Taxation, James Martin is the Chairman, Ms. Constance Hunter is the Vice Chairman. They were both at the meeting yesterday and both planned to be here today. Ms. Hunter is ~."\.I.~ here, Mr. Martin was i l l and could not be here. They will .'~ .l meet in Room 402 and the members of that committee are Representative ,George Williamson, Mr. Robert L. Nash, Mr. James R. Davis, Senator Al Holloway, Commissioner W. E. Strickland, Mr. Lyndon Wade, Dr. Charles McDaniel. And the third of our committees -- subcommittees is on State Debt. This will meet in Room 337-B. The chairman of that committee is Representative Marcus Collins. The Vice Chairman is Charles L. Davis. They were both at our 4 subcommittee meeting yesterday and they are both here. 5 Members of the committee are Senator Jimmy Lester, Mr. Kermit (, Keenum, I. W. Funderburg, Edward D. Irons, Charles D. Pressley, 7 : William Nixon, Representative Charles Hatcher. ;~ And the staff will divide themselves up among ') 'these several committees. Mr. Robin Harris has indicated that 10 the Select Committee, with its schedule, would like to have '7"- 11 ~our final report by November or December, which means from ~ ~ ~this point forward we've got to move pretty briskly and use tall of the time that we have. We will be working with the '/, :~subcommittees. I hope that the subcommittees will all have }') '~fairly well completed drafts that the full committee can III i.ll ~begin to work with as working drafts by September 15. l I will say to the subcommittees by the way that I communicated with David Gambrell and Bob Smalley, the chairmen Ie; respectively of the committees on Article VIII and Article ]0 IX, to raise with them the question as to whether there ought .2 j i .to be an accumulation within the Tax -- within Article VII of '.more of the taxation provisions. Their initial reaction was that they were disinclined to do that and -- unless someone else raises it or unless they re-examine it, we'll leave it with that, but the subcommittees can take that into account in any way they wish. We undertook, just for PAGE 23 --- ~ ~-- ~---------l I I examination and comment, to ! set forth for our subcommittees objectives and some suggested plans of operation that are shown in the agenda. These are not in concrete at all but are just suggestions thrown out II for you to work with. I think we do want to have a constant interchange among our several subcommittees so that we have ~ a harmonized approach to the problems. But we would think that one of the important objectives would be consolidation, iO simplification, clarification, reduction in size of this ! 1 ~-. entire Article VII. I think as we read through -- anyone 'U .~~ reading through Article VII, I think it'll be clear that there ~ are many constitutional provisions that one would think :;: would more properly be within the domain of the General !') :~ Assembly to be modified in its wisdom from time to time 11\ ~ without the requirement of a constitutional amendment. I; As to what is done with the -- any provisions of the Constitution that would be dropped by amendment, the ilJ suggestion was made at our first meeting that we could have a 11 , ,) 1 general provision which would convert those into legislativ~ -,.~) provisions having the status of legislation subject to modification by the General Assembly. Of course the eliminatiD~ of the use of local Constitutional amendments is a problem .' ., . not peculiar to the Article VII, the tax Article, or the debt provisions, but runs throughout the Constitution. The only thing is that with respect to taxes, it has been probably L the most popular use made of the local amendments. It does ~ constitute a kind of local referendum on certain tax 4 ,provisions and to eliminate local amendments does not necessarily eliminate the us of local referenda and it may be that that can be Constitutionally retained without having 7 to go through the amendment process. I would propose at an early point we communicate iwith the Tax Section of the Georgia Bar Association asking 10 them if they have any input, not expecting a great deal, but .z" IJ :at least to get them related in the hope of having their ~) '- ~ (r~)) (~(iW~> Ii.. ~ approval when we end up. _ It has been suggested, and I think t s ~~r----c-um -'-" .4 ~ . ~ , an essent~ al one, t h at b ond 1 awyers wh 0 are work"~ng w~ t h J4 : our debt provisions be keyed in early and their input secured, .~ r. [5 ,~and we would hope that their eventual approval would be c:(. :::> Ih <::: ,: obtained. '',:-.i 7 < ,,:'t": The members of the subcommittees I would hope would concentrate on policy decisions and decisions with 19 respect to drafting and I think they can lead -- they will have 20 staff available to carry out their decisions with respect to drafting. I don't want to inhibit anyone who is a natural born drafter from drafting, but we do want to relieve the subcommittees from unnecessarily taxing themselves on drafting. At this point, I wonder if the officers of the 'Subcommittees have any comments that they would like to share PACE 25 with the full committee before we break up and begin the subcommittee meetings. First -- I don't believe Representative Castleberry is here -- the Vice Chairman of the subcommi ttee on Powers of Taxation, Professor Larry Blount of the law school of the University of Georgia. Larry, do you have MR. BLOUNT: I have no specific ones other than to invite anyone who may be assigned to other subcommittees who 1\ may have an interest in Section I to feel at liberty to make input, in whatever form they choose to in the matters that we 10 will be taking up directly in that subcommittee. C) i. 11 ~ CHAI RMAN THROWER: Thank you. The next subcommittee, ~ Cl. "',J,: ~ Purposes and Methods of Taxation, Ms. Hunter. Connie, do fz: you have any comments? MS. HUNTER: Well that section deals basically with [J OJ two things, enumerating -- or rather limiting things which the State can tax and also the provision that funds have to be .) / <: c~ paid directly to the State treasury. Those are two policies that really need to be addressed, whether you wish the I') General Assembly's powers to be limited by the Constitution or whether a more general statement "tax for public purposes" -, . would be sufficient. That's a policy decision that our committee will work with as a whole. The other of course is that although all the money is supposed to be paid in the same fund, Mr. Collins says that they aren't always and so I guess that desirability and feasibility of that issue also 26 : i ought to be addressed. CHAIRMAN THROWER: And the subcommi ttee on State 3 Debt, Representative Collins. Marcus, do you have any 4 comments? REPRESENTATIVE COLLINS: Yes, sir. This particular 6 'i section of the Constitution is the Georgia General Assembly printing press that we talk so much about the federal government going into debt each year printing their money. Realizing that we might need debt service, we're going to have 10 to be particular to not to mess it up to where the bonding companies would go out of reason with us or anything. I think we can look at it and try to see if we can shorten it or simplify it any. CHAIRMAN THROWER: Thank you, sir. n : 16 L" w important item and that is discussion of the source of our n Z < 17 '":'l; additional research materials. Michael Henry who is a staff li', attorney with the Select Committee on Constitutional Revision 19 was going to review source material for us. 20 MR. HENRY: At the request of the committee, of the 21 chairman, I prepared an analysis of the court decisions that shed some light on the provisions of Article VII. In some ), _.) instances I have provided a historical perspective of the 24- ! provisions and statutory implementation of some of the 25 provisions and then in one instance, the State Debt provision, 27 'I , I ''C' J aUJ" I provided a restatement for my own benefit because it was , ; kind of difficult to read through the entire thing and try and keep track with what it actually meant, so the restatement - mayor may not help you. The material is back here and it's for the benefit of the committee members and I presume the staff and the .~ visitors and there are several copies. If anyone needs one, . feel free to pick one up . Hopefully it'll help you. .j CHAIRMAN THROWER: Do you have anything to expand on ;- , that, Mel? -, JI > .Co >,. MR. HILL: No. CHAIRMAN THROWER: We've certainly gotten great iassistance and cooperation from the several staffs available ~ and we do greatly appreciate that. '.. r 15 ,," ~with the efficiency of it. We have been impressed If) ~ .'.:'1 Yesterday, we talked and reviewed calendars in order .~ < i, to set a time for our next meeting of the full committee, ,'! " which I thought should follow a few days after we have received and distributed the reports and recommendations of the several subcommittees and having in mind that we are asking .2l the subcommittees to give us their final drafts for circulation at least by September 15th, we selected a date of September 24th, 1980. Is anyone aware of any conflicts that would make that unacceptable? (No response.) 28 CHAIRMAN THROWER: Hearing none, let's set our next then at ten a.m., regardless of what I may hereafter say, on September 24th, which is a Wednesday. 4 And I would like to suggest to the subcommittees that they meet and again, following today's meeting, that they (. meet again by August I and if you will let us know your meetings, why we will want to have -- I think the several staff will want to be there to assist in every way that we can. iO We are moving through our agenda. Are there other " 7.:. II ~matters that need to take up before we break up into sub- ~~, I:? :T ; committees? ~~f~"'" c: REPReSENTATIVE COLLINS: I want to ask you one thing, ---_.-.......... ]4 : Mr. Chai rman . Is each one of the subcommittees going to notify ~each member of this committee where if they like they can .,; 16 "~" attend the other subcommittee meetings, or not? 1- < 1:' ;; CHAIRMAN THROWER: I think that's a good suggestion. I think that certainly all would be invited and I think it \l) , would be a good idea for the full committee and we will have 2') that practice of having the full committee notified of 21 subcommittee meetings. MR. HARRIS: We'll do that. CHAIRMAN THROWER: Good. And in that event we will want to avoid conflicts of meetings . All right, anything -- . '~ , appreciate the suggestion. Anything further? Does each one of PAGE 29 you know now what your committee is and where it's meeting or shall I go back over that? (No response.) CHAIRMAN THROWER: Everyone seems to know, so we'll declare this meeting adjourned. Thank you again very much. 6 (Whereupon, the meeting was adjourned at 10:52 a.m.) .., ;~Z " 1II '- (:1 j) '~'-; ,'.' , ..l I .; c .;,.-\i ,- 30 C E R T I FIe ATE :2 I, Peggy J. Warren, CVR-CM, CCR A-171, do hereby 3 certify that the foregoing 29 pages of transcript represent a true and accurate record of the events which transpired at the time and place set out above. Ji v, < 1: I:, " 1 -, lK ?O .1 .) INDEX Committee to Revise Article VII Full Committee Meeting Held on June 26, 1980 FULL COMMITTEE MEETING (Procedural), 6-26-80 Proceedings. pp. 3-10 COMMENTS ON SPECIFIC ISSUES 1. Mr. Jack Morton, Tax Reform Commission. pp. 10-16 2. Ms. Cindy Nonidez, Office of Legislative Counsel. pp. 17-19 (Local Constitutional Amendments) APPOINTMENT OF SUBCOMMITTEES Section I: Power of Taxation (Don Castleberry, Chairman). p. 21 Section III: Purposes and Method of State Taxation, (James Martin, Chairman). p. 21 Section IV: State Debt, (Marcus Collins, Chairman). pp. 21-22 Chairman's Remarks on Subcommittee Assignments. pp. 22-26 Sources of Additional Research Materials (Relevant Court Cases). pp. 26-27 Agenda for Future Meetings. pp. 27-29 PAGE 1 2 STATE OF GEORGIA 3 COMMITTEE TO REVISE ARTICLE VII 4 OF THE 5 CONSTITUTION OF GEORGIA 6 7 8 9 10 "z 11 j: o..Il..l..: ~ 12 ~ ~F~ ! 14 t"'" :I: 15 ~ "Ill: ;;) 16 .~.. Q Z 17 l"li SUBCOMMITTEE ON POWER OF TAXATION 18 19 20 21 Room 401-A State Capitol 22 Atlanta. Georgia 23 Thursday. June 26. 1980 11:10 a.m. 24 25 j j j j j j j j j j j j j j j j j j j j j j j j j j PRESENT: COMMITTEE MEMBERS: VICE CHAIRMAN LARRY BLOUNT DR. GEORGE O'KELLEY MS. CLARA WEST MR. JIM DAVIS ALSO PRESENT: MELVIN B. HILL, JR. WALTER WINGFIELD JIM KITTRELL ED SUMNER ROB SUMNER FLORA DEVON JIM NEWMAN GLENN STRICKLAND MICHAEL HENRY PAGE 2 PAGE 3 PRO C E E DIN G S 2 VICE CHAIRMAN BLOUNT: My name is Larry Blount , I : ~- 3 am Vice Chairman of the Subcommittee on Section 1, Power of 4 Taxation. 5 Representative Castleberry was unable to be here 6 today, and I had learned yesterday that I would be chairing 7 the meeting today, and our task as I perceive it is to speak 8 to the content of Section I of Article VII which is generally 9 styled Power of Taxation. 10 I think we can be guided by the remarks that were "z 11 I- ..'0".... made earlier this morning by Mr. Thrower as' we define our @ r l12 '" task which is what I hope to accomplish, that we will accomplish at this meeting to take a revision approach to ! 14 l- Section I with a view toward consolidation, simplification I: 15 ~ or clarification and reduction in size of the text of that "'";;;) 16 .Iz.I.I section, and that is one thing we can do that superficially Q Z '" 17 < III at least is politically neutral, it might be lauded should we 18 be able to attain that goal. 19 There are some general considerations that we ought 20 to keep in mind as we approach our work as I see it. One 21 of the observations we should make as we reword and sentence 22 and paragraph the section is whether the language that is 23 embodied in Section I should legitimately be part of the 24 state constitution or whether it should have the status of 25 statute or not exist at all because it for one reason or PAGE 4 another is obsolete. 2 To the extent that we find language that is really 3 not constitutional language but more statutory language, we 4 have to figure out or make some assessments about the extent 5 to which that language should be retained at least in some 6 form within the context of statute or some other rule or 7 regulatory form, which brings up the question what do you do 8 with language that is in the constitution that for one reason 9 or another you feel ought not be there. 10 1:1 Z 11 j: ..'o".... ~ 12 ~ @J~ 14 ~I ':z": 15 ~ 1:1 '~" 16 .~.. Q Z 17 : In an earlier meeting there was some suggestion that such language could be relegated to the status of statute and done in a way as not to require readoption by the General Assembly, providing some general provision in the constitution itself that all of this language that we're excising shall be law and statute. That may be one approach. Mr. Thrower commented yesterday he had not seen such a provision, so it might bepart of our task to fashion one if 18 we feel it is appropriate, at least recommend the language of 19 one. 20 A problem that will permeate this revision effort 21 clearly we must speak to in our subcommittee and in our 22 committee generally is the elimination of the use of local 23 constitutional amendments. 24 I just want to toss out before we go on to a formal 25 roll call and introductions a thought that you could PAGE 5 consider. The question is whether any tax matters or matter 2 is appropriately the subject of a local amendment, the 3 proposition being that if the taxing power is vested in the 4 state should any local ameftdment mechanism be employed to 5 provide exemptions from tax, and that's not to say that not 6 everyone in the state votes on a local amendment, but we have 7 been reminded that in the General Assembly as a matter of 8 courtesy and protocol they're not scrutinized very much, one, 9 and secondly a local amendment dealing with taxes that 10 purports to be limited only to one county or one city is l:I Z 11 i= going to have an indirect effect upon everyone else in the 'o.Q"... ~ 12 ~ state because to the extent of that: exemption the tax base 8Jr i for all tax purposes has been shrunk, which indirectly ! 14 increases the burden on everyone else, so just one question lU:z:I 15 .:l whether local amendment mechanism should be employed at all l:I '";;;) 16 ~ where taxes are concerned, and that is not a cause I am Q z 17 : trumpeting, it's just a question that I throw out for some 18 thought. 19 As a general proposition I think we ought to view 20 things from a policy perspective, we ought to consider the 21 question from the perspective of what ought to be as a matter 22 of policy the language and the function of Section I and 23 Article VII generally. The detail work we can take up to the 24 extent that the subcommittee desires; the drafting, additional 25 research, et cetera -- we are flanked by some very able PAGE 6 staff assistants who have done tremendous work in this area 2 already and are willing to provide any information the we 3 might need, so that our work here will be considering what 4 ought to be in this constitution and why. The detail work, s the language et cetera will be worked out as the process 6 continues. 7 I would like now to call the roll and get a real 8 feel for who is here. 9 Representative Castleberry is absent; 10 I am Larry Blount, I am here; Senator John Riley is absent; Dr. George O'Kelley is here; Mr. W. J. Barton is absent; Ms. Martha True is absent; Mr. Henry Robinson is absent; Mr. Abit Massey is absent; Ms. Clara West is here; 18 Mr. James Davis is here. 19 Could I ask others present in the room to just give 20 names, not necessarily rank and serial number, but name and 21 function. 22 MR. ED SUMNER: I'm Ed Sumner, I'm attorney for the 23 Georgia Municipal Association. 24 MR. KITTRELL: Jim Kittrell, Seaboard Coastline 25 Railroad. PAGE 7 MR. NEWMAN: 1 1m Jim Newman with Southern Bell Telephone. MR. ROB SUMNER: Rob Sunmer, Georgia Farm Bureau. VICE CHAIRMAN BLOUNT: Feel free to interact with any questions or comments or observations that you want to share. Our proceedings will be very informal. I would like to call upon Melvin B. Hill to share any comments or observations that he has regarding the work of the subcommittee, please~ MR. HILL: Thank you, Larry. I think you did a very good job presenting the larger questions that the committee must deal with. We have attempted to distribute -- the staff has attempted to distribute materials to assist you in this work, and I would suggest that you would want to look at the earlier revision efforts that have occurred in 1970 particularly, because the 1970 version there was an analysis of how that proposed change compared with the 145 and then the 164 proposals, so I think that would be helpful, and they did in 1970 with the proposal they had before them, which I might add passed the House of Representatives, manage to reduce the length of this down quite a bit, and I would say all of the exemptions -- so much of this section relates to exemptions, and if we decide that the exemptions should continue to be listed specifically in the constitution as they are now PAGE 8 certainly I would think much progress could be made in 2 shortening them and having them a much tighter document than 3 we have now. 4 I don't have any other general observations except 5 to say that we are available, the staff is available to do 6 research for you as directed, and it's up to the members of 7 the committee to try to let us know what kinds of research 8 materials they need. 9 VICE CHAIRMAN BLOUNT: Thanks, Mel. 10 z~ 11 i= .'o0"... ~ 12 ~ ~r~ 14 .~.. :' 16 .~.. Q Z 17 :; invite persons more expert than ourselves to come in and share information that they have acquired or developed, possibly some of the peo~le that we listened to this morning who have been working in this process ongoing who could come in and speak to with a little direction from us matters of interest and concern to us. Dr. O'Kelley suggested some areas of special interest from a policy and substantive perspective; we could identify 18 some of those and have people come in and speak to them 19 directly. 20 At that same meeting it would seem appropriate once 21 we have had some information exchange and identified some areaE 22 of special interest to assign some tasks for committee members 23 to perform, including editorial ~ork with the text as it 24 exists and some systematic development of recommendations 25 that people would like to have addressed. PAGE 12 At a second meeting we could consider the work 2 products of subcommittee members and have some dialogue 3 regarding those and make some assessments of priorities at 4 that point. 5 During that second meeting some kind of final work 6 could be assigned in terms of pulling everything together and 7 preparing a working paper that would be circulated to all 8 subcommittee members for review and comment before we make 9 our report to the full committee. 10 It's about a three-step process that would involve three meetings and some work and correspondence in between each meeting. Could I have some reactions to that? It's not the format, that's one possible approach, The floor is open or the table is open for other approaches as well. Yes? MRS, WEST: I just wanted to ask if you attended a 18 meeting on yesterday in reference to it. 19 VICE CHAIRMAN BLOUNT: Yes, I did attend. It was a 20 meeting of the chairmen and vice chairmen to kind of outline 21 a lot of this, to add some dialogue. 22 Any reactions to that approach? 23 MR. DAVIS: I think it sounds fine. I don't have 24 any objections to it personal., 25 MRS. WEST: I think it would be helpful to me as we PAGE 13 explore and study and look forward to coming out with 2 definite recommendations with substantive changes as may be 3 necessary. 4 VICE CHAIRMAN BLOUNT: I'm sure we all have some. 5 There are a lot of special interest representatives in the 6 room and on the committee, and it was desired that way. We 7 think everybody with an interest in this activity ought to be 8 represented, and as a management style I think everyone 9 affected by the decision ought to have some part in the 10 "z 11 i= 'o.l>"... ~ 12 ~ ~r~! 14 ... ':"r 15 .:> ":'"> 16 .~.. Q Z 17 : decision making process, so if we could use that format let's have a little dialogue now about meeting times. I did not come prepared with a set of dates to suggest, although I'm sure that in your cooperative spirit had I done so you all would have said yes to that too It would seem that we're working against a tentative deadline of August, or at least we're supposed to have had a meeting by August, we're supposed to have the report out by 18 the 15th of September. It would seem to me that we could 19 meet in July, August and September conveniently, or on a more 20 expedited basis if you thought that was appropriate. 21 For me the month of July is quite flexible, so that 22 almost at any point during that time, any week that month 23 I'm sure we could agree upon a date when we could come and 24 listen to some experts in our area and speak to questions or 25 situations that we have some interest in. ---------------------- PAGE 14 Before we leave today I would like to get some input 2 for issues or topics that you would like us to direct the 3 staff to tool up for. 4 I suspect th~t the first week of July should not be 5 considered due to the fact that we're near the last of June 6 and the Fourth presents a bang that I'm sure all of you are 7 preparing for now. 8 That following week might be a convenient time for 9 an initial meeting and information exchange. Is there any 10 problem with a meeting at some point during the week of July 11 "5z 7th through 11th? e;1oG..o. MR. DAVIS: I won't be able to be here for the 2nd crthe 3rd. Would that be your first full week starting the ! 14 ... 6th, right? '" :r 15 ~ VICE CHAIRMAN BLOUNT: That's right. "a: ~ 16 ~ MR. DAVIS: That week and the week after I won't be lz!l 17 = able to be here. so that again -- you know. don't cancel it 18 just on my account. 19 VICE CHAIRMAN BLOUNT: That's the kind of dialogue 20 we need. 21 MRS. WEST: I will be out of the country, I'll be in 22 Canada for a World Baptist Alliance that week, and I want to 23 be here the first meeting. 24 VICE CHAIRMAN BLOUNT: Okay. That precludes the 25 week of the 7th through 11th. PAGE 15 Mel, your life is pretty congested during that first 2 couple of full weeks as well, isn't it? 3 MR. HILL: Well, that's the nature of the job. I 4 think we can make it at whatever meeting you schedule. I'd 5 say the week of the 14th or the week of the 21st would be 6 fine. 7 I would suggest that this committee shoot for the 8 end of August to begin to have its draft done and give them- 9 selves a cushion in September for final work, so I would say 10 CzI 11 i= @;;'o..".... ! 14 ~ '" :I: 15 .:l CI :'"l 16 .~.. Q Z 17 : you ought to have your three meetings, you know, one in July and then two in August, so that by the last week of August you have completed your work, so the first meeting then on either the week of the 14th or the 21st would be fine. We already have a meeting scheduled for Wednesday and Thursday the week of the 14th. As I say, we can meet those dates if that is what the committee would like to do, but the 14th, 15th or 18th would be better for us. 18 VICE CHAIRMAN BLOUNT: Is that a good week for 19 everyone? 20 Jim, you're going to be away for a two-week period? 21 MR. DAVIS: No. The 18th is what, a Thursday? 22 VICE CHAIRMAN BLOUNT: A Friday. 23 MR. HILL: I know you probably don't like Friday 24 meetings. 25 VICE CHAIRMAN BLOUNT: Is there some reluctance for PAGE 16 a Friday meeting? 2 MRS. WEST: We've got a job to do. 3 DR. o'KELLEY: I don't have a calendar with me. 4 I recall setting up a very important university meeting on 5 the 15th and I cannot be here. 6 VICE CHAIRMAN BLOUNT: Why don't we think in terms 7 of the 18th as the first meeting? Ten o'clock, is that 8 workable? 9 MR. HILL: Or earlier. It depends on where people 10 Czl 11 j: Q.'o"... @;i 14 ~ I:'<"rl 15 .:l Cl '";;;) 16 ~... Q Z ..:..: ~ 12 ~ ~F~ ! 14 ... '<"l :I: 15 .:l CI 0>:: ::;) 16 .~.. Q Z Cl ~ '" 16 .~.. az 17 : addressing the same issue as it relates to tangible property, I think there's a question as to whether we should have one or mOlEclasees of tangible property. MR. DAVIS: Are you referring as far as different rates of taxation? MR. WINGFIELD: Of real estate for different kinds? MR. DAVIS: He said intangible . MR. O'KELLEY: Oh, tangible, You were talking about 18 intangible. 19 MR. DAVIS: I'm sorry, I misunderstood, 20 DR. O'KELLEY: Wait a minute now, You're saying, 21 you were differentiating between real estate and personal, 22 }fR. WINGFIELD: Tangible personal. 23 DR. O'KELLEY: The point is -- yeah, what I want is 24 shall consist of tangible property, that's one classification. 25 MR. DAVIS: That's the way it reads now, PAGE 30 DR. O'KELLEY: And it continues right on, and one 2 or more classes of intangible. I cannot see why we should 3 have one or more classes of intangible. I cannot see why we 4 should have one or more classes of intangible without having 5 the same privilege with tangible, and delay the groundwork 6 so if at some future date we do reach the point where we're 7 willing to classify real estate that it be possible to do it. 8 MR. DAVIS: Of course we're probably saying the 9 same thing, it's just a matter of semantics. I'm saying one 10 or more classes of tangible property too, whether it's two as ~ "z 11 I- in real and personal, and then five classes of real estate 'o" "- 1M 12 ~ MR. WINGFIELD: That would be up to the legislature. (@)r i MR. DAVIS: But if you say one or more classes of ! 14 tangible property, that answers his desire and mine too. I- :'"r 15 ol) DR. O'KELLEY: I think so if the lawyers can support "'";;) 16 ~ us in this, because at the present time the legislature does 1M 17 gzQ not interpret it as within their province. 18 VICE CHAIRMAN BLOUNT: They're not at liberty to, 19 and that is one of the reasons why you have a couple of 20 paragraphs following this one that speak to specific classes 21 of tangib le property. 22 MR. DAVIS: Not tangible, intangible. 23 MR. WINGFIELD: There are two specific amendments 24 that were added to the paragraph to permit classification of 25 automobiles. PAGE 31 VICE CHAIRMAN BLOUNT: That's right. 2 MR. WINGFIELD: And mobile homes, et cetera, and 3 that's -- 4 VICE CHAIRMAN BLOUNT: They had to do that by 5 constitutional amendment because the General Assembly is not 6 at liberty to make classifications of tangible property. 7 We'll just identify the whole issue. 8 MR. DAVIS: Thank you. If nothing else happens, if 9 we end up trying to amend or change that portion of the 10 CzI 11 l- lo..l..<.. ~ ~\r~12 ~ ! 14 I':<"z:l 15 .:I CI ll< ;:) 16 .~.. Q Z Ic!rI: ::> 16 .~.. Q Z 17 ::i page 55 -- you would certainly have eliminated a lot of verbiage much of which is statutory in nature. If you look at one thing, these things often involve dollar amounts, and with inflation they quickly are outmoded. VICE CHAIRMAN BLOUNT: They become obsolete. MR. WINGFIELD: You've. got to go amend the constitution, or you've got to have special local amendments 18 to deal with this problem, and that is very awkward. 19 VICE CHAIRMAN BLOUNT: You could, I mean as a 20 matter of structural approach to allocating power do a general 21 grant of power regarding the exemptions with an extraordinary 22 vote requirement of 75 percent or something like that, any 23 number you wanted, and I think it would be appropriate 24 because many of these exemptions by definition impact the 25 tax base, and those are fiscal assessments that are made PAGE 37 depending upon revenue needs and the facts and circumstances of the economy and other socioeconomic or political considerations, and I don't think we ought to answer those questions just as a general personal proposition for once and for all relatively speaking within the context of the constitution. That's something that we could consider, and maybe we can invite a little input from the experts on the extent to which this is the norm or not the norm around the country, at least from a selected group of states. Okay. MR. WINGFIELD: Another aspect of this whole exemption, it's got a lot of proviSbns, it's got a lot of very detailed material in it defining such things as what is a disabled veteran, and goes on for -- it's something, as a lawyer when I look at it it looks more like a regulation, not even a statute but a regulation which is one step below a statute in the table, so if your objective is simplification you could certainly be serving that I would think by some procedure on this. VICE CHAIRMAN BLOUNT: It's a $64 proposition too because you're delegating a tremendous amount of authority and power, and there are those I think around the state who are quite comfortable with it the way it is, not so much in that there's an affirmative grant in that power of initiation or initiave in the people, but the fact that it is so PAGE 38 difficult to change it and. you know. some peopl~ have grown 2 comfortable with it because at least it's serving. and once 3 they reach that level they want things certain. and so there 4 is more than just governmental efficiency and simplifaction 5 or reduction involved with a move like that. I think we 6 should be mindful of that as we go along. 7 MR. WINGFIELD: That's absolutely correct. and I 8 think another thing we have to be mindful of is if there were 9 any decision made to attempt to remove all the language of 10 the exemptions is that you would not want to let something 11 "z i= fall through a crack. and if exemptions are going to be .'oa".... ~ 12 ~ preserved that you're not undertaking to decide what should be @F~ exempt and what's not. You might want to consider some ! 14 ... procedure to preserve as statutory material for the future ell : :~z: 15 .:> '"cr: ::> 16 ~... Q Z ~ 17 : that category, as a matter of protocol you just kind of let it go through and, you know, that is not the type of scrutiny that we expect or probably assume that's going on, There is also the problem with uniformity as you add on all of these local amendments, you know, it becomes a quagmire and can end up in some very inequitable burden allocations, because if I exempt property from the tax base in Clarke County that does not reduce the burdens of 18 government which means that they must be absorbed out of 19 revenue generated from the tax base as it exists after I have 20 carved out my little part, and that's going on all around, 21 Representative Collins gave us the situation where 22 you could have two counties similarly situated with assessed 23 value of property adjacent to each other and one with a local 24 exemption, the other without one, and you could have one 25 county's burden of government shifted to this other county PAGE 40 by virtue of the fact that one has it and the other doesn't, 2" and there's some question as to whether exemptions that 3 erode if you will the tax base should be permitted on a local 4 option basis. 5 MR. DAVIS: You mentioned a fact earlier, I don't 6 know if I'm missing it or not -- even if Marcus said so I'm 7 certainly not questioning his word, but I don't see where an 8 extra exemption between Bibb County and Crawford -- I don't 9 see how any of those loads could be shifted to Crawford 10 ~ Czl 11 i= '..o".... 12 ~ ~ri ! 14 .... '<"C( :z: IS .:. Cl '";;;) 16 .~.. oz Cl '";;;) 16 .~.. Q Z . MR. HILL: That's right, and that would be a dressed upversion I think -- VICE CHAIRMAN BLOUNT: That's the $64 rub because 14 ~ there are people who are not inclined to delegate that power ~ ':-" ~ "'" 16 ~... Q Z Cl '~" 16 ~'" Q Z ~:z: 15 ~ "";;;) 16 .~.. Q Z ~ 17 : limit it and throw out this federal obligation amount the tax base has Shrunk even further on bank shares, so it's a growing problem, it's only because of that, but I really think it's going to be an issue in the next session of the General Assembly. I just hate for us to go through here and have them locked and unable to do anything, MR. ED SUMNER: This is even worse on the bank 18 shares because even if it went to a corporate income tax 19 you still have the deduction for federal obligations and, 20 you know, the questions concerning how you -- and the Tax 21 Reform Commission has great material on this if you all are 22 looking for material. I don't know if Jim is aware of it. 23 One thing they came up with was as much as 55 24 percent or 45 percent tax reduction for the banks of what 25 they paid in 1978 if they were able to take all of the PAGE 57 federal obligations out of their -- 2 MR. DAVIS: I think they explored the possibility of 3 like an excise tax versus the corporate income tax. 4 MR. ED SUMNER: That's what a lot of states do. 5 MR. DAVIS: Which would not allow them to leave out 6 federal obligations. 7 MR. HENRY: I think another thing you may want to 8 ask is what is the e x act total amount of revenue produced by 9 this tax, and it must be listed as a state property tax, and 10 the state property tax is somewhere around .03 percent of z~ 11 I- 'o..".... total revenue collected in the state, yet it's given a ~ 12 ~ constitutional niche, you know, and we're protecting it there ~r~ when it's such a minimal amount. 14 ~ l- VICE CHAIRMAN BLOUNT: Another thing that when V> J: 15 .:l you're dealing with life at the constitutional level ~ '"::J 16 .~.. dialogue about the revenue effect should never come up, but Q Z 17 : given our present constitution you have to take those things 18 into account as you undo things that are there or what will 19 be the revenue affect. Here it's insignificant except 20 politically and psychologically. You know, you do something 21 thaterodes themx base further for the financial community, 22 it's going to put a lot of people up in arms if you work 23 gets labeled as banker relief work, it's going to get shot 24 down real quick, and I think although we are not limited in 25 our work by the political realities that exist we have to be PAGE 58 mindful of them as we go. 2 Are there other areas that we could focus upon in 3 preparation for our next meeting? 4 MR. HENRY: One other thing, it's kind of related 5 to that, but the fact that you could increase the state sales 6 tax from three to four percent with a majority of the people 7 in the state house and that would create so much more revenue 8 and you can't even affect the bank shares tax which creates 9 such an infinitesmal amount of revenue, you can just double 10 the other revenue sources in the state -- I'm not saying the sales tax should be restricted, I'm saying that I think they should be given their proper perspective. DR, O'KELLEY: The General Assembly has the authorit to increase the sales tax from three to four percent now, but of course the prevailing sentiment is to allocate that to public education, but they have the authority as I understand the law, they have the authority to do that for one year, 18 They cannot without public referendum establish this alloca- 19 tion more than one year and, therefore, it has to go to a 20 public vote, Is this correct? 21 VICE CHAIRMAN BLOUNT: I didn't recall the sunset 22 provision, MR. HENRY: Are you speaking of earmarking? 24 DR. o'KELLEY: Yes. 25 MR. HENRY: They would have to have a constitutional PAGE 59 amendment to earmark that fund. 2 MR. WINGFIELD: That's right, but that's another- 3 section. 4 MR. HENRY: There's nothing to say they couldn't 5 collect that other percentage and bring it in and allocate it 6 all for educational purposes or allocate none of it for 7 educational purposes; that wouldbe part of the budget 8 process as I understand the way it works anyway. 9 VICE CHAIRMAN BLOUNT: Then the sunset dimension 10 zC1 ~ 11 I- .'"o."". 12 ~ ~F~ ! 14 I- '" :J: 15 .:l C1 '"::> 16 .~.. Q Z 17 ::; of it to the extent that it exists applies only to the designation of public education as the recipient of that one year -- DR. O'KELLEY: That's correct. VICE CHAIRMAN BLOUNT: The general authority to increase the sales tax is not limited or subject to any sunset. Okay. That's another practice that we ought to consider, I don't think it will impact our work directly, is 18 the use of sunset legislation in the tax area. 19 You know, we use tax laws to affect segments of the 20 economy, and it's based upon economic assessments that we've 21 made at that point in time, and what is happening at the 22 federal level a lot more is that they will pass a rule like 23 a depreciation rule or an investment credit rule, and they'll 24 say we'll let it work for two years or five years and we'll 25 let it self-destruct, and we're doing that with public -_._----- PAGE 60 agencies now and it's becoming vogue across the board. 2 I don't know if we can provide the General Assembly any of 3 that type of direction within the context of our work here, 4 but we might devote a little thought to it. 5 Anything further? Yes, sir. 6 MR. DAVIS: Let me just talk a minute about what he 7 mentioned, the fact you're limited on your bank shares 8 whereas you're not -- do I understand you to say that maybe 9 what we should address is to remove the mention of a cap on 10 millage for banks, I mean not necessarily just for banks 11 "z j: but any reference to those? If you're not going to limit .'o.".... @;I the salea tax, then why limit a property tax by constitution? Is that really the crux of what you-were saying? ! 14 ... MR. HENRY: The gist of what I'm saying I think is ", x 15 .:l the fact that, not that you should limit anything by millage "'";;;) 16 ~... rate, but if you do remove this thing from the constitution Q Z 17 : then bank shares number one, you wouldn't have to tax them 18 by bank shares, you would tax them on their property plus 19 their personal property and intangible property, minus the 20 exempt intangibles they have, tax them like any other 21 corporation, but you would have to change the constitution 22 to do that. 23 MR. DAVIS: You would only have to change it by 24 really just taking out that mention, because nowhere does it 25 specifically say how to tax the other corporations, really, PAGE 61 in the constitution. 2 MR. HENRY; That's the state's right, inherent 3 power of taxation, exactly. 4 MR. DAVIS: So you could -- I don't know if we 5 could constitutionally change the method of taxing the banks 6 by simply removing that reference to taxing bank shares 7 because the General Assembly by statute I think -- at least 8 that's the way they were attempting to do it this last 9 session 10 "z 11 ~ .'o<".>.. ~ 12 ~ ~r~ 14 ~ ~ Cl :':"> 16 ~ Q z 17 :; because as you consider allocating or reallocating the tax burden it speaks to an exercise of the tax MR. DAVIS: Nowhere in here do I see there is an allocation of tax burden in Section I that I can see, that's what I'm saying. I don't see how we can solve the problem that is brought up. I think it is a problem. VICE CHAIRMAN BLOUNT: Except by making a delegation of power to the General Assembly. A lot of these questions 18 or situations preempt any consideration by the General 19 Assembly because they don1t have the power. Now, that is the 20 thing we can speak to with respect to the taxing powers here, 21 is the possibility of some delegation of the taxing power 22 directly within the purview of the work of the General 23 Assembly. That is a question about where decisions ought to 24 be made, which I think is part of the scope of our work here. 25 Another aspect of our work I think clearly relates PAGE 64 to literal revision, and in that connection I would like to 2 invite each of you to read Article VII and to read it 3 critically, and to characterize or categorize the language, 4 principally the language involving Section I as either 5 appropriate constintional language or something other than 6 that, statute or whatever. 7 Also as you read make note of language there that 8 may for one reason or another be obsolete or otherwise no 9 longer timely for our purposes today, and to note those in 10 a form that I can or the chairman of the subcommittee can receive and circulate, and what I plan to do is to get with Mel Hill and kind of reduce to the form of minutes the dialogue that we have had here today and identify the issue sets that we identified and circulate those to everyone for reaction. MR. HILL: Might I suggest, Larry, that for purposes of the next meeting we have three topics that we 18 would consider, and we would talk with Jack Morton about 19 having someone come and address each of these three topics, 20 and we would prepare a brief decision agenda is the word we 21 use to describe the questions that we would want these people 22 to address, and I think the three topics would be classifica- 23 tion of tangible ~roperty, that issue that's arisen already, 24 the whole matter of exemptions is one other topic, and then 25 the bank shares provision as a third, and we will probably PAGE 65 have three different people, or maybe it would be the same 2 person addressing those three, depending on who Jack 3 recommended, but then following that presentation the 4 committee could go through that list of questions itself and 5 try to decide how it comes down, and then based on those 6 decisions the drafting could begin. 7 VICE CHAIRMAN BOUNT: I think that's good. 8 Also in keeping with the methodology we suggested 9 this morning and everyone agreed to, once we this agenda 10 CzI ~ 11 I- 'o" "..".. 12 ~ ~J~ ! 14 I- ':<"z:l 15 .:l CI '"::;) 16 ~.... Q Z out and put -- And we, of course, introduced at the same time I I statutory changes with a self-destruct in them, that if the 2 Constitution failed in the public adoption of it they wouid 3 all self-destruct and the Constitution remain the same. 4 I guess my emphasis is on the closeness we're going 5 to have to communicate with those people and let them know b that we're working in that area, if we decide to go in that area. We've sure got to have them sitting with us -- VICE-CHAIRMAN HUNTER: That's true. \, SENATOR HOLLOWAY: if we're going to get into it. I'm talking about the practical politics of passing 1 : this thing ... after your recommendations. VICE-CHAIRMAN HUNTER: Well, certainly, should that route we decide to go, that would be preservation of 1i~ ,..... the present provision by statute would be SENATOR HOLLOWAY: What we did, we just lifted ,. ::. 1(, ,"'.;, everything in Article X back there and wrote a statute putting 17 ., it into law and passed it at the same time. MR. HENRY: I think that could be done here, as well. 1'1 SENATOR HOLLOWAY: I think so. :0 MR. HENRY: If you reverse that presumption, you 21 could take this, write it up in a statute, and introduce -- SENATOR HOLLOWAY: Have all those bills drawn up -- 23 MR. HENRY: -- it simultaneously. 24 SENATOR-HOLLOWAY: -- say, "Look, we're going with this, too, at the same time. And, if something should happen to the constitutional article with the ratification at the 2 ' polls, you're still not hurt. Because this automatically self 3 destructs and you're still in the Constitution." VICE-CHAIRMAN HUNTER: We will, of course, have ~ staff support for drafting purposes SENATOR HOLLOWAY: Oh, yes. VICE-CHAIRMAN HUNTER: -- rather than doing that ourselves. MR. HENRY: The legislative package will be drawn up i if; between the Select Committee staff and the Office of Legisla- tive Counsel. We will have to prepare the legislative package " for any omission that you may want to make. And that's not a .( , concern of this committee; we'll do our best to make sure nothing slips through the crack. SENATOR HOLLOWAY: Well MR. HENRY: But, generally, I think you could just take this language and pair it in a bill. SENATOR HOLLOWAY: Well, we want to be specific in our recommendations to the Select Committee to the extent that it's pretty well all spelled out. You mean, you're going to put it together after we make . ? I don't quite follow that. ';;"',J MR o HENRY: Yes, sir. After the decision is made, then we will determine what legislation needs to be enacted in order to retain everything as it presently exists. Unless you i want to make some type of substantive change; such as if you ~ wanted ,to delete for school lunch purposes, then we would not 3 put that 4 SENATOR HOLLOWAY: No, no, no. s MR. HENRY: -- in the -- I know that; but just as an () example. Or any other purpose. SENATOR HOLLOWAY: Well, of course, we could get suggested changes in the statutory provisions from our input with the people involved that might be acceptable to both of 10 us, see. Those are the things I would want to be sure . . . -,: l, . . Our staff scares me, sometimes. I love them, but . A lot of politics in that, too. VICE-CHAIRMAN HUNTER: Well, most of these very- detailed sections are relatively new. I" SENATOR HOLLOWAY: Um-hmm. ::> 1(, '- ~ VICE-CHAIRMAN HUNTER: But that doesn't mean that .. "7,. I ,". there might not need to be some changes in them that -- IE SENATOR HOLLOWAY: Sure. 19 VICE-CHAIRMAN HUNTER: And it would be good -- [, 20 SENATOR HOLLOWAY: Sure. 21 VICE-CHAIRMAN HUNTER: to consult -- ,) SENATOR HOLLOWAY: Sure. -,,; . . . VICE-CHAIRMAN HUNTER: -- with them to see what 24 SENATOR HOLLOWAY: Well, you take the change in the !'c\.(,L 21 Georgia. VICE-CHAIRMAN HUNTER: Yeah. 3 SENATOR HOLLOWAY: Well, that's absolutely r~dicu- " lous. I mean, it actually helps them to -- And I can't see S anywhere down the road where it would hurt them. !'; VICE-CHAIRMAN HUNTER: No. I'm glad you think that way. I, MR. NASH: Well, education will probably be one of 'J major ones we will have to watch on when we . . . and being 'In" sure that I think we've been limited more than SENATOR. HOLLOWAY: I agree. MR. NASH: helped by the Constitution. SENATOR HOLLOWAY: There's no doubt in my mind about;I it. We could have cured many things over the last twenty years I've been here with a little oid statute .. that -:-'., ~\ ~Z everybody was for, but this kind of stuff precluded us ad- dressing it, really. ,.",. MR. KANE: Senator Holloway, you're referring specifically to these enumerated purposes as having limited the . . SENATOR HOLLOWAY: Generally spea~ing -- Well, I certainly think we ought to give consideration to -- and you writing an article where if we wanted to add wouldn't necessarily have to go the Constitution i'.\\Ji, 22 Iir~ -- , by name without a lot of . and then say "and others" or 2 "not to exclude others" or some verbage in that area. VICE-CHAIRMAN HUNTER: Well, that would be sort of 4 a middle ground, to say the General Assembly can -- 5 SENATOR HOLLOWAY: Yeah. VICE-CHAIRMAN HUNTER: -- provide, by law, for . . . SENATOR HOLLOWAY: But not iimited to. VICE-CHAIRMAN HUNTER: Well. . . -/ SENATOR HOLLOWAY: Say these things are not limited ](J Now, I'm sure that was a political decision because of some 11, hell-raising by those people who were included. ~~",=:r'"" ~ ,~~, U '/ VICE-CHAIRMAN HUNTER: It's better to include them ,:: in the circle ... SENATOR HOLLOWAY: Yeah. Oh, sure. Well, you've 15 ~ got to be practical; we've got to consider something we can l( ~ get passed. We can sit up here and write the most beautiful 2. Robin Harris did that, and he wrote the most beautiful consti- lR tution you've ever seen as much chance of passing it as . . . 19 A gorgeous document. VICE-CHAIRMAN HUNTER: Of course, there is an in- herent problem with that: When you enumerate those purposes, 22 they're strictly construed . . . even though it says that it is 24 25 SENATOR HOLLOWAY: Well, I don't know. VICE-CHAIRMAN HUNTER: -- not an exclusive list. SENATOR HOLLOWAY: Well, I think if you said "not to exclude any other purposes." I think that would cure that. MR. HENRY: I'm not certain SENATOR HOLLOWAY: That's for you all to decide. MR. HENRY: I know, for instance, in Article IX you have .. the General Assembly, the counties -- or local governments -- in general, can tax . . for any public pur- poses as defined by general law or by this Constitution, but not limited to these following purposes. And the court, in a u very recent case, said the General Assembly can tax for these purposes, these thirteen, the counties can tax for these four- , teen purposes. And, if the State cannot tax for a purpose "'('I., IL..,))\h'C" ",.. which it attempts to delegate to a local government to tax for ': "/ i ".-- jf they can't do it, either. So, you're really limited, even in your delegation of taxing power to a local government, by these 'f " purposes, and by the purposes in Article IX. So . . SENATOR HOLLOWAY: Well, that's the reason we wanted you all to give some consideration to the language, if we should go that route. MR. HENRY: Right. it VICE-CHAIRMAN HUNTER: Well, isn't the legal pre- sumption often that if you make a list like that that you in- tended that to be the list, otherwise you woudn't have made it? MR. HENRY: Right. VICE-CHAIRMAN HUNTER: If you meant any purpose, 1",'\(,1;- 24 i then you wouldn't have to mention those few. I' SENATOR HOLLOWAY: I suggest that getting that passed 3 would be a chore. 4 VICE-CHAIRMAN'HUNTER: I agree. :i SENATOR HOLLOWAY: I really do. VICE-CHAIRMAN HUNTER: I won't argue with that. SENATOR HOLLOWAY: What we're doing is letting the ~: courts run our law instead of our elected officials. I'd ',j rather it be in the hands of elected officials any day of the lie week . . twice on Sunday. VICE-CHAIRMAN HUNTER: Okay, we have three things to (I, ;<' .~~;,ylid' .l... consider: the threshold question, which we discussed at ((r,=?!))~"'!c <, length; the title change, of course, needs to be considered; ',-_/ 14 , and then the other section -- or, paragraph, that deals with . . . " " I' the Ih n;':., 'd SENATOR HOLLOWAY: Are there any Confederate widows left yet? IK VICE-CHAIRMAN HUNTER: I wondered 1') SENATOR HOLLOWAY: As I recall -- 20 VICE-CHAIRMAN HUNTER: -- that, myself. SENATOR HOLLOWAY: we appropriated $15,000 for -- 1 "' MR. NASH: I think 23 VICE-CHAIRMAN HUNTER: There are a couple of child 24 brides of old men, I think. SENATOR HOLLOWAY: -- figured that out mathematically, and a soldier ninety years old would have had to marry a sixteen-year-old girl or something. 3 VICE-CHAIRMAN HUNTER: Yeah. Well, I think there 4 is one. ) MR. KANE: Ms. Hunter? VICE-CHAIRMAN HUNTER: Yes? MR. KANE: So far, then, in connection with the purpose or, at least Paragraph I, you would like the staff to conduct a survey to determine what other states have done; ! secondly, to propose some alternative language? VICE-CHAIRMAN HUNTER: And I think, along with ;' r, \ ifl",""J) )('"'' " ~", ,J,! Senator Holloway's suggestion, we need to that need to be . MR. KANE: And identify. Okay. identify the groups VICE-CHAIRMAN HUNTER: . . . consulted or . . MR. NASH: Mr. Henry, you made the statement that, this local option thing, that we wouldn't be involved as much in that? -- in this committee? MR. HENRY: In the local amendments? MR. NASH: Yeah. MR. HENRY: Yes, sir. It doesn't really lend itself to this particular section. MR. NASH: Well, it doesn't lend it to it; but, in ...., .~ ~ ~ what Senator Holloway is saying there, much of that, if we open it up to the Legislature, could -- it'd be statewide !',\U: 26 1 ; rather than local legislation that they have to come up here 2 with and get approved. Maybe we could prevent so much of that. 3 being added to . . . by this committee. And, what he's saying, 4 :: that it'd be done on a statewide basis rather than a local . . . 5 each local group coming up here amending . . to get somethina /; done. MR. HENRY: Yes. That's a good point. It will have f an effect on local amendments to that extent. '-I MR. NASH: Well, I mean, to me, I think it does. J(J That's the reason why I was asking the question . ., 11 MR. HENRY: Um-hmm. In other words, if the General ((~~~~,r-~'~~"" :~~~Ylt:1 J2 u Assembly can define what a "public purpose" is, then when ,. i. someone from a county comes up and says, "We want to tax in " -:'~~~,./ :4 .' order to grant funds to our development authority" -- which \) ., would be a policy decision made by the General Assembly -,-;.: .; (~ ,)!!l , then they could say, "Well, yes, you could do that," under -;, local legislation. Or, they could say, in a bill of statewide application, that every county with a development authority I'} can tax in order to provide funds for their development author- ity. SENATOR HOLLOWAY: We've already done that. 22 MR. HENRY: By constitutional amendment . . . yes, sir. Well, I just used that as an example. But .. 24 SENATOR HOLLOWAY: I introduced the first develop- 25 'L__~~_~_~__!i~t?ority bill in 1957, and . and we made a general l'.\LE 27 constitutional amendment permitting the local governing body ~ to, within these parameters, set up certain things, instead 3 of having fifty-some local bills opening up 4 Local bills scare me to death, because nobody pays ,; any attention to them. Oh, Lord, I've seen some things done h around this country with a local bill that you just wouldn't believe. MR. NASH: That's what I'm getting at, is if we can write this where the Constitution gives the Legislature the i(' right to do that without the local authorities having to come . up here every time they want their own little nit....picking .:) done, I think we'd be a lot better off in this state. SENATOR HOLLOWAY: I've always felt that local bills raising exemptions are unconstitutional as the devil. MR. NASH: And there are plenty of those. ;\ ~ SENATOR HOLLOWAY: Oh MR. KANE: Sixty-five on the ballot this November. VICE-CHAIRMAN HUNTER: Yeah. SENATOR HOLLOWAY: I mean, because the State does even though it's infinitesimal, it gets a portion of those 2l local monies. And for one county to have a $10,000 exemption )', and the other to have two, it's kind of ridiculous, to me, from a legal point. 24 VICE-CHAIRMAN HUNTER: Well, Marcus made the point yesterday that in Appling County, in particular, they're trying to exempt everybody, regardless of age, $10,000 . -" SENATOR HOLLOWAY: Well, we've got a local -- 3 VICE-CHAIRMAN HUNTER: . which means that the 4 !: paW& companies will be paying the electric bills. , I mean the J __ the property tax. That those people will not -- not be doing. o And that goes to all rate payers. SENATOR HOLLOWAY: Sure. We had one local bill pass through I forget the old man's name -- he was in the House ') and highly regarded, and the thing slipped through there. He 1'J exempted all industry in his county. It's still on the books. : I i Local bill. 1~~Y1:t..-1' fI ) ',: MR. NASH: It won't be, necessarily, the power com- (~~~"OT'~ 3 panies; it'll be the landowners who'll be -- __ "-. . .-'." VICE-CHAIRMAN HUNTER: Well, rate payers. MR. NASH: paying the bill in -- l(. .",~ VICE-CHAIRMAN HUNTER: Oh, rate payers pay the bills -- :7 4 I i ~ =' OJ MR. NASH: It won't be the power 1R VICE-CHAIRMAN HUNTER: for -- i'l MR. NASH: companies. 20 VICE-CHAIRMAN HUNTER: No. He meant that they would 21 passed on. '""-- MR. KANE: The power companies have to pay higher 23 taxes, and they would automatically get -- 24 MR. NASH: So will property owners in excess of 2S $10,000, too. r: MR o KANE: And the people in Macon would be paying , higher-- VICE-CHAIRMAN HUNTER: Yeah. MR. KANE: -- rate bills because of the increase in property taxes that Georgia Power is paying out to the county, A is the point. MR. HENRY: Well, this committee -- MR. NASH: They can pass it on; we can't. MR. HENRY: may want to take their title and use it, use methods, and say on a statewide basis or . you i; know, that you can't have .~] In other words, say that all 1.' '.' tax laws have to be uniform throughout the state. Or . I'm not down there in the trenches like you are, Senator, but -- SENATOR HOLLOWAY: Well, what scares me about a lot '. of those things . one of these days we're going to have to l~ : come to it, I'm afraid, but Macon County is spending about $6 a child for school and DeKalb County is spending $150 I believe. What kind of Constitution is that? -- when it's ., " the State's responsibility to .. MR. NASH: That's right. SENATOR HOLLOWAY: Some of these days we're going to -, .., , have to face that. MR. NASH: I wish it could be done when this is done. It'd save a lot of problems. SENATOR HOLLOWAY: I don't know where all the money i !'.\Lt 30 would come from, though; if we have to bring all these other 2 counties up to, say, what DeKalb is putting out. There just 3 isn't that much money. 4 VICE-CHAIRMAN HUNTER: It's a fine idea to let a 5 local government decide what it's going to do for itself when h you have no transfers of funds between governments. 7 SENATOR HOLLOWAY: That's right. VICE-CHAIRMAN HUNTER: But when you introduce inter- governmental transfers you change the ball game. 10 SENATOR HOLLOWAY: Well, of course, the minimum foundation protects us from that to a great degree ... (inaudible). Basically, I am a local-type guy; I like to leave anything to the decision of local. . That doesn't necessarily have to be uniform, from an equity standpoint. IS ,.',) MR. NASH: Weil, Senator, when you're bringing it ,:.,: 'OJ 1~} r:.~ L ,~ all and putting it in one pot, and start putting it back out .') 1I ,",: (X', it leaves the local people from having the option of . . I I' SENATOR HOLLOWAY: Yeah. 19 MR. NASH: And that's where we're at. 20 SENATOR HOLLOWAY: Right. And it goes out in pecu- 21 liar ways, don't it? 22 MR. NASH: It sure does. 23 MR. HENRY: I think you could take the word "method"; 24 and you could limit the methods of taxation, in whatever way you want to, to solve the problems as you perceive them. PAGE 31 SENATOR HOLLOWAY: How much overlap would that have with any other article? There'd be a lot of it, I think. MR. HENRY: Perhaps with Article IX on the . . I think this would be a charge of this committee, David; wouldn't you agree that they could properly take this title and expand on it and reduce what you want to, and make your recommendation? -- and then, at some later date, it would have to be reconciled -- SENATOR HOLLOWAY: The Select Committee -- MR. HENRY: -- with other recommendations -- SENATOR HOLLOWAY: -- would have to homogenize it somehow. MR. NASH: I certainly think we should look at that as a possibility, in this committee, myself. VICE-CHAIRMAN HUNTER: Certainly we need to -- I'm not at all clear, not having studied Article IX, how our work affects them. This needs to be addressed, I think, at the next meeting; there ought to be some covering of that. SENATOR HOLLOWAY: Well, we've got to approach it, I think, on the basis that we believe it's germane to this article to put our ideas in it and let the Select Committee do whatever homogenizing -- VICE-CHAIRMAN HUNTER: Oh, true. SENATOR HOLLOWAY: needed. VICE-CHAIRMAN HUNTER: True. But, that's . SENATOR HOLLOWAY: Because I think it's VICE-CHAIRMAN HUNTER: Apparently what they do hinge~ on what we decide to do, so we need to know SENATOR HOLLOWAY: Um-hmm. That could very well be. ! VICE-CHAIRMAN HUNTER: -- what . . . what those actions might be. MR. HENRY: I think -- VICE-CHAIRMAN HUNTER: Alternatives. MR. HENRY: -- the threshold question, once you answer it, will allow them to do what they would like to do as .. ,, as -- do almost the same thing, is allow the General Assembly to determine what purposes local governments should be able to tax for, and then omit their enumeration of purposes in their article, and allow the General Assembly to come back with : .', legislation, perhaps parroting the purposes that they have and let it be legislation, let it be legislatively enacted l i ' rather than in the Constitution, so that they don't -- They have the same problem, and their local constitutional amend- J'J ment problem is much more immediate there . .,'1) VICE-CHAIRMAN HUNTER: Oh, yes. Are they leaning that direction, then, to -- MR. HENRY: I think VICE-CHAIRMAN HUNTER: a more permissive MR. HENRY: I think they would like to do that. When I pointed out to them that they would have to correlate PACE 33 with your article as to what you were going to do, then they - they want us to draw two options. One would be assuming that you did allow the General Assembly to determine what public purposes. Assuming that, then they could do the same thing in Article IX. But if you intend to keep an enumeration of purposes they will have to do the same thing. SENATOR HOLLOWAY: I don't know why they would, but . VICE-CHAIRMAN HUNTER: Well . . SENATOR HOLLOWAY: I don't know that that's a . Well, they'd have to make a decision of whether or not to do' ~ it, but they sure wouldn't -- VICE-CHAIRMAN HUNTER: No. SENATOR HOLLOWAY: have to do it. VICE-CHAIRMAN HUNTER: No. SENATOR HOLLOWAY: I mean, because that's the pur- poses of multiple committees and getting multiple ideas and as long as it's germane to this article we're on, we ought to make whatever recommendations we want to, without VICE-CHAIRMAN HUNTER: Yeah. SENATOR HOLLOWAY: too much concern with what the ... J other committee does. MR o HENRY: I'm just saying that the posture of the courts right now -- SENATOR HOLLOWAY: I understand that. MR. HENRY: If we could change their mind over there, then -- SENATOR HOLLOWAY: If they decide to go one way and we decide to go the other, it'd be up to the Select Committee ! to put the thing together and make the final recommendations. MRo HENRY: Oh, yes. You're completely independent of that article. Yes, sir. VICE-CHAIRMAN HUNTER: Okay, Paragraph II, Promotion of Agricultural and Other Products, financing disposition of .,, I funds. That particular paragraph is slightly different from the others. I guess that's why it's a paragraph by itself. So I think that needs to be looked at. I would think that could be provided for by statute, but . . . SENATOR HOLLOWAY: You'd better go through a lot of coordinating. VICE-CHAIRMAN HUNTER: Yeah. You two fellows pro- bably know a whole lot more about this than I do; I know I ,'(. know zip. It's MR. NASH: Well, that's one of those things that needs to be done by the Legislature, and have to go -- .-, , VICE-CHAIRMAN HUNTER: Yeah. MR. NASH: -- a constitutional amendment to get it done. And it's got some restrictions in it that have been held_. PA.GE 35 by the court as . SENATOR HOLLOWAY: Well, that's VICE-CHAIRMAN HUNTER: Um-hmm. ,f MR. NASH: But it, the Legislature, had they had the ~ right to have done that without having to write it in the Con- l stitution, it'd been much eas';ter. VICE-CHAIRMAN HUNTER: Um-hmm. I'm sure it would. And you can react to a dynamic situation through the Legislature but you can't through the Constitution. MR. NASH: And it would be just like any other group: There would be a lot of fear if it'd come out of the Constitution, that . SENATOR HOLLOWAY: Of the ag folks that they'd be getting urban-oriented Legislature. And, of course, that ain't so. I'm chairman of the Reapportionment Committee, and I find that largest metropolitan areas? -- in the state? they're not keeping up with the state at all. Everyone of the large ones have got to expand their geography to pick up their necessary numbers. MR. NASH: Well SENATOR HOLLOWAY: The state is, on the whole, 12- 13-14 percent; Atlanta, Savannah, Augusta, everyone of them, -'i' 4 and 5 percent. Of course, the folks are going to the bed- room -- VICE-CHAIRMAN HUNTER: Yeah. SENATOR HOLLOWAY: -- communities, like Gwinnett is doubling. Gwinnett had eighty-some thousand people; it's got 3 160,000 now. MR. NASH: But, then, you have to put the overall picture. They are metropolitan. SENATOR HOLLOWAY: Well, I'll say this: I thought we'd have a hell of a lot more liberals in the General Assembly because of the urban areas; but if you think them bedroom com- munities are liberal ... they ain't. I'll tell you that for I.' sure. I don't think you're going to get the change in phi1- osophy that I thought we would get seven-eight years ago, by reason of reapportionment. I think, if anything, it's going to get a little tighter. VICE-CHAIRMAN HUNTER: Um-hmm. SENATOR HOLLOWAY: Because your Cobb counties, and I ~ . Gwinnett County folks, and Clayton County, they're ... pro- bably they were, but you can't hardly live with them. (Laughter.) 1; MRo HENRY: This Paragraph II, if you'll notice, is also permissive and it's not mandatory that the General Assem- 'I bly do this. Throughout it you have "may provide" -- "the "'j General Assembly may provide," "may create" authorities, "may" do this, "may" do that . .:'l So, really, there's a constitutional protection in that this provision allows the General Assembly to do what t~e ,',',.c[.: 37 want to do in this area without violating other constitutional provision; but this statute, as it exists today, could be amended, repealed, changed drastically, by the General Assem- bly, if they decided to do that. SENATOR HOLLOWAY: Well, nothing in Paragraph II is self-enacting; so it's got to be a statute MR. HENRY: Right. VICE-CHAIRMAN HUNTER: Um-hmm. SENATOR HOLLOWAY: . . implementing it, subsequent statute to implement. And the way this is worded, the statute can be changed. MR. HENRY: Yes, sir. VICE-CHAIRMAN HUNTER: So, there shouldn't be re- sistance to changing this if we did a good job, because, in th~ I I first place, it's been restrictive and, in the second place, it's permissive rather than mandatory. So it's no protection as far as You could lose the program, anyway. MRo NASH: Well, you'd have to . Yeah, you coul9 change it amend the Constitution again to take it out, as far as that goes. . . . VICE-CHAIRMAN HUNTER: Well, what I mean is making this statutory rather than a constitutional provision would not .. would not put anything in any danger. That it '.., . ... isn't already in. MR. NASH: No. j MRo HENRY: There is a -- MR. NASH: The only reason why it's in is because of the interpretation and -- VICE-CHAIRMAN HUNTER: Yeah. " MR. NASH: -- taxation, even though it . . . MR. HENRY: You'd have to retain the portions of it that do cut across the constitutional grain, or cut across ~ other constitutional provisions. But, being permissive, if you retain that, the General Assembly could still do it by law. ,. j" MR. KANE: Mike, do you have some provision in mind that this was designed to overcome? MR. HENRY: Well, it appears that That case, ~:; I believe, was they were . . charging a fee, of certain commodities, and not putting them into the general fund and they were also not taxing commodities statewide; so I think it would probably cut across both the earmarking prohi- bition and the uniformity provision. MR. NASH: Well, the reason why it came into test 1\) was the fact that it was compulsory for all of the commodity; and it did have to go in and then be used -- be restricted as to how it could be used at all. And, they had to amend it, then, to get it accepted. But I certainly What you all don't -- Any way we can help you as far as getting the background on that, we will be glad to do it. We have plenty of background as to why, I';\C}; 39 and how it had to be done, and comply in court. California has a very similar law, if you want to look at it. MR. HENRY: California does? 4 MR. NASH: Um-hmm. VICE-CHAIRMAN HUNTER: Well, this does state that there is no necessity for such funds to be placed in the state treasury or appropriated, is that not -- MR. NASH: It's not put in the state treasury. It's kept by the State, and then SENATOR HOLLOWAY: Is thAt the Commodity Commission? MR Q NASH: Yes, sir. VICE-CHAIRMAN HUNTER: Um-hmm. MR. NASH: And then it's used by the commissions. 'i VICE-CHAIRMAN HUNTER: Um-hmm. SENATOR HOLLOWAY: And you've got how many of them? MR. NASH: Nine of them right now. SENATOR HOLLOWAY: Nine? MR. NASH: Um-hmm. And then the other commodity can enact one by a vote of two-thirds majority, for protection of or, 25 percent of MRQ HENRY: There is a case which resulted in this I'm pretty sure. In other words, they tried to do this by statute, and then MR Q NASH: Yeah. MR Q HENRY: -- a case came up -- 1';\( L 40 MR. NASH: Um-hmm. - MR. HENRY: - and then, the very next year -- MR. NASH: Yeah. ,1 MR. HENRY: -- or, the next general election -- MR. NASH: It came back. It was declared unconsti- () tutional, the original one; and they came back and amended it to where it SENATOR HOLLOWAY: I remember that. VICE-CHAIRMAN HUNTER: Paragraph III, then, would ;U require that some such language would be included if there were an enumeration of If we just said "for State pur- poses," and left that paragraph out, we would run into trouble with Paragraph III, wouldn't we? MR. NASH: Oh, yes; you couldn't. But that would be true of some others when you go through, also . . . not just on the agricultural. VICE-CHAIRMAN HUNTER: Well, there's that one in Paragraph III about the legal fees . isn't there? Yeah. Or, not legal fees but assessments .. penalties. Which is a case of earmarking. MR. HENRY: Yeah, that's it. That's another policy decision that I think this committee has to address, whether the earmarking prohibition is a good policy. Prohibition against it. Which-- SENATOR HOLLOWAY: How many funds do we earmark now? l'AGE 41 MR. HENRY: We've got the motor fuel tax; you've got , this, the SENATOR HOLLOWAY: That's all you need. MR. HENRY: --provides for training. Then you have (Laughter.) Then you have the . . this agricultural thing . the paragraph above has it earmarked. That's all I can recall SENATOR HOLLOWAY: The only difference is: The State doesn't collect those funds. That's not exactly "ear- marking." MR o HENRY: The agricultural commodities -MR. NASH: Yeah. They have the responsibility of collecting it. SENATOR HOLLOWAY: Oh, they do? MR. NASH: The Department of Agriculture does, as a State agent. MR. KANE: Mike, I was going to ask you what changes 1II if any, the Article III committee made with respect to ear- marking? I suppose fuel taxes. MR. HENRY: That was a very delicate issue, as I recall. I think they tried -- MR. NASH: To some people it was very important, I imagine. , " I MR o HENRY: They tried to e~l?_and it to p\J.bJi,cJ:::t;C!I1_~_":'IJ portation purposes rather than roads and bridges, and that met with . . SENATOR HOLLOWAY: Well, I know this: We had some 4 very fine committees, that did some excellent work, and most " of them were chosen from people who didn't have too much political pressure on them, and they did a great job. And they came back to the Select Committee with it last year, and you talk about it getting torn up politically. You couldn't Ii even recognize what they'd done. I mean, the influence had just when you get to that Select Committee, or the Legis- lature There are some folks that have to be reckoned with. MR. HENRY: It came to the Senate floor in pretty i'l good shape, I thought. But. So as not to discourage this committee that every- '- thing's going to be torn apart, it goes through a process . . . SENATOR HOLLOWAY: Yeah; but what date did it come to the Senate floor? MR. HENRY: Well, yes; that was about five days left to go. SENATOR HOLLOWAY: Five days left in the Legislature ., and they wanted to pass a constitutional I wouldn't even _..) have looked at it. I wouldn't have even looked at it, much less try to do something with it. MR. HENRY: In any event, your policy decisio ns will: PA.GE 43 be considered right on down the line as it goes from Select Committee to Judi -- House Judi, to House floor, to Senate. Judi, to Senate floor, and on down the line. So . VICE-CHAIRMAN HUNTER: I'm not still -- I'm not through fighting that battle. So, I'm perfectly willing to to do it again; but . I don't expect much success; but I figure if it's done often enough maybe someday it'll work. Is there anything in the way of staff material that you want on this particular article for the . next meeting~ I I mean this paragraph, III, before we move on. We got paragraph on Grants and Municipalities and the Industrial Development Commission .. are the remaining paragraphs. Don't we make grants to counties, too? MR. HENRY: For roads VICE-CHAIRMAN HUNTER: That That's in some other 4I MR. HENRY: . and bridges. VICE-CHAIRMAN HUNTER: -- article. All right. MR o HENRY: Huh? )'1 III? VICE-CHAIRMAN HUNTER: That is -- Would that be in MR. HENRY: It may be in IX -- I'm not sure. But the grants to municipalities are . I don't think they're provide . VICE-CHAIRMAN HUNTER: (Inaudible.) MR. HENRY: The purposes that you can make funds (l " available for a municipality to spend are not as restricted as 1 they are to counties -- VICE-CHAIRMAN HUNTER: (Inaudible.) MR. HENRY: -- which is for roads and bridges. And that's also not a delegable power. The General Assembly can't grant the county the power of taxation in order to grant funds for municipalities. That was an issue which ! arose recently and resolved. SENATOR HOLLOWAY: (Inaudible) ... local option taxes. MR. HENRY: Yes, sir. VICE-CHAIRMAN HUNTER: Well, it seems to me, just looking at this -- MR NASH: Well, that's. 14 VICE-CHAIRMAN HUNTER: just that the organization of this thing is a little . . . quack, because -- (Laughter.) SENATOR HOLLOWAY: You're so kind. (Laughter.) ]'1 VICE-CHAIRMAN HUNTER: II, IV, and V seem to me just , :'~j ;' more of . I. And only III is really something different. " But . . maybe I'm overlooking something. What did you want to say? MR. NASH: If there's any way we can get this together, I think it is an important issue . this munici- pal versus county, and so forth like that, that someway in PACE 45 -----, ',--i here the Constitution needs to be to where the Legislature can i make a decision on that, without allowing one to do something ,; that the others can't do, and things like that, because we " have too many people now that are utilizing both county and municipal and it's costing taxation both ways. SENATOR HOLLOWAY: Um-hmm. MR. NASH: So I think if there is some way that this issue can (unintelligibie) . . rewrite a constitution here be determined that the Legislature could have that authority to get this straightened out, I think it should be done. SENATOR HOLLOWAY: Well, I think we've got two op- fl' I tions: Leave it like it is or add counties to it . i VICE-CHAIRMAN HUNTER: Um-hmm. MR. NASH: Well, I think -- SENATOR HOLLOWAY: (Inaudible.) VICE-CHAIRMAN HUNTER: Yeah. MR. NASH: I think you should address it . . . if it could be done. VICE-CHAIRMAN HUNTER: Well, I think you're right. If we continue to enumerate powers that that's something -- the inclusion of counties and . . . on the same footing would :1 be desirable. But those grant programs, one of them was just designed to replace something else, wasn't it? -- SENATOR HOLLOWAY: Tell me something. i'.\(;~', 46 VICE-CHAIRMAN HUNTER: in 197-- SENATOR HOLLOWAY: I -- That occurred to me the other day, that I wondered about. In Muscogee County, when c\ they consolidated government, are they a city or a county? -- under the law? MR. HENRY: You'd have to look at their charter. They have both -- SENATOR HOLLOWAY: You see what I'm talking about, now -- MR. HENRY: They have VICE-CHAIRMAN HUNTER: Um-hmm. SENATOR HOLLOWAY: I mean MR. HENRY: They have powers of the two; they have combined powers. So j ~' SENATOR HOLLOWAY: Well, powers don't have anything to do with this. VICE-CHAIRMAN HUNTER: Um-hmm. MR. HENRY: Well, I think they could be granted funds. SENATOR HOLLOWAY: You think so? MR. HENRY: You would have to look at their charter, but my understanding of it is -- and I haven't studied it, you know, in that much detail -- but SENATOR HOLLOWAY: In the home rules, the city is generally a whole lot more exclusive and broader than for t>AGE 47 counties. And, I just wondered whether it was considered a county or a city. MR. NASH: Well, that's the reason why I think it's important that we perhaps look at this, because we're getting more and more counties that are being covered up as cities. And, as long as it stays like it is, we're going to restrict them ever, perhaps, getting together and consolidating ... their school systems and all of this; it's just quite involved So, I think if we can address this issue it'd be a very one that we look at. VICE-CHAIRMAN HUNTER: Okay. Do we need to discuss the Industrial Development Commission section? . before we go back to Paragraph III. MR. NASH: I would -- VICE-CHAIRMAN HUNTER: Today? I mean, aren't we -- MR. NASH: Well, I don't mean VICE-CHAIRMAN HUNTER: I know we do, but -- MR. NASH: -- discuss it; but I think we've got to do some research work on it, because it's VICE-CHAIRMAN HUNTER: Well, this is the -- MR. NASH: it's getting -- VICE-CHAIRMAN HUNTER: -- time to say so. MR. NASH: It's like all the rest of them; it's getting so many exemptions and so many different things on it, i so -- . ,;:. 48 VICE-CHAIRMAN HUNTER: Um-hmm. MR. NASH: And, there again, you've got county and 3 versus cities, involved in industrial development. One of them ~ can do one thing and tha other do something else. It's not right for the taxpayers to be supporting it in a city and then turn around and .the county not be able to do the same thing. I think there's problems in this area that needs to be SENATOR HOLLOWAY: Well, the purpose of this law originally -- I'm very familiar with it -- as a matter of fact, ;u I wrote the first . (inaudible) -- it was called the Payroll -, or Development Authority. The whole purpose of it was to increase But, since that time, we are financing warehouses I .,~ I' -,.... under that thing . . It's gone way off -- MR. NASH: That's right. And there's lots of exemp- tions g~ with -- SENATOR HOLLOWAY: Warehouses MR. NASH: -- (inaudible) -- SENATOR HOLLOWAY: -- (inaudible) -THE COURT REPORTER: I can't get both of you at the same time . ., , VICE-CHAIRMAN HOLLOWAY: One at a time. -,.',' MR. HENRY: I think this Paragraph V gets around the constitutional restriction of . . . that . . . the purpose of loaning money, that is not a power for which the State can tax. !'ACE 49 And this says that the General Assembly can provide for taxation in order to implement and carry out the pnrposes of this Commission, which is created to make loans to be secured by second mortgages. So, this is a loaning agency, I assume. The State cannot get into the loaning business. There's a case where they've created a loan board, but they created an independent authority where the authority issues revenue bonds and, from those bonds, they use that money to make loans, second mortgages. And the court said that the money that's being loaned is the money of the authority itself and not the .' money of the State. So, this says that the General Assembly can tax in -. order to provide funds to make loans to this Indus trial De- velopment Commission and would cut directly across and would ! . not be included in any of the other thirteen purposes. So, I think that's the reason for this. Whether this commission is still viable and is still i working, I don't -- I don't know the fact. But, certainly, if i I you want to continue the Development Commission they would hav~ \! to have this provision in the Constitution. SENATOR HOLLOWAY: I'd like some background on why this paragraph is in here. It-- MR. NASH: I don't see why it's under this part, other than that it's taxing the people to -- SENATOR HOLLOWAY: Well, something 1,.1,1, 50 MR. NASH: -- to pay the bonds that are being sold on this thing. J SENATOR HOLLOWAY: I don't know what the Industrial 4 Development Commission is. Does anybody? MR. NASH: Not for sure. MR. HENRY: Is that -- That's not -- VICE-CHAIRMAN HUNTER: (Inaudible.) MR. HENRY: -- the small loan to SENATOR HOLLOWAY: Well, I don't know whether it's a mortgage loan group for homes, or . . . I don't think it's ; i that. '" (t::j))t"""," . ,r/ , ,I " MR. NASH: I think it's separate to homes and the one they amended this last year, to put agriculture under it. SENATOR HOLLOWAY: Yeah. Yeah. MR. NASH: That's a separate one, I think, from this one. This is strictly on industrial, here, It may be working on the same system -- I don't know. But . 1'1 SENATOR HOLLOWAY: Well, this doesn't apply to local industrial . . . MR. HENRY: No. No. -'1 SENATOR HOLLOWAY: authorities that they've ,. ..f set up, either. I just don't know exactly what this was de- signed for, myself. Can you all find out for us? MR. HENRY: I can find out. VICE-CHAIRMAN HUNTER: Yeah. All right, well, it seems to me that for our next meeting ~e need to be prepared to discuss the threshold question, whether . . . to eliminate methods from the title or add methods to the content . . and, our interest in . in Paragraph III, revenue to be paid i.nto the general fund . and then, I suppose on the theory that we would accept a permissive thing, what parts of these enumerated things would have to be ... constitutional rather than statutory. Until we decide that issue, it seems a shame to spend a lot of research time on . . . on the purposes here. Now, that that is my thinking. I'll ... open to suggestions. (No response.) l ~ .l What you could provide us, without a lot of work, would be helpful. But. MR. NASH: Well, would it entail too much work if the staff provided us, ahead of that meeting, their interpre- tation of what each one of these possibly wouldreach into. In other words, the agricultural part, what would have to be done if it was taken out of the Constitution. This would give us some background to work from. VICE-CHAIRMAN HUNTER: Yeah. MR. NASH: If it could be put in 80me kind of a . . ,'\1;, 52 some reform that we could look at. MR. HENRY: If you took it out, under the present .3 posture of this section, you can pretty well be sure that 4 you're taking away a purpose for which taxes can be spent. If you want to change the posture of this section and state that ' for general public purposes . (Shakes head.) MR o NASH: In other words, what I'm saying: Can you write it in the Constitution where the Legislature can tend to that? -- and still keep it in effect? MR. HENRY: Write it in the Constitution? MR. NASH: Write the Constitution in such a manner that gives the authority to the Legislature, to handle this, rather than writing it in the Constitution. '<) MR. HENRY: I think you could certainly try. MR. BASHAM: Would any other section of the Consti- tution impact on that? If you would say for public purposes as determined by the General Assembly, would other sections of the Constitution be prohibitive of that? MR. HENRY: Well, the local government taxation power, you'd impact that. You'd impact the gratuity section. But, as long as you retain the gratuities prohibition, I don't 1 ' think the General Assembly could determine that a public pur- -, ,, pose was to grant to MR. KANE: I think that the only effect of the other provisions would be limiting to the extent that these provisions are 'limiting. PACE 53 MR o HENRY: Right. MR. KANE: Otherwise, you'd have a more open field. ,1 SENATOR HOLLOWAY: I think . . . Well, of course, our Subcommittee is charged with this article. And we ought to reflect our thinking, regardless of overlap. I do think it might be well to go through the Constitution and note where we have such overlaps. That's the information we would need - at least be knowledgeable that it's there -- and what we do with it, consider what effect it mayor may not have. VICE-CHAIRMAN HUNTER: Well-- SENATOR HOLLOWAY: That wouldn't be too many areas, ' I don't think. .+ VICE-CHAIRMAN HUNTER: Yeah. We -- We need to know which of these enumerated powers are in there because of some other section. SENATOR HOLLOWAY: Um-hmm. VICE-CHAIRMAN HUNTER: If at all. I mean, it may be that that's not the case. But if they're in there because of some other section, then our changing this will not make those legal. MR. HENRY: Um-hmm. SENATOR HOLLOWAY: Well, the only thing it would do '\ ~ ,f is bring it to the attention of the Select Committee. VICE-CHAIRMAN HUNTER: Um-hmm. !','l.U' 54 SENATOR HOLLOWAY: But I do think in our delibera- 2 I tions we ought to know where we are involved in another sec- 1 tion; and I don't think it -- ,j VICE-CHAIRMAN HUNTER: Um-hrnm. SENATOR HOLLOWAY: would be too much problem to look through the Constitution and find out where is germane- ness in two separate articles. MR. NASH: I think we would have to address every bit of this one on one as to what we would do with it; once we got the purpose of it and set up as to, really, what the Con- stitution should have in it, then we'e going to have to deter- mine each one of these what effect it would have on it and whether it could be turned over to the General Assembly to j,-! enact it or do away with it or whatever they wanted to so with i .:, it. So I don't think we can pass over anyone of these; I think we're going to have to go to each one of them one on one VICE-CHAIRMAN HUNTER: Um-hrnm. MR. NASH: -- to really determine, once we decide what -- VICE-CHAIRMAN HUNTER: Yeah. li MR. NASH: how we want the Constitution -- VICE-CHAIRMAN HUNTER: Sure. MR. NASH: whether we want it -- VICE-CHAIRMAN HUNTER: Yeah. MR. NASH: to be restrictive or whether we want i't\CE 55 to give the Legislature . . . the opportunity -- SENATOR HOLLOWAY: We'e got to recommend a lot of statutory law if we MR. NASH: That's right . SENATOR HOLLOWAY: . open that -- MR. NASH: We'e got to determine whether we'e going to come back to amend the Constitution every time we'e going to do something or whether we're going to -- VICE-CHAIRMAN HUNTER: Okay, what's a reasonable amount of work to be expected to be done between now and the 14th or the 16th of July? We're talking about. MR. HENRY: Can I ask Senator Holloway one question? Assuming that we did reverse this presumption and say the State can tax for all general purposes, as determined by the General Assembly, do you think it would impede the budget process, by having to go in and say, "We're going to grant X amount of money to schools under . " and then have to put "for educational purposes" -- spell out the: purpose that ,I; you're giving -- that you're spending this money? Do you think it would impede the budget process, or does the budget process pretty well know what they can do under the Constitu- tion and they don't have to SENATOR HOLLOWAY: I don't think that would be any problem at all. Generally speaking, this money isn't appro- priated Any bill that authorizes appropriation money is null and void or lays dormant until such money is appropriated, in general, at least as far as I know. We have all kinds of authorizations to appropriate money for this purpose and that , purpose; I think we passed one for the teeth or the health or something last year, but. But really, it lays dormant until it's appropriated. I had a bill to put a sunset provision of those . . . because it's just politics; you know, you tell that schoolteacher, "Yeah, we'll go to -- to $2 for 'I a ceiling and .. " you know, up in the money, and you make them happy and they go on off, but then they do it every year and those things are still on the books, still unfunded, still just a a weapon, so to speak . . . continued . . . lobby~ VICE-CHAIRMAN HUNTER: Do you feel like you have ,, }I" enough information now that you need to be working on for the next meeting? I know we can't do all this. It's going to i', have to be like frying an elephant, but . . MR. KANE: Do you have any questions, Mike? MR. HENRY: Mel had talked to Jack Morton this morning, and we had thought that perhaps where the subcommit- tees wanted it we could have someone come in and speak on a particular issue, either from the Tax RefcirmuCQIiunission' or outside the Tax Reform Commission. SENATOR HOLLOWAY: Well, bear in mind we'e looking for answers not problems. We'e got to VICE-CHAIRMAN HUNTER: Yeah. SENATOR HOLLOWAY: .. find somebody PACE 57 ~-- --~---------, that's got i some answers. MR. HENRY: Well, that's -- .\ VICE-CHAIRMAN HUNTER: Well, John Keith had done some work on the grants; if you want some background on muni- cipal and county grants. He might be a resource there, if you want to know more about that. MR. NASH: Well, if someone has some answers for us on this county-municipal situation . . VICE-CHAIRMAN HUNTER: Um-hrom. MR. NASH: . . . I think that's more important to us the grants; we'e got to determine whether they're allowed to have grants equally or otherwise. -, VICE-CHAIRMAN HUNTER: Um-hrom. MR. NASH: And I think this is what the Constitution : C needs to do -- VICE-CHAIRMAN HUNTER: Yeah. MR. NASH: -- is say whether or not they have a \1 right to do this, and then let the Legislature say whether they should have a grant for it or not, is the way I look at it. Is determine who has the right to be taxed and for what purposes; and then how these taxmonies~dah'be used, I think, has to come back to the elected officials. But, I think we've tried to write it all in the Constitution, and it just doesn't work that way. It keeps them from doing things that should be !'\<,l; 58 done; likewise, it brings in monies that are used for other purposes that probably the Legislature intended . or, even ~ when it was written into the Constitution, was intended for ,i other purposes. SENATOR HOLLOWAY: Well, I feel this way: It's a different ball game now than it was some years back, with the reapportionment laws have. I'm satisfied in my own mind now the Legislature, the elected representatives from the multiple geographical areas, is the only body to rewrite the Constitu- tion of Georgia. There's a lot of constitutional conventions and all that sort of thing; I just think that the only fair body to rewrite the Constitution of Georgia is the Legislature of Georgia. And I'm in favor of constitutional conventions and the I was on the group that Carl Sanders appointed to rewrite the courts throughout -- and accepted. But, having served with some of those appointed bodies to write the Con1, "l: stitution, I'm firmly convinced now that the Legislature is the one that should put the final stamp of approval to what is submitted to the people. In my :OW,J1 mind . MR. HENRY: I think one thing you may want to bear ,. in mind -- and I hate to belabor the point, but -- the fact that a state constitution is a limiting document and not a , ,' power-granting document. And so what you want to retain in here is limitations which you wish to IDmpose on the General Assembly. And there's really no reason to authorize them to !'ACE 59 do something. They look to the Constitution for limitations, not for authorizations; they have inherent power unless other- wise limited. You know, that's such a well-known fact I alway .1 hate to bring it up; but sometimes to keep, you know, when people begin to discuss the Constitution they begin to think in matters of, "Well, what do we want the General Assembly to do?" I think you should reverse that and say, "What do we not want the General Assembly to do?" MR. NASH: Well, I think what's happened, though, is in the Constitution now, it limited; but all we did is just ! said, "This is what we want to do," so we'd come back and writ~ it in the Constitution, instead of the General Assembly having: an opportunity to enact what we did do in the Constitution. And the people hold them responsible for making some of these things rather than coming back and writing the Constitution; most of the people that vote~ on an amendment of the I Constitu- ! i tion doesn't understand what they're even voting on in the i first place. Practically everyone of these that been put in there, I'll bet the people that voted for it had no idea reall* what was put in there. Because they weren't informed; there was just a summary there, and it was written to either pass it or defeat it, and that's the way it was accepted. So I think the shorter we keep the Constitution, and -- and certainly limit their power to do certain things but! , '''::', don't limit it to the point we have to come back and amend the Constitution every time the public feels like they need some- , thing. -' SENATOR HOLLOWAY: Of course, that's the very phil- . ~ osophical decision we' e got to make right off the bat. And, based on changing what we'e doing. We'e got that decision to make right off the bat. There's no law that says we can't change . (Inaudible.) VICE-CHAIRMAN HUNTER: Well, that's our task. And ,) I think we can adjourn for today. to SENATOR HOLLOWAY: I so move. !: MR. NASH: Second. (Whereupon, the meeting was adjourned at 12:20 p.m.) -jgp- ~ .1 C E R T I F I CAT E I, J Gary Proctor, CCR No. B-259, do hereby certify that the foregoing 60 pages of transcript represent a true and accurate record of the events which transpired at the time and place set out above. lq 1, INDEX Committee to Revise Article VII Subcommittee Meeting Held on June 26, 1980 SUBCOMMITTEE MEETING (Procedural), 6-26-80 Section III: Purposes and Method of ~ Taxation Proceedings, pp. 3-5 Paragraph I: Taxation; purposes for which powers may be exercised. pp. 5-11, 15-34, 40-44, 51-56 Paragraph II: Revenue to be paid into general fund. pp. 6, 34-40 Paragraph III: Grants to counties and municipalities. pp. 43-47, 57-60 Industrial Development Commission - Deleted. pp. 47-50 Scheduling of Meetings. pp. 11-15 rr--- .... ' .. --- .. - . _ - _.._-~--_._...- - - - . PAGE 1 , - ,I II J STATE OF GEORGIA 4 5 COMMITTEE TO REVISE ARTICLE VII () of the 7 0 CONSTITUTION OF GEORGIA <) i,,_ 10 Subcommittee on State Debt 11 .'2.".: 'o" o. 12 "~' @/~,~I t~_ u :~ U! IlJ Z ~ a z I7 ,<,' ~, I ,~ 19 ' 20 21 )) Room 337-B State Capitol Atlanta, Georgia Thursday, June 26, 1980 11:05 a.m. - - -------- ---------------------- --------- ---------- --- PRESENT WERE: PAGE 2 -~-- ----- -- -------_._-_.._------ -- ----.-_._---------.-----------, 2 SUBCOMMITTEE MEMBERS: 3 MARCUS COLLINS, CHAIRMAN CHARLES DAVIS 4 OWEN FUNDERBURG KERMIT KEENUM SENATOR JIMMY LESTER WILLIAM NIXON (, RANDOLPH THROWER '7 I SELECT COMMITTEE STAFF: MS. VICKIE GREENBERG ') I 10 'z" 11 ~- o 0w 12 : ~~~SY/!t~d'''. ~~14 ,_ -/, <\ 1: 15 :> I':' u: ::> 1() ~~ w a I OFFICE OF LEGISLATIVE COUNSEL: DR. CYNTHIA NONIDEZ OTHERS: CANTER BROWN JACK MORTON 21 23 __ ......- . PAGE 3 . _ - - - - _ .__. _ ... _..__._---, I PRO C E E DIN G S MR. BROWN: The basis of my review of the debt in . 3 terms of the types of changes I feel y'all could make without -f really making any substantive impact on the state debt ~ provisions are all included in the draft of an Article VII (, revision which would have been mailed to you toward the end of last year. That was never intended to be any final draft of an I, article but just to show the types of changes that I felt and some of the other members of our office thought ought to be lil made without any major impact on the Finance Article in a V) Z l! ;. substitute way. ::> a. ~ I.! ~..~ u CHAIRMAN COLLINS: Canter, since you do have a ..:..'6Vl? ~ ((~L5)) f j..c!,-"'''' proposed draft or a working draft we want to call it instead \ ......, " ' 1/:' '-~ ,~. of proposed. Before these committee members leave, could they ]) ~ come by your office and pick up a copy of it? '.? ,c< . j f, .,-3" copy made? r.,) Have you got a < j. ~I MR. BROWN: Yes, sir, we'll be delighted to do that j> or to mail it to anyone, really whatever the committee pleases. )i, I'm looking to see if I have one or two extra ones here that W at least we might could have around the table. This is one. . ~~ ..- .!l Let me just set it over here beginning at the bottom there. Let me see if I can find -- ::3 CHAIRMAN COLLINS: What time is our meeting going to :>1- be on the 24th? MR. NIXON: Ten o'clock. MR. BROWN: If I could, Mr. Chairman, what I'd like 2 to do is just go through the debt provisions with you and 3 explain generally what they relate to and then to indicate to 4 you the types of changes that I feel could be made in a more or 5 less nonsubstantive way and I'd also like to attempt as much as o : I'm able to identify to you what I think the more controversial , issues which you'll be facing will be in each of those x provisions. CHAIRMAN COLLINS: That would be fine. Go right 10 ahead. 11 ~ MR. BROWN: Of course the debt provisions are found o" Q. ~ 12 ~at Section III of Article VII. The first paragraph relates to ~ '0 I ~~ I":;''}.~~ .. r~..'!D ~ the purposes for which debt may be incurred. // I ~~ :;/'1 J4 ~. As a general matter as we go through this debt I. ,n 1': ,r<:,provision, I think you will find several series of overlapping I (J ~ provisions. Th;i.s was done because the original provisions in Q z. 17 ~ the Constitution of 1877 were extremely conservative with IX regard to state debt to the extent that as a practical matter !Y it prohibited state debt other than for certain extremely 20 limited purposes. Over the years you'll see a gradual -- 21 provisions that indicate a gradual loosening of that very ), conservative stricture until finally in the early 1970's we've .?3 authorized the state to issue general obligation debt for 2~ certain purposes. When these series of changes were imposed upon this article of the Constitution they were never really PA(~E 5 reconciled and consequently I think you'll see as we go through here a good number of provisions that simply just become obsolete because they have been superseded by this series of changes over the last 100 years. In the first paragraph I think the major change that , " you can make of a nonsubstantive nature is to simply reorganize that provision where it's readable. K Some lawyer, who apparently was being paid by the 'i word, drafted this the best I can tell and really let himself 10 go. '..:' 2: It ;:: Yo ::> a As you can see by the draft that is in front of some a possible reorganization of the Essentially what this does is split it up into two Actually, I gues~ it splits it up into three, four, It splits it up into a whole series of them. Just to break out the various types of provisions that -:'- 17 ~are located in this one broad paragraph, the first one that I )K propose to you is a general provision relating to purposes for '9 which debt may be incurred which is the same as in the present-- .'0 This is the original provision back in the Constitution of 1877. 'As you can tell, it generally relates to why we can.borrow'1l\oney, to repel invasion, to supply temporary state deficits under certain circumstances and to issue general obli~ation debt for certain purposes, generally to acquire, construct, develop, ,..::, extend, enlarge, improve land, waters, properties, highways, buildings, structures, equipment or facilities in the state. It also authorized guaranteed revenue debt for certain purposes. I've lumped all of those provisions into one paragraph in terms d .of what we're authorizing. I suggested to you the creation of a second paragraph (0 then which would contain the limitations on the issuance of debt for those purposes. s In a number of provisions in this section of Article <) VII we define annual debt service requirements. Time and again lO we state that these are such and such. I'm suggesting to you '..:J Z 11 ; the creation of a single provision which would define the term c~-' ~annual debt service as related to the provisions in Article VII. f- ~That's found in the draft that again some of you have in front ,. of you on page 31, line 14. This is ess~~tially the same 1:' '~language as is already mentioned, as I say, time and again [(, ,~throughout this section of the Constitution. c 1, 1.', ,"t: I' I've gone on from there, as you can see, generally I i~ just to track the language that's in this provision relating to J'! l1mitat;ions. 20 You'll see on page 32 at the bottom here's the first _11' instance where I have omitted the language defining debt , .) services because it's already been defined in this draft on a ~.' previous page. )I I've tried to adopt here the rules of style which have , been adopted by the Georgia Code Revision Commission for use in PAGE 7 the new Code of Georgia of 1982. The Code Revision Commission , ihas encouraged our office to already begin drafting everything i! we draft pursuant to those rules of style. In that regard we "~ had 18 million dollars spelled out. We now just use the arabic numerals. We are also attempting to eliminate provided (, howevers, provided furthers, notwithstandings and to just attempt to just reconcile the provisions using simple, plain ! English. We've had a good deal of success in the General tu Assembly in the last several years in encouraging this format, -, z 11 ~particularly Senator Lester and Mr. Collins have done that in o Q. J~ ~"' their revision of the Revenue Code and the Alcoholic Beverage i.'\)"\~~.":~'L\.~..ic:):1<.!\j/,--c-o-o-.."," ~' Code, ~ both of which have just been done in the last year or two I: ~ using these same guidelines of utilization of simple English . 12 "~' which could more naturally be located in statutory law wherever ~ .. j,POSSible should be left to statutory. An example of this is 14 ~in these provisions on debt specifying what state offices r" 15 ~certain debt payments are to be made to. State law does provide :">" 16 ~that those payments had to be made to the Director of the Fiscal o z 17 ~<' Division and really, in my opinion, there's no reason for that 1~ ,type of thing to be in the Constitution as such. There are 19 other constitutional provisions which refer to where funds will 20 be paid, in any event, which is into the general fund. Again, 21 there are references allover page 34 tcsinking funds which I 22 believe you will find are generally authorized. I've just gone through on page 35 of the draft again 24 I trying to take out language that was just redundant, you know, I I 25 !, "No appropriations shall lapse It and "No appropriations shall u . ._.... -- -_.__ . ~ .~--- ~---.----- _-~.----._- PAGE 9 be continued unless " and all this. I just think you'll '1 find that it's really -- Just saying it once will nail the lid 3 on the coffin. You don't have to keep banging away at it. On the bottom of page 36 of the draft you'll see a Ii s I; lot of language deleted here relating to the subordination of I (, !obligations. You see that type of language a9ain repeated time 7 and again throughout the debt provisions. A simple -- The 8 ilgeneral rewriting of this section, which would include a simple i , 9 i provision relating to debt subrogation, I think, would take care; 10 of all of these various references to state debt and you'll see i ~, z II ~this eliminated in several occasions here. Again, this was o,. ,(""VI 12 ~brought about by the nature in which this section of the (~~);"~~ ~ConstitUtiOn was handed down to us. And that is, on a number of \< .--"/'J I "- 14 ~occasions completely distinct and separate types of debt :I: 15 ~provisions gradually becoming more liberal were superimposed :'", 16 3upon one another rather than integrated into one another and a Z < 17 ~I think your efforts in terms of integrating those provisions J8 [lcan eliminate provisions like that. 19 On page 37 of the draft we have again broken out a 20 specific type of provision which related to the prohibition of 21 .:certain types of contracts for the assumption of debt. This " " particular provision arose when the state did become more ), _.) ,liberal in authorizing general obligation debt. A lot of the language that was used to prohibit the assumption of certain "..,..l types of debt that were already on the books related more to PAC" 10 transition into this new way of financing state debt. As you'll 2 'see on page 38 of the draft, we're talking about September 1st, 3 ! 1974, a full half page of text there. I think you'll find that 4 ! all of those transitions have been fully completed now and you Ii 5 ,!i really won't need any language like that. " Again, we've got language on page 39 relating to .., I funding debts. You'll find a single provision relating to 8 funding debts and sinking funds, I think, can take care of all 9 your references to that. 10 The language at the bottom of 39, again, I think II "z ~you'll find is generally language that was used in the o "- ~ v 12 ~transition in the early '70's to general obligation finance. @r~~ We finally made it to Paragraph II here. If I could 14 ~real quickly, just an overview again of what I'm suggesting you t;; J: 15 ~can do to Paragraph I without changing any of the substance of ~, '::"> 16 "~the paragraph relating to state debt limitations. I think you o z 17 ~will find a number of provisions that can be eliminated because 18 ! they duplicate one another. I think you can reorganize the 19 Iii text of the paragraph so that it's more easily understandable, 20 you can more easily find the substantive provisions you're 21 looking for and I think you can adopt the use of just simple 22 I English which will clarify the meaning a great deal. Yes, sir. MR. NIXON: Can I ask you a question? Over there on 24 page 40, the provision has been struck on line 8 there which says " the term of the funding or refunding issue shall not PAGE 11 rr------~~--------------------------~--------------------------------------, II ' I il extend beyond the term of the original debt or obligation and 1 Ii .2 i: the total interest on the funding n and so forth. I mean, i II I!:i I'm a -- I wasn't a state auditor when this was passed and , , ,I ,iessentially what it means is if you refund an issue under the ) old provisions we can't refund for any long than the term of th~ 6 toriginal debt. In other words, we've got a loan of 20 year 7 bonds. We've gone five years. We can only issue then at that is point in time a 15 year bond. Now you've struck that provision. 9 Now I don't know whether it's taken care of somewhere else or 10 whether the General Assembly intends -- wants to do that or not.: -.!J l: 11 ,'"0".-, MR. BROWN: Let me mention one thing again. 12 I/ 16 '.~, o MR. BROWN: I think this is one of the two provisions Z 4: 1-: ''""we talked about late last year and I think we both agree that 18 ! they need particular scrutiny. I hadn't intended by this really I l~ : to say you just absolutely have to make this ch~nge and not tha~ 20 : one. I was just trying to show the types of changes, I thought~ that you could do without even venturing into the substantive conflict and I hadn't intended to inadvertently repeal a 23 substantive provision like that. I think it was just my JA , mistake. MR. NIXON: I remember our conversation. I just ]';\(;[' 12 i:1 wanted to bring it to the attention that this is being done. 2 .!We didnlt want to strike it without understanding -- 3 MR. BROWN: Please let me underscore again that in 4 terms of using this text as a basis for your discussions in 5 I terms of providing it to you for your own review, all lim trying 6 to do here is show you the types of changes and reorganizations 7 and deletions that I think should underlie your efforts and s that can be done without reeking any damage upon the integrity 9 'of the debt provisions. I think there are some very 10 substantive and controversial issues you will want to face, but ~ "z II ~I really had not inteded to deal with those in this draft at o "- ~ 12 ~all. ~r ~ CHAIRMAN COLLINS. When you qet throuqh with this 14 ~draft are you going to discuss those with us so we need to <0: 1: 15 ~know what we need to think about? ':J ,:t: :::> 3 ](J MR. BROWN: Yes, sir. oz < 17 ~ CHAIRMAN COLLINS: Good. IE SENATOR LESTER: Do we have any more copies of this 19 i draft? 20 MR. BROWN: live got two copies of a clean text that ,, .::! won't show the underlines and the strikethroughs. I would have ,) 'provided everybody copies, I just hadn't realized that lid be making a presentation to y'all today. CHAIRMAN COLLINS: I did put Canter on the spot 25 because we didn't have an agenda, we didn't have anything to i-:_ _ ~ ~~_~ ~ ~._~ ----------~------------- PAGE 13 1 ~~~~~~~~~;~~r;~~;-~~~~~---~ knew he~d-done -~;~i~~;~--~~d I-f~~~ :: like maybe if this conunittee would like we would go through- 3 this and if we decide we want to use this for a working draft 4 to where we can begin to get the bonding companies and other 5 people that's interested to tell us what parts of it they think b they couldn't live with it would give all of us an opportunity 7 to have something to go to work with. SENATOR LESTER: Well, we've got to start somewhere. 9 CHAIRMAN COLLINS: If we don't have a working draft 10 we won't know whether we can agree or whether we can or can't <.:l 11 gmake these changes and this is more or less just something oa. w 12 ~being brought up for us to look at and we're going to decide (,,,~~~'i-Fj__~}"J')/~0J~~. ~~~ today whether we want to use this as a working draft and if so, \,'---//1 I '-- 14 ~ then do we want to contact the bonding companies and see if a 16 ~keep from affecting our bond rate and things of that nature. az- . w @ r ~talte q~ 12 a'. CHAIRMAN COLLINS' We're going to go back -- If we this we're qoinq to back and qo throuqh it section by 14 ~section and have an opportunity to object to any of the changes, ~ J: 15 ~any suggested changes in the working draft too. a'. => 16 .'Z" ,~ MR BROWN: Senator, please don't misunderstand that Cl z 17 ~ I'm here trying to be expert in state debt. I'm not by any 18 means. I have a little acquaintance with the constitutional 19 provisions, but I'm not trying to tell y'all I'm an expert. 20 I think the reason Mr. Collins wanted to use this 21 !this morning is that although justifiably on state debt 22 I think your committee is going to want to be extremely cautious 23 and careful, I think what he wanted to illustrate to you was 24 that even within that caution and that care, that you can make 2~ 'a qreat number of chanqes to improve the article even without changing the substantive provisions. PA(~E 15 - ------ - ----------~- - ---------1 All I'm trying to do in this very quick run-through of this draft that I've got is to 3 illustrate to you the types of changes that I think could be -+ made, not specifically each change but the types that could be made even with the subject that's as sensitive as the state debt provisions of the Constitution and I think you'll see that -, you can in the end easily eliminate half the text just with 8 'these type changes. ') CHAIRMAN COLLINS: Senator, some of the substantive ]0 changes that I could personally vote for, if we could get them "r. IJ ~through the General Assembly too. o "'- ~ 12 ~ SENATOR LESTER: We'll direct our attention to those (~~j1r""'" ~at ,~'fl!-l.(<1 ~ the proper time. '---~ 14; ~ CHAIRMAN COLLINS: Yeah. I 15 .:> MR. BROWN: As soon as we leave this meeting I will I !~') :'":) I J() r~:!J make copies of this available to anybody in my office, plus I'll!I z 1[;.~send all of you copies of it. i MR. KEENUM: We' '11 get copies reflecting the changes 19 : themselves? MR. BROWN: Yes, sir, I sure will. There were two II sets. ~- __ I Each member of the Article VII Task Force received this 22 ,complete draft, both the clean version and the striked and 23 I underlined draft at the end of the year. I would have had them I 24 Ihere today if I had been aware y'all were going to use them and I certainly will provide them just as soon as I can today. ['A,;]: 16 - - . - - - - - rr---------~----------------------------- -- I Ii Paragraph II of the present Constitution relates to Ii',I 2 II the pledge of the full faith and credit of the state to II,i 3 ilvalidation of debt. As you can see in the draft, those of you II I. 4 i!who can see it, I really haven't suggested much change in that 5 provision. 6 Paragraph III relates to the Georgia State Financing 7 Investment Commission. I think there you have an opportunity 1\ 8 !Ito radically change the provision and permit it to be handled 9 by state law. I think in any event, as with all these 10 provisions, you're going to want to be extremely careful in . ~ \ <."cp'Y~-!_.t:/J-)/,\-~,,!om1'!2!' --- 14 ."~~.' I t r think aditio you nall w y ill want the Sta t to e tu of rn some Georgia substantive attention, has been extremely but ~I conservative in how it permitted the General Assembly to act in < 1: 15 ~ that area. <:t: ::> 16 ~ Paragraph V of the present Constitution relates to Czl <: ]7 ~construction. Of the previous four articles I think you'll fin~ 19 that in a total rewrite of this section of the Constitution 19 you won't need this construction. This is the one that tells 1U you how to read those paragraphs relative to the rest of the 21 section. I think a careful draft of the whole section will ,) , iintergrate the provisions and you won't need a construction. Paragraph VI of the present Constitution prohibits .>+ the state from assuming debts of local governments essentially. That, again, is a very substantive type provision that I think r....-~--------"_---~----__~-~~-_- Ii iiyou want to pay some attention ,i !i ------.--~--- to. Most states don't have that 2 !type provision, Georgia does. I guess to a certain extent, I 3 particularly during the Depression, it stood the state in good 4 stead, but it is an area of substantive interest to you. I have 5 proposed the elimination of a great deal of verbage relating to 6 : depression amendment to this paragraph relating to the assumption 7 !of indebtedness for highways. In checking with the Transpor- 8 tation Department, they don't feel that provision is any longer 9 ! needed. 10 Paragraph VIII of the present Constitution relates to 'z" 11 ~payment of -- Well, Paragraph VII makes a criminal penalty for o a. '-' @ ,,~.. ~ ~sv 12 iprofiting from the use of public money. Again, I think you will find !:hat lends itself toward statutory treatment. It is 14 ~against the law by statute and I don't think you really need < T. 15 ~the criminal provisions in the Constitution. '";:> 16 .~.. az <: 17 ~ bonds. Paragraph VIII prohibits the state from paying certain This is a hundred year old prOVision that I think is 18 , really outdated. It relates to Confederate bonds generally. , 19 The federal law-prohibits the redemption of those bonds. In 20 any event, you don't need that in the State Consititution. 21 Paragraph IX authorizes the sale of certain state 22 I property. The proceeds of that property sold should go to 23 retire the debt. Essentially, this property is the Western '.) and Atlantic Railroad. Again, I think you'll find that any 25 discretion that needs to be left could be left to the General rr-------------------- ---------.-- ~--~._~_._---~-_._--- 1 'I Assembly without much harm. PAGE 19 2 CHAIRMAN COLLINS: I don't think we owe much on that railroad now anyway, do we? MR. BROWN: No, sir. 5 Paragraph X authorizes the creation of sinking funds. 6 I mentioned earlier due to the way the section is handed down 7 to us there are repetition of provisions relating to sinking 8 funds and this general provision, I think can handle the task,. 9 The last several sentences of that provision, however, I think 10 really could be handled by statute~ The first sentence that z~ II ~I've omitted, I think, is just really verbage. After that, o Q. w 12 ~I think the general law could provide for and does provide for (~0 )r~'- ~ />..::'./c-.SlYl'~ ;;;:: funds in which public -- places where public funds could be ' ...>~-:/') I 14 ~invested.andGeorgia has been relatively conservative even by < I [5 ~"~, statute in what it permits local government and state government => 16 ~to invest in and I think you could safely consider the a Z [7 ~elimination of those. MR. FUNDERBURG: Come again with that. This deals 19 ! with what now? Where money can be invested? 20 MR. BROWN: Where you can invest sinking funds. 21 MR. NIXON: As Canter said~ the state law already 22 ,provides what you can invest it in. MR. BROWN: That's right. It would prohibit the 2J ,General Assembly from ...- theoretically from prohibiting certain 2:\ nonworthwhile investments, but I think as a practical matter your risk there if fairly slim. The statutory law has been 2 ! extremely conservative in terms of what public funds can be 3 invested in in Georgia. 4' I have suggested too in the draft the addition of 5 another paragraph to this section to avoid any question that b the changes in your removing certain of these limitations by 7 the General Assembly's authority to act, but that in no way 8 could be interpreted as impairing the obligation of any of the 9 bonds that are already in existence. I don't think that it's 10 absolutely essential to have this paragraph, but I think that :z.!, II ~ it could reassure some skittish bond lawyers that you're not o "w- 12 ~attempting to in any way impair the bonds they've already (~~) ~ ~S~V ;;: ~ ) ~ CI'"'''' . approved. 14 ~ So anyway, as a general matter I think you'll find ~ < 1: 15 ~in going through this that although there are a great number of \:J '::"> 16 ~ substantive and possibly very controversial changes you'll want Q z < 17 ~to consider that as an underlying effort this subcommittee Ig could eliminate a great deal of the language of this paragraph 19 without working any substantive impact in a real sense on the 20 constitutional framework of the state debt, that it can 21 j reorganize the provisions that are there which you decide to Y) leave in in a coherent and understandable readily usable manner and that you can adopt the use simple modern English and modern 24 ,I styles of grammer to make it further usable and understandable 25 without doing any damage to the Constitution. PAGE 21 Ir----------------- ------------------------------------ ---------------- ----------------- ----._- -------------------l '. Mr. Chairman, again I'd like to apologize to you and I 1 i the subcommittee for not being better prepared, but I do think I that through the use of a draft like this one, not necessarily f i this one, that you can begin your work with some major I I I " improvements in the debt article and then go on to consideration () of some more substantive changes. I do think, just in making I! the types of nonsubstantive changes that I've discussed with ,I you, that you will have taken a great step forward in terms of ') i the status of the constitutional debt provisions. Thank you. CHAIRMAN COLLINS: Canter, we appreciate your coming ''':) Z ! 1 ~ and bringing this. We didn't have but an hour before lunch .o".-, I~ ~so we didn't want you prepared too well to use all our time up. I\(\(.\~":'j.,l-"E.~..~."_--",/'}<1\.\~'\JIr-=~- f- 3~ Now to the committee, any member of the committee kno~ --.., -".~/ 14 ~of any other working draft around that we might want to look at ]', ~ before we decide which one we want to go to work on? '::"> J6 ,'.~, "z ,-, < :~ this: Then the next question I've got of the committee is Would you like to take this as a working draft for us IX ito go through and for us to begin to see what we can find i J9 wrong with it or would you like for us to see if we can get 20 Ii another working draft prepared to work on? 21 SENATOR LESTER: So move, Mr. Chairman. ,) CHAIRMAN COLLINS: You think we should go with it. Is there any objections to us using this as a working draft? (No response.) CHAIRMAN COLLINS: If there's not then, Canter, you've. ['.\(;1: 22 If--------------~'----~--~----~-------- I already said you would get each member a copy of this .:' I MR. BROWN: If any member wants to come to our office I, 3 [i! !today they can have one to take home with them and I'll mail .:+ a copy -- ') I MR. FUNDERBURG: When will you mail it? MR. BROWN: I'll mail it today. CHAIRMAN COLLINS: Canter, be sure and make a note on 8 first page of it this is a working draft cause we don't want anybody to think that we have okayed any part of this as our 10 work at this time .., z 11 ,... 'o" MR. BROWN: Yes, sir. "- "' @r~12 : CHAIRMAN COLLINS: Does any committee member have ianything they want to request canter to do on this working draft i 14 ~or do we need to ask him or anyone to begin to contact the bond ':l r 15 ~experts and to see what their objection is? Now we only have a '::"> 16 ~short a-z. time to get into this and to do this work if we're going <;, 17 gto have this back to the Full Committee in time. MR. BROWN: Mr. Chairman, could I make a suggestion for your consideration? Given the amount of time the deadline you're working under, I think if you're going to consult with some bond attorneys that you're going to need to do it in a 22 i somewhat formalized manner and I'd like to suggest the possibility of you and Chairman Thrower attempting to appoint 24 an ad hoc committee representing the major bond firms to work 25 directly with your subcommittee in review of these materials and , lL-- . . ~_~ __._. ._ . _. _ PAGE 23 ~me:~~n;-~:~ge-~~'~::~---s:""'~~~~-~::"'-~:~:-:~me'-~~~a~~~;---~~::~~;;~~~~-'--' II 2 Ii'I individuals who are representing the bond industry and who 3 il could be on call to help the subcommittee. Ii CHAIRMAN COLLINS: I think we do need some experts in! field because I'd hate for us to go through and us to have' something that would cause them to up- 'the rates that we 7 !I have to pay on the bonds in the event the state were to sell th$'n. " MR. FUNDERBURG: Do we have the money to pay for that! I kind of service? 10 CHAIRMAN COLLINS: What we look for is free service. ..::..SYlt.,4 "z II - :':"> MR. DAVIS: Free gratis. You don't have to worry 0- 12 ~"' about that. What probably might be /('~-\'\ \<-- -:::> / \\ (\, ),;;;;JI,)JI' '1-~ 'V-~I MR. KEE NUM: I'll ask someone f rom the GC-_loIU..'IJre11- -- 14; Mobley firm, John Mobley ...: 1: I ~i "> ,~) MR.. THROWER: I think we could get, Mr~ Chairman, a u: :> It'J 'Z" ,~ subcommittee of people like that. ,;) z < 17 ''""' CHAIRMAN COLLINS; You say three? 18 ii MR. NIXON: We use three. We use King and ~pa1ding .lU' i1 and Mobley and Gambrell and Sanders, the three ,-- one of those 20 three. Those are the oneS--He has the po~rtoappointthe 1awyersi. CHAIRMAN COLLINS: Would those three be sufficient or I do you think we might need some outside firms besides? MR. DAVIS: I wouldn't exclude any of them. My suggestion -- What my suggestion would be is to get Canter to mail this to those firms that do provide bond counsel with the PACE 24 n 1 I! idea that they give us written comments back or set a meeting Ii 2 Ii !I time where we would meet with them_ Ii 3 CHAIRMAN COLLINS: Canter, do you have a list of 4 .! those firms? 5 MR. BROWN: Mr. Nixon, I suspect, does. 6 MR. NIXON: I know them, I've got addresses 7 downstairs. 8 MR. DAVIS: There's not many of them in the state. I 9! CHAIRMAN COLLINS: We'll follow up on that point. 10 Is there anything else? "z 11 f- MR. FUNDERBURG: When do we need their counsel? As 'oa". l""-l 12 :we need -- There are two ways to go about this; one, that we (~~~)~r ~~ can meet as a comnittee and work with this draft and then to '- 14 ~submit what the committee has come up with to the counsel for 1- '< :I: 15 ~its evaluation or you could send the draft as it is, let them l,,') '":;) 16 3respond and then we would know what to stay away from as we oz 17 :0:iimet. 18 , CHAIRMAN COLLINS: I think we're going to need their 19 iadvice as we make these decisions so I think they're going to 20 need this before we meet. Of course then after we take their 21 'advice naturally we can -- a majority can vote any way. We 22 I can make the mistake -- We can take it or leave it, but I think 2~ jWhen you go to thinking about your interest rates most of the 24 :ttme you're going to take their advice, but I think we would 25 need the advantage of that before we make a decision in these L- - ---------------.-. -- -- --..--.--.--.~------ r .-------,. ------ .---.----- I -----.-.--~----,------~-.----~ PAGE 25 I II particular areas. ii,i 2i MR. KEENUM: I think the suggestion made of mailing J II them a copy of the working draft with the specific request that I 4 : they review it and make any comments they want to before we get 5 I back together is going to be a time saver. MR. DAVIS: I would hope those comments would be in 7 writing and would be distributed to the committee before the 8 meeting. I 0) ,I CHAIRMAN COLLINS: Well, we will request of Canter 10 MR. BROWN: Mr. Chairman, I think Dr. Nonidez has ,z-" 11 ~gotten copies of this for everybody. <:> o. 12 '~"' CHAIRMAN COLLINS: If you could then, when you contact (1(~'j(,\~'f::('Y1J)0r~~ ~~ these people ask them to give us their comments favorably or ,\:..'--- ----/ /// ,"I 14 ~unfavorably in writing if they don't mind so we'll be able to 16 '~" staff of the Select Committee to approach these people or would oz < 17 ~you like to take this task on yourself? MR. THROWER: I think maybe I'd better. I'll be glad 19 !' to approach them. I'll do that on Monday. 20 CHAIRMAN COLLINS: Do we have any other suggestions 21 now of things that we might need to do while we're here today? MR. KEENUM: Mr. Chairman, as a matter of just again --, --' saving time, lim sure there are going to be areas that have 24 'substance that we need to look at in this and if there could be 25 some list of the items that need our attention both in reading and li .. ._~ - .----~~------ -....- - - - - - - . -- ---- -. - ---.- .- - . -.- -.----.--- PAGE 29 rereading possible changes and things we want to be very 2 careful about changing. I would personally not be offended 3 if someone would give me a list a ten items we need to be 4 I looking at. I may know two of those, but I might overlook I 5 eight of them. Someone who is more familiar and deals with this 6 on a regular basis, if that's possible -- 7 CHAIRMAN COLLINS: We can ask our Office of 8 Legislative Counsel to look into this and to make a list of l) some of the major changes, some of the others that they think. 10 MR. KEENUM: We may not have to agree with them, it's "z 11 ~ just o "- ~o:~}~~ ~ 1~~Y14 12 '~" CHAIRMAN COLLINS: You have numbers of things, even the percentage that the state can sell bonds. You might want '-_/ 14 ~ to look at upper and lower end and it would be controversial. ~ J: I 15 ~ There are several areas in here that could be real controversial!. :'";; 16 ~ oz canter, would you mind making up a -- 17 ;; MR. BROWN: I'll certainly try, Mr. Chairman. I liS !would certainly welcome if any of the members of this 19 ISubconunittee want to -- 20 CHAIRMAN COLLINS: Add to it? 2l MR. BROWN: Alert me to anything that they're aware 22 of, I'd be most delighted. Again, please let me stress that I am not here trying to tell you I'm an expert in state debt. MR. THROWER: We might ask the bond lawyers to do 25 too for themselves and ourselves. -- r r - - - - - - - - . ~ . ~ - - - - - - - - ~ - - - - - - - - - - - - - . - . - - . - PAGE ------- ..'_._'-----.. ---_.,-+--_._- ...-_._,-" - - - - - __ 0'_' --. -------'-.--- 30 Ii MR. FUNDERBURG: You seem to feel that a great deal Ii 2 of what is in the Constitution should be deferred to statutory 3 law? 4 MR. BROWN: Yes, sir, I do believe that. 5 MR. FUNDERBURG: I happen to be one that's not quite G comfortable with that. I need to study. There may be an area 7 that we ought to have on that list. We have some good K iilegislators and we have some not so good. Not you, Marcus. ') CHAIRMAN COLLINS: I appreciate that. 10 MR. BROWN: The one thing I would suggest to you, 11 Cz~l and I think Vickie could probably provide you some very good 'o" / /I '" I .1+ ~ of taxation other than to pay for bonded indebtedness in this : :6 "~" understand the area of responsibility that you're dealing with z .~ ~doesn't really touch directly on some of the concerns that ]X iyou've had. Also, I think you'll find that although there's 1 11) I clearly -- and I want to say this up front, there's no magic .:U i in this draft I passed out to you. Again, it was just to illustrate the type changes I felt you could make. I think 1 you'll see, however, that by and large the changes that I made don't deal with substantive provisions. They deal more with technical administrative provisions and also toward the elimination of redundancies and obsolete provisions. I don't think just because something is in the Constitution that you 2 ought to assume that it is a substantive provision. One of 3 the major reasons for the Georgia constitutional revision ~effort is that there's a lot of stuff in the Georgia ) Constitution that is not substantive, that is not current, is 6 ,'not vital, is not necessary and I think it would be a tragic 7 I mistake to feel like because the area of state debt is such a g ': sensitive area that that provision in the Constitution is not ! <) very much like all the other provisions and that is that'it's 10 just loaded with obsolete and useless material. And although 11 'z~" I think your concern is quite correct, I don't think any o "w" 12 ~constitutional J"evisioD effort would want to authorize one part (~l--' ~ ~s~ ~ of the state to hurt another one. I think you need to look \4 ~ specifically at what you're dealing with in this article and "<' l: 15 this section and determine whether or not that is properly "..:x> 16 ~included within the State Constitution or should more properly Czl < 17 ~be included in statutory law or shouldn't be included in Ib either and I think you'll find that you're going to split out \9 a great deal of what's in here under that type of critical 2U examination. 2\ CHAIRMAN COLLINS: Anything? MR. FUNDERBURG: How does the work of this 23 subcommittee get coordinated with the work of the total ,2~ I subcommittee? How does this subcommittee's subcommittee get 25 coordinated in that sort of thing? I'AGE 35 CHAIRMAN COLLINS: You're talking about the group 2 that's sitting here? MR. FUNDERBURG: The group thatfs sitting here and 4 the group we're responsible to. 5 CHAIRMAN COLLINS: We're going to report back 6 hopefully September the 24th. 7 MR. THROWER: Fifteenth. Under the schedule we would 8 hope that each of the subcommittees would have a redraft of 9 ,its article for distribution to the others on or before 10 September 15th and we would then have a meeting to review these (:J Ii ~together -- begin to review on September 24th. In addition to o0: "- ~~/'"'''' i12 ~that, at the suggestion of Mr. Collins, all members of the larger committee will be notified of each subcommittee meeting ~- 14 : and there will be overlapping interests that many will have so ~. '< 1S t h a t :I: .:> that will provide some coordination also. 16 3="", CHAIRMAN COLLINS: This thing has got several steps a z: I! to <~>: take. Whatever this subcommittee -- In other words the IS i! will of the majority will come out from this. It will be made ii 19 :1 back to your committee. Then the Article Committee will make 20 i its suggestion back to the big committee. MR. THROWER: Select Committee. 11 CHAIRMAN COLLINS: Then the Select Committee will 23 'make its suggestion to the General Assembly. Then legislation 24 will be drafted and it's going to go through some committee in 2~ the House for them to go through. Then it's not through becaus~ ;; it's going to go on the floor of the House and go through the battles there or the Senate. Then it's going to revert to the j other house and do the same thing. In other words, what comes -+ from this will just be the first step. It will have several ) more steps to take before it's enacted. Well, it won't be 6 enacted in law until the people approve it or disapprove it. 7i MR. FUNDERBURG: I understand that, but the next ! 8 I meeting of the subcommittee on taxation is September 24th? 9 MR. THROWER: September 24th. 10 CHAIRMAN COLLINS: The Full Committee. Lz? 11 .... ,.'o".. MR. FUNDERBURG: And he expects by that time -- The @ r ij12 : Chairman expects by that time that we will have completed at least the initial draft that's supposed to come out of this 14 :>;-; committee which deals with debt? <:: 1: 15 .:> CHAIRMAN COLLINS: Right. '..,'J :':"> 16 .~.. MR. FUNDERBURG: Which doesn't give us much time oz 17 ~ CHAIRMAN COLLINS: You're right and that's the 18 i reason I got Mr. Brown. I knew he had this already prepared 19 and that's the reason I asked him to stay here with us. In 20 I fact, I loaded him up with this after we adjourned awhile ago 21 and I do appreciate him coming in and giving us this information because I didn't give him an opportunity to go back and relook at what he had done several months ago. I called him in here 24 cold and asked him to go through this thing with us, but I do 25 feel like if we're going to do anything we've got to get PAGE 37 started and do something in a hurry now. 2 MR. THROWER: May I add this too, Mr. Chairman, at .\ this point, which might' have been stated generally? For the benefit of those who follow in reviewing our proposals, whether it's the Select Committee, the General Assembly or eventually (, the courts, I think a commentary of comments on reasons for the changes and what's intended by the changes would be quite k helpful. This has been the practice in American law institutes 9 in its'efforts, the restatement of the law and of course those ]0 comments are quite valuable for years to come. I don't know .., z. 11 ~whether that practice is being followed by the other committees, o a. 12 ~"' but if not I think it would be a very useful and a great .;..'9'U.(-1 ~ ~1~(.J.!('\~\'~~- ~i: time saver. 14 ~ MS. GREENBERG: That has been done in the past and is !;; -- r 15 .~., going to be followed and, in fact, we'll also have :':"> 16 z-~;J; ~ --- 14 ~ have to, but do you agree that we need to try to meet the week 1: 15 ~of the 21st, on the 21st, 22nd, 23rd, 24th or 25th or the next ,,' J r.o ]6 3 week one, to where we could go through a procedure to give us ,) L < 17 ~ a little time to make sure that we're not making mistakes as we I\'~ go through it? 19 MR. DAVIS: I suggest either the 22nd or the 29th as :0 i a meeting date, a Tuesday. 21 CHAIRMAN COLLINS: Does anybody -- Senator, do you ,) have your calendar? ,, " MR. THROWER: May I suggest the 29th with the ;-+ expectation that getting this many people in July from a standing start to do what we want them to do We can ask them for the 15th and -- but there may well be a lag of a week there. 2. MR. NIXON: I've got a conflict on the 22nd so the , 29th would be fine with me. 4 SENATOR LESTER: Mr. Chairman, I'm probably not going 5 : to be able to participate in that meeting because I've got to 1 o : run the August 5th Democratic Primary and I have an election to 7 ! consider. 8 CHAIRMAN COLLINS: You don't think you could just tell that fellow you're busy, to get out? \0 SENATOR LESTER: I'd like to. (:J z 11 fo- 'o" MR. FUNDERBURG: It's going to be a 10: 00 meeting? That w"- ~r~~ I~S~ 12 ~ makes a difference too. : CHAIRMAN COLLINS: The time won't really bother me 14 ~ either way. If you'd like 10:00 r 15 ~ MR. FUNDERBURG: Morning is better for me. 1:J '":;) 16 ~ owz CHAIRMAN COLLINS: Ten o'clock will be fine with me. 17 ~ Senator, you're not going to be able to be here whether it's 18 the 29th 19 SENATOR LESTER: Anytime in that area because it's 20 !the week before the primary. I will communicate any views that l' 1 21 ! I have or changes or so forth to Canter Brown and he can express them. 23 CHAIRMAN COLLINS: That will be fine. Does the 29th suit everybody then? 25 MR. FUNDERBURG: Well, I'm going to see how I can --~~-- ,---------,--- - - - -~,------- ,,~~-------~-- -- ~-~-~~--------------------~--------~------ PACI'; 43 - - - - - - - - - - - , ----- ~-~------------- -~-~-~~--------------------~- - - - - - shift I have a meeting, but I might be able to handle it. 2 CHAIRMAN COLLINS: If it's agreeable then we'll set 3 : it for the 29th at 10:00. 4 MR. FUNDERBURG: I've got it tentatively set. 5 MR. NIXON: Mr. Thrower, a thought just crossed my 6 I : mind. As a matter of protocol, it might not be bad to contact I 7 Mr. Bolton because they do -- they go with us on the closing. x Perry Michaels is not really very knowledgeable in the area -- in this area. You know Perry, don't you? It might be in the 10 interest of protocol. 'z" CHAIRMAN COLLINS: We're adjourned. (Whereupon, the meeting was adjourned at 12:08 p.m.) 15 .:> '.:1 '":;:.1 iu ezn w C Z -< 17 '"~, Ii< 19 I; :U 21 11 23 .:A " ~,-------~~------_.~-" ------_._---~---- CE RT I FI CAT E I ',! 44 2 3 I, Peggy J. Warren, CVR-CM, CCR A-17l, do 4 hereby certify that the foregoing 43 pages of transcript 5 represent a true and accurate record of the events which () transpired at the time and place set out above. .., I 8 !"i Peggy J. Warren, CVR-CM, CCR A-17l 9 Ii 10 IZ" 11 ~ o'" "- (~\ ~:. ~.. ~~!--,--~.. -'" 14 '>- <: .t 15 ,~ .:J '="> 16 ~ ~, ,) z ~ -; < ~ 18 19 20 21 "INDEX Committee to Revise Article VII Subcommittee Meeting Held on June 26, 1980 SUBCOMMITTEE MEETING, 6-26-80 Section IV: -St-at-e-D-eb-t Proceedings, pp. 3-4 Paragraph I: Purposes for which debt may be incurred. pp. 4-6 Paragraph II: State general obligation debt and guaranteed revenue debt; limitations (annual debt service requirements). pp. 6-8, 10 Paragraph III: State general obligation debt and guaranteed revenue debts; conditions upon issuance; sinking funds and reserve funds. pp. 8-9, 19-20 Paragraph IV: Certain contracts prohibited. pp. 9-10 Paragraph V: Refunding of debt. pp. 10-14 Paragraph VI: Faith and credit of state pledged debt may be validated. p. 16 Paragraph VII: Georgia State Financing and Investment Commission; duties. pp. 16-17 Paragraph VIII: State aid forbidden. p. 1] Paragraph IX: Construction. p. 17 Paragraph X: Assumption of debts forbidden; exceptions. pp. 17-18 *Profit ~ public money - deleted, to be provided by statute. p. 18 *Certain bonds not to be ,paid - deleted as obsolete. p. 18 *Sale of state's property ~~ bonded debt - deleted as obsolete. pp. 18-20 Paragraph XI: Section not to unlawfully impair contra~ts or revise obligations previously voided. p. 20 General Discussion - bonding experts, etc. pp. '20-43 STATE OF GEORGIA COMMITTEE TO REVISE ARTICLE 7 OF THE CONSTITUTION OF GEORGIA SECTION 2 SUBCOHHITTEE Room 402 State Capitol Atlanta, Georgia 10:00 o'clock a.m. July 16, 1980 2 SUBCOH!'UTTEE MEMBERS PRESENT: JANES F. l'IARTIN, Chairman CONSTANCE HUNTER, Vice-Chairman ELDON BASHN! (for Dr. Charles NcDaniel) ROBERT NASH H.E. STRICKLAND GEORGE ~nLLIA'1S0N SUBCOHtHTTEE STAFF PRESENT: HICHAEL HEnRY DAVID KANE OTHERS PRESENT: TOH BAUER TOH BOLLER CANTER BROUN ELMER GEORGE DAVID GODFREY ADP.oN HARDEN JOlIN KEYS JI1'1 KIDD JAY RICKETTS ED SUMNER -000- 3 PRO C E E DIN G S MR. MARTIN: I'm Jim Martin, and I'm the Chairman of the Section 2 Subcommittee of the Article 7 Committee. We have present members of the committee, the Vice-Chairman, Mrs. Constance Hunter; representative of Dr. HcDaniels, Eldon Basham; and Mr. Strickland, the Revenue Commissioner; and the staff, we have David Kane and Hike Henry present. I guess our first order of business is to approve the minutes that Mike sent out from our last meeting. I apologize to the Committee that I was absent. I was sick on that day, and I promise I won't be sick on any more meetings, or try not to be. Bob Nash just came in, a member of the Subcommittee. Is there any discussion about the minutes from the last meeting? (No response) Depending on what results we get from this meeting, there may be a decision, in comparison, whether we need a chairman or not; looks like y'all covered a lot of ground. Is there a motion that we accept these minutes as written? HS. HUNTER: I so move. MR. KM~E: Second. MR. ~ARTIN: All in favor? (No response) HR. HARTIN: Passes, okay. The minutes have been 4 accepted. I have an agenda for the meeting based on the minutes from the meeting on June the 26th. Mike went ahead and advised the people to appear and set a framework for this meeting that I think will be very productive. I'd like to propose this as the agenda for the meeting, and then if we have any additions or changes, we can make those before we get started. John Keys, with the Georgia Tax Reform Commission, is here to talk to us about the what's called earmarking provision in Section 2 --that's Paragraph 3-- and to also give us some background information on Paragraph 4, dealing with grants to municipalities. After that, Mr. Elmer George, with the Georgia Municipal Association, and Mr. Jay Ricketts, with the Association of County Commissioners of Georgia, have been asked to give us the benefit of their observations about the necessity for that provision and maybe some suggestions for changes or to keep the provision as it is. After that, we could discuss some of the basic decisions that we need to make as a committee. Those would include a work plan for our meetings for the remainder of the summer. Some decisions about some of the provisions of Section 2 which are special-purpose provisions, the provision dealing with promotion of agricultural and other products, which is 5 Paragraph 2, the provision dealing with of course grants to municipalities, Paragraph 4, and the provision in Paragraph 5 dealing with the Industrial Development Commission, if we can make hopefully some tentative decision about whether we want to incorporate those in the provision that deals with the purposes of taxation. And finally, some decision on whether the title of this session is more appropriately Purposes of Taxation rather than Purposes and Methods of Taxation, since the research that Mr. Henry has done indicates --and on a fair reading of the section. it seems that methods is not really covered by the section. Are there any changes to the agenda or any suggestions about other ways of proceeding? (No response) Do I have a motion that we adopt the agenda for the meeting? MR. STRICKL&~D: So move. MR. HUNTER: Second. t1R. MARTIN: All in favor say "aye." (Chorus of ayes) MR. MARTIN: John. we're ready for you. then. MR. KEYS: Okay. You may regret inviting me after you see all these papers I'm going to hand out. Don't be intimidated by the volume; it's not as bad as it may appear at first glance. There are three separate items. and I'll 6 kind of zip you through them and try to respond to any kind of questions that you may have. Some of my comments will be personal observations, and then others will be-- I'll try to speak as a staff member of the Tax Reform Commission, try to address some of the positions that the commission has taken on some of these issues. I think the personal observations will stand out pretty much. Does everybody have the three of these? MR. MARTIN: John, before you begin, could you maybe give us just a statement about the reason that it's important for us to hear what you're saying in terms of Section 2? MR. KEYS: Okay. MR. MARTIN: And also, if you're going to be referring to these written documents, could you for the purposes of the people who don't have copies of them maybe try to amplify on some of your comments so they won't be totally lost. MR. KEYS: Okay. There are extras here if people don't have them. I'm going to try to comment generally on the pros and the cons of earmarking, and if it's okay with the Committee, I'll not refer to specific language in our present Constitution. I'm just going to try to restrict it to pros and cons, generally the earmarking provisions that we do have in our state at present, and lead from there into a discussion of purposes of taxation, talk a little bit about fiscal relationships among 7 the state and local governments in our state, trends that have gone on, and possible alternatives for the future, given what's happening in Congress right now and throughout the country, but especially I think it's going to impact on our state, and what that means in terms of city and county grants in our state. Generally, the arguments that are voiced in favor of earmarking by proponents of earmarking of revenues, constitutional or statutory, is that it will guarantee that certain programs are going to be funded regardless of what the Legislature or the Governor wants to do. In just a real quick run-through of various state constitutional documents, Arkansas takes what appears to me to be the most extreme example of that. They provide in their 1874 constitution that every tax has to be imposed by law, and that each of those laws has to specify the purpose for which that tax is levied. So why the legislature even bothers to go through the appropriations process in that state is problematical. Frequently, too, you'll see a bad tax, a tax on an evil thing, say for instance cigarette smoking or alcoholic beverage consumption, tied to a noble purpose: education something like that, health programs, things like that. That's also a "pro" argument. You can also relate a given tax source to a specific function or program area: again, booze and tobacco taxes for 8 health programs, motor fuel taxes for highways, severance taxes for conservation purposes, and so forth. The arguments against earmarking. I guess it's apparent that it greatly limits the Governor's as well as the Legislature's ability to set priorities, regardless of the source of revenue. It ties some programs to a revenue source that may not be responsive to needs. For instance, tobacco tax receipts in our state averaged 2.1 percent per year increases from '74 to '79. Now, obviously inflation in those years ran considerably higher. So if we had earmarked that revenue source for a given program area, it probably would not have been sufficient to cover inflation's impact. Earmarking can be viewed-MR. MARTIN: John, can you hold just a second? MR. Y~YS: Yes, I better hand out-MR. MARTIN: George Williamson has just come in, a member of the Subcommittee. Representative Williamson, we are in the process of hearing a presentation from John about the pros and cons of earmarking, and that relates to Section 2, Paragraph 3, which is within our study. MR. WILLIAMSON: Thank you. ~1R. KEYS: Earmarking, then, can be viewed as a strict limitation on government. It obviously evidences a distrust by the people of the governor and the legislative 9 branch. It's also evidence, obviously too, of "special interests," and that's not meant in a pejorative sense; it ,s just the impact of special interests on the legislative branch to get in the constitutional document assurance that they will be assured of funding. Earmarking in our state --Now I'd refer you to the first handout in that packet. This focuses on motor fuel taxes, because it's excerpts from a motor fuel tax report that will be coming out next month, I hope. I guess there are several instances in our Constitution, but motor fuel taxes stand out, especially given they are not just earmarked, they are automatically appropriated, and there's very lengthy language about what happens to motor fuel taxes. Basically, prior to 1945 --and you may be familiar with this already, but I'll just kind of run you through it again. Prior to the 1945 revision of our state Constitution, there were a number of instances of earmarking in the state, and they are listed at the top of that first page. You can see that again the influence of evil-taxes~tied-to-nob1e purposes kind of comes out. For instance, under the wine law, 1937, the Legislature imposed license fees on wineries and wine dealers. Three percent were earmarked to the State Revenue Commission for collection purposes and enforcement, and the balance was to the state to be set apart and devoted to schools, or free textbooks to children. 10 Motor fuel tax laws --All of these are 1937 laws, as you can see. Motor fuel tax laws, six cents a gallon was levied, distributed to the state for highways, four cents; to counties for public roads, one cent; and to School District Equalization Fund, one cent. As a reaction to the earmarking provision, the limitation on legislative flexibility, the 1945 Constitution provided in the finance and tax article that there would be no earmarking, and the adoption of this language ended the practice of earmarking and required the assembly to appropriate from the state's general fund specific amounts for each fiscal year. Language was carried forward and exists in today's Constitution in Paragraph 7 --Article 3, Paragraph 7, Section 10 of our Constitution. In 1952, however, an exception was made to the present language that provided for earmarking of motor fuel and motor vehicle license taxes for the purposes of constructing state highways and also providing grants to counties for county road purposes. The 1960 amendment to the 1945 Constitution carried forward that language. It, however, did delete motor vehicle licenses, interestingly enough, and I don't know the history behind that as to why that happened. Perhaps it was a trade-off that occurred to al19w for that earmarking for highway purposes. 11 I was asked, too, to comment on the specifying of purposes of taxation, which is found in Article 7, Section.2, which 1-- MR. MARTIN: John, before we get into that, are there any questions from members of the Committee about John's presentation-- Is that all you're going to cover on earmarking at this point? MR. KEYS: Yes. MR. MARTIN: Are there any questions from the staff or members of the Subcommittee about John's presentation? (No response) There is one piece of information that we may want to also consider, and I have raised this with Mike, that there is an Attorney General's opinion --and there may be a later one; the one I'm familiar with is Official Opinion 77-77-which lists the types of agency funds, or revenues that are received by agencies of state government, that are not required to be paid into the general fund. That's an area that we may also want to look into. He lists five different categories in his opinion. The first is gifts and grants received by an agency; the second is the proceeds of property sales; third is monies received from other agencies of the state; fourth is monies received by the judicial branch, which would include the state bar dues 12 and court reporters' fees; and the fifth is funds that an agency generates without specific statutory premise. Do you have any comment about-- Has the Tax Reform Commission looked into those areas or thought about that? MR. KEYS: No, sir. That kind of spills over into the appropriations area. And in the area of motor fuel taxes. it's very hard to separate the appropriation and expenditure because of that very lengthy language in the Constitution. But we try to steer clear of appropriations-related issues. MR. l1ARTIN: The reason I asked that ques tion is. of course, our language in Paragraph 3 is, "All money collected for taxes, fees, and assessments for state purposes, as authorized by revenue measures enacted by the General Assembly, shall be paid into the general fund." This opinion indicates that those do not fall under that provision, and my concern as we develop our work is whether we need to specifically except agency funds and other types of funds, or whether that language is adequate to recognize the reality of existing practices of the state. MR. KEYS: I really wouldn't feel comfortable talking about that. I'm not familiar with that opinion. MS. HUNTER: Have those practices ever been tested? MR. ~1ARTIN: Commissioner Strickland, do you know? MR. STRICKLAND: I'm sorry, I didn't hear the question. 13 MS. HUNTER: Have those practices ever been tested in the courts? MR. STRICKLAND: I'm not aware of any test case. Of course, when we're talking about these exceptions, we're not talking about any tax, are we? MR. NASH: Your agricultural funds is considered a tax. MR. STRICKLAND: Is a license fee a tax? MR. NASH: That was the ruling back then. I don't have the specific language of it, but there was a ruling at one time that it was a form of tax, the reason why it had to come to the state, had to be collected by the state agency. It doesn't go into the general fund, specifically sets it apart, but I don't know the justification for it. But it would be one of them. MR. BASHAM: Gifts and grants aren't taxes, and oftentimes they have conditions on how they can be spent, when somebody gives something to the state. MS. HUNTER: I wouldn't think interagency funds would be taxes. They were originally taxes, but once they had passed through the agency they would cease to be taxes. MR. MARTIN: Canter Brown, with the legislative counsel's office, part of the staff, I think you have a -MR. BROWN: Jimmy, just on two points in the Attorney General's opinion. The Constitution in Article 3 specifically 14 appropriates for the purposes for which money is granted to the state, they are automatically appropriated, and just simply don't have to go through any appropriations process, much less go into the general fund. And also, of course, Article 9 authorizes state agencies to contract with each other for government services. Again, this would be considered an exception to the appropriations provision. MR. MARTIN: Any other comments before John goes on to ... (No response) Okay, John, would you continue. MR. KEYS: Okay. As I mentioned, I was asked to talk about the provisions in Article 7, Section 2, which list the various purposes for which the state may expend monies. Just general personal observations, this would appear to fail to recognize the dynamics of government. What was a valid public purpose yesterday may not be today. Perhaps a year or so from now, the government may want to get into another area. lihat'll happen then. I guess. is if it's not listed. we've got to amend the Constitution and specify that purpose. Thus, it's obviously a limiting document again, limiting provision. It can tend. too. to lead --and I would imagine that it has. I haven't researched the legal end of it, but I would imagine that it's led to rigid court interpretations. The court probably --perhaps has taken the position if it's not 15 listed, it's not valid, it's not legal. In summary, I guess, it reduces legislative and gubernatorial flexibility to meet the changing public needs and demands. Instead of providing that perhaps language could be inserted in place of all that listing that taxation may be exercised for any public purpose as may be defined by general law, thus leaving it up to the General Assembly, the purposes for which the money may be spent, the General Assembly is locked in to amending the Constitution of Georgia to add new items as new public needs emerge. It would appear, too, that the same principles would apply to a listing of government purposes which may be provided by local governments, which is set forth in Article 9 --And I know this is outside of the finance and tax article, but it would appear to spillover into the local government article as well-- Article 9, Section 4, Paragraph 2, and for county governments in Article 9, Section 5, Paragraph 2. Perhaps language may be inserted in place of those listings of public purposes that "public purposes as may be provided for or prohibited by law." Now, in the ar~a of intergovernmental fiscal relationships --and this is the somewhat intimidating-looking second handout item MR. MARTIN: Let's see if we have any questions about purposes. That's Section 2, Paragraph 1. 16 Do any members of the Committee have any questions of John about that discussion? (No response) What do you think our alternatives are? ~1R. KEYS: Personally, I'd say try to keep the Constitution a general document that's capable of adapting to changing needs, and I would suggest just knock out that whole listing, just say "public purpose." Now, again, there may have been court cases in the past that set forth some sort of a public purpose test in our state. I think other states have had that experience. But again, when you list a whole string of what is a valid governmental purpose for spending public monies, it limits the legislative and I guess gubernatorial flexibility. I'd say keep it general. }~. HUNTER: Mike had mentioned the last time the Constitution is a limited document, that's its sole purpose, because they have all those powers if you don't tell them they can't have them. But by this language, "for these purposes only," you do restrict what they can do, or there might be certain purposes you wanted to restrict them from that you might specify. I don't know what they would be, but there might be some, like gratuities and that kind of thing, if that language is in the Constitution. MR. KEYS: You may want to keep, as you mentioned, a restriction on pledging of government's credit for the benefit 17 of private individuals or corporations, use of the taxing power to benefit private people. HR. MARTIN: Canter, go ahead. MR. BROWN: Jim, I was just going to suggest, as has already been mentioned: In terms of limitations upon expenditure of tax funds, generally the Constitution has addressed that in terms of limitations on appropriations, and they are sprinkled throughout the Constitution, particularly Article 3, but also in Articles 7, 8, and 9. But those limitations generally have been directed towards appropriations limitations as opposed to prohibitions on taxation for a particular purpose. MR. MARTIN: Mike, you may want to make a comment on that. As I read the research that you've done, you interpret this provision to be essentially a limitation on appropriations, too, don't you? MR. HENRY: The way I see it is that you're saying that you can tax for these purposes, but you're saying --in effect what you're saying is you can't spend tax revenues for anything but these purposes. MR. MARTIN: The case that you cited was the local option sales tax case. The difference in those two cases, the earlier one, which struck down the local option sales tax, and the one that upheld it was the distinction that the court drew between whether the Legislature had the authority to authorize a tax and whether it had the authority to authorize the 18 expenditure of those tax funds. Is that ... MR. HENRY: Well, not really. That was more or less a delegation of the authority to tax local governments. It said they could not delegate any greater authority than they themselves had. And they said the purposes for which the state can tax are listed, and those are the purposes that it could delegate to the local government to tax for, or local government to tax for the purposes that are listed in its own selfexecuting power to tax. MR. }~RTIN: ~~at's the name of the second case? MR. HENRY: Mangelly; City Council of Hephzibah vs. Mangelly. MR. MARTIN: That was the one that upheld it? MR. HENRY: That was the one that struck it down, but that's where that language comes from. ~1R. MARTIN: The second case that distinguished that, what was the name of that? MR. HENRY: Cooper vs. Board of Commissioners of Taylor County, or Taylor County vs. Cooper, one or the other. MR. MARTIN: I thought they had drawn a distinction in that case by saying that the Legislature could not authorize the county to use the money for municipal purposes, but that it could under the second version of the local option sales tax authorize the tax, and since it was being paid back it was a statewide tax. It did not want to follow this provision -- 19 MR. HENRY: Well. it was a different tax. The tax that was struck down in Mange11y was a county tax. The tax that was upheld in Cooper was a special district city-county tax. which was a different animal. And the tax in Mange11y that was struck down was struck down --one reason was because the county was granting funds to municipalities. and although the state has the power to grant funds to municipalities. they don't have the power to delegate that authority to counties to grant funds to municipalities. In any event, my reading of ~his was if the purposes are not listed. then the state can't tax for that purpose. and the effect of that is that the state cannot spend money for any other purposes except those listed. Do you not agree with that, Canter? MR. BROWN: Well, in principle I do. The problem is that the list is misleading. Throughout the Constitution you find provisions authorizing either the appropriation of funds or the state to act in a given area. even in other articles provisions relating to authorization for taxation that really bear no relevance to the list. And that's the problem; it's just having that list itself is misleading, in terms of you look there and they list what we can do. In fact. if not. the entire Constitution time and again serves as an authorization for taxation. and it's been interpreted to be even when it doesn't specifically authorize a tax for that. 20 So there are far more general authorities or numerous authorities contained in the Constitution, even though as a practical matter that list is supposed to be authorization. It just doesn't serve that way all the time. MR. HENRY: Well, like for instance you're talking about maybe some of these federal programs, relocation assistance or something like that, where it's specifically over in Article 1, where it would specifically say they can provide funds for relocation assistance, and they shall be able to exercise the power of taxation. therefore. So, in other words, this would be another purpose that may fit into this list in Article 7. And then. for instance, where I think you could imply that they could tax would be like for the power of eminent domain. The power to condemn land necessarily implies the power to tax and spend public funds to pay for the land that you condemn. I agree that this is a misleading list, but I think the effect of the list is a limitation on the purposes for which the General Assembly can spend money that they've raised by tax revenues. MR. MARTIN: Do any members of the Committee have any questions or observations? MS. HUNTER: I don't know how much time you want to spend on it, if this is a thing we really need to stress. If you want to do it later, after we have the presentation-- 21 MR. MARTIN: No, I think right now is probably ... Well, what's the will of the Committee? Do y'all want to come back to this, or do you want to continue to talk about it for a while? (Pause) MS. HUNTER: For the benefit of those who weren't here last time, the thing the three of us that were felt like the first thing we had to do was decide whether these purposes would be specified in this article or not. That is a major change, if the Constitution doesn't say and delegates all of this to the Legislature. That's a major change, and probably will excite some opposition that would have to be defused some way, understanding that these would all become statutory provisions; they wouldn't be dropped, it's just that they would not be in the Constitution. And of course that's one of the things we need to decide before we go on to consider what purposes and what language should be in there, because if we decide to delegate this authority to the Legislature and make it statutory, then that changes the rest of our work considerably. MR. }~RTIN: Without getting into the proposed work plan that hopefully we can adopt later on in the meeting, without adopting that, maybe one way to proceed is at our next meeting schedule that for a decision about what we're going to do with the provision in Paragraph 1 dealing with purposes of 22 taxation. If we're going to do that, and if that's what the Committee wants to do, then we probably need to let ~1ike know what questions we have that need to be looked into before we meet again to make that decision. One question that I had is, what types of activities have been prevented from being done by the state because of Paragraph 1? What type legislation that has been proposed in recent years has been held unconstitutional or has not been passed because of conflict with this provision? That maybe gives us some insight into how it operates. MR. BASHAM: Expenditures of funds for extracurricular activities in schools would be one, like football teams. l~ether it would be passed or not I couldn't say, but it certainly would be brought up. The Attorney General has said those kinds of expenditures are not authorized at the present time. MR. BROWN: Jimmy, I think that's a good point. Generally there isn't a lot of litigation about whether the state can do it. Somebody asks the AG's opinion and he says no, or they ask for a legislative counsel's opinion and he says no, and then they have a constitutional amendment. And I think that this is one of the big points in terms of what the Governor and Mr. Harris and others have said concerning the charge of the Constitutional Revision Commission, and that is to attempt to write the Constitution in a manner 23 which permits flexibility to government without the necessity of continually coming back and amending the Constitution. And I think you'll see that this list of purposes when it started out was relatively short, and beginning in the depression, when we picked up Social Security, and ever since, every time something comes up, the General Assembly has proposed an amendment and the voters have had to decide on issue by issue by excruciating issue through the years. And I would like to suggest to you that this may be an ideal place in which to instill the spirit of the constitutional revision effort in your work; that this is one of those provisions of the Constitution which has been amended time and aeain. And it has been amended so often that it has now become so broad that in fact it really isn't serving as much of a limitation upon anything. This taken together with all the other provisions of the Constitution really pretty much allow the state to do everything it wants, except just give away money and property; there are other limitations and prohibitions on that. And I think a careful look by your Subcommittee will reveal that, and I do think you should give some serious consideration to just a general provision, and I think if you do you will find that that does not particularly broaden the authority of the General Assembly as existing under the present Constitution. MR. BASHM1: I did talk with Dr. ~1cDanie1 about that 24 one point --we brought this up last time-- and he said he'd just as soon have it "for public purposes" or something like thatj sees no need to have the General Assembly's authority limited at all. MR. MARTIN: Representative vJilliamson, do you have any observations about that in terms of the legislative process, the change that we're talking about? HR. H'ILLIA\fSON: I tend to agree with what Canter said. I sort of feel that if it's a public enough purpose and the Constitution's holding us back, then here comes a constitutional amendment, and we'll get at it that way. I don't think the General Assembly has been stopped much on constitutional amendments; if we want to do it, we do it, and it just clutters up the ballot. So I support, you know, really a broad-based, public-purpose type expenditure, and let the General Assembly decide. MR. STRICKLAND: I certainly agree with that. I think all we have to do is look at the history during the years to support that statement. MR. MARTIN: David, I know you've done some research on this. Do you have any additional comments? MR. ~~E: I've surveyed some other state constitutions, and I would say that overwhelmingly that the language adopted is for a broad approach, to allow the legislature great discretion as long as it has the expenditures for a 25 public purpose. MR. BROWN: Jim, could I mention one other factor that I think may weigh in the discussion, and that is that Article 3 in the appropriations provision, which applies to any expenditure of tax funds, requires that the purpose of the appropriation be set by a previous law. l~atever the General Assembly's authority is in terms of the purposes for which taxes are levied, the actual expenditure of those tax funds requires two laws to be passed, whatever the Constitution says, unless the Constitution itself specifically appropriates funds, such as motor fuel taxes. But it requires that a separate law and a previous law be passed specifying the purposes and the methods by which the appropriated funds are to be spent, and a second law actually appropriating those funds. So even though you do have a general authority for the General Assembly to set purposes, it's still going to require in Article 3 that the General Assembly act twice before any tax funds can be spent. We do have quite a check-and- balance there. lffi. MARTIN: At this point, it might be helpful to-- We're going to talk about an agenda after we hear from Mr. George anc Jay and John. The suggestion is that at our next meeting we make this decision, and that we ask for maybe some information to be developed before that. It might be 26 appropriate to ask Mike to get with Canter and David to draw up some draft language for a general provision to get to us before our next meeting, and also some analysis of the types of things that we have not been able to do in the last five or six years because of this provision. Would somebody on the Committee want to make that suggestion, or -- MS. HUNTER: Yes, I'd like to ask if you like this. Mike had done a long list of other provisions in the Constitution, other purposes that are stated in other articles actually broadening this, and maybe we could eliminate a whole lot of this as well as the verbiage in our own section. And if you'll look at that section, it started out as nice, short, single purposes, and they got longer and longer as time went on to make sure that they fit within the restrictions and everybody was covered. So you can see that it frequently is a problem. MR. BROWN: Jim, concerning the idea of suggestions for language, a couple of weeks ago I attempted to send all the members of the Subcommittee a draft that had been prepared at the request of Mr. Thrower and Representative Collins, intended only to illustrate types of changes which could be made without really any major substantive impact, in my opinion. As a part of that, I did suggest some language for a general authorization. I've got some extra copies of this whole thing 27 here, if any of the members of the Committee would like it. But it's on Page 23 of the draft, and it's simply, in Paragraph 1, "Subject to the limitations otherwise contained in this Constitution or provided by law, the powers of taxation of the whole state may be exercised for public purposes as specified by law. 1I And although I don't think there's any magic in those words, necessarily, I do think that would give an illustration of the type of provision which could be adopted. 11R. ~~RTIN: Well, if it's okay with the Committee, what weIll do is we'll ask Mike to get with David and Canter and come up with some draft language that we can discuss at our next meeting. If you'd also look at-- make sure that that language covers the list that you have already done of other provisions of the Constitution that deal with purposes so it will cover all of these, and also some discussion about what this provision has done in the last five or six years to limit the power of the Legislature. Any other information that we might need for our decision next time? Mr. Nash. HR. NASH: As I get it, then, theylre going to attempt to draft words for us that would make a general statement that would allow the General Assembly, then, to have in effect . --rather than going to these amendments to the Constitution, that they would do it by General Assembly action. HR. HARTIN: That's what I understand. That will 28 make our decision at the next meeting whether to accept that language or to have another meeting and talk about which of these specific purposes to include and exclude. John, could you-- Are there any other questions? MR. NASH: I have one other question. Should they do this, what would be the recourse, then, for those existing amendments to the Constitution here? How would they be handled? MR. HENRY: They would either be incorporated into statutes with a corresponding legislative package that we would present to the General Assembly at the time we presented this Constitution, would be --that's how they would be covered. MR. BROWN: I think what may end up happening, although it would certainly be preferable to pass a lot of bills, I know in Florida when the constitution was revised in 1967, they were faced with almost an identical problem, and they just included a provision in the new constitution that was labeled "schedule," and that "schedule" provision automatically created all the deleted language as statutory law, subject to amendment or repeal, unless it specifically conflicted with a provision in the new constitution. So there are mechanisms by which you can ensure that all of this is automatically written into law, even without the necessity of actually passing bills through the General Assembly. r1R. NASH: Well, without something like that, then, it'd be very difficult for us to put in such wordage in here 29 that would make it a general statement, unless you tie with it some way of getting in what's already in existence. }ffi. BROWN: Well, as I say, other states have been faced with tha~, and they have found a handy mechanism in a single sentence in the constitution just automatically creating all this deleted language as statutory law. MS. HUNTER: I think it would go to a general provision and the rest of this to be statutory. Our only concern then is, is there anything that we think ought to be deleted, even from statute. That would be the only thing we would be concerned with in that line, as far as these new any-way purposes. MR. HENRY: You could make a recommendation to the General Assembly that you don't feel that, for instance, . there are any more Confederate widows out there, and you think that that provision may want to be deleted from the law when they get around to enacting it. MR. BROi~N: Just in that regard: As of early this year, there were still two Confederate widows. MR. KANE: Canter, these purposes are not se1fexecuting, so that there is in there legislation which would effectively adopt anything that's in here, so I don't see why you'd even need to have legislation carrying over these, say if we still wanted taxes-- MR. MARTIN: Can y'al1 just maybe work that out, 30 iron out that language, and make that a presentation to the Committee? That may be the best way to proceed. Mr. Strickland? MR. STRICKLb~D: We're not saying that as a Committee that we would pass judgment on some amendments that have been adopted, whether it should or should not be in there. Did you mention-- Is that what you said? MS. HUNTER: That's what we could do if we tried to. MR. STRICKLAND: I think that goes a little bit beyond what we're supposed to be doing, doesn't it? I mean that's already been, you know, voted on by the people, hasn't it? MS. HUNTER: Some things may be obsolete, though. MR. MARTIN: As I understand our charge, it's to look at this section and come up with recommendations to the full Committee on Taxation and to the General Assembly. And to the extent, I guess, that we document our decision one way or the other, provide all the information about why we decided one way or the other, then the appropriate authorities who make those decisions will have that benefit. I understand what you're saying, ~1r. Strickland. We can run into a lot of problems if we get too radical in our changes. But I think we do have a responsibility to look at this article and exhaust the alternatives that are available. MR. WILLIAMSON: I think a problem that you run into 31 in terms of passing the new document is people on the floor of the House and the floor of the Senate that think that they had something before and they don't have that any more, it doesn't take but one or two sentences and you've lost that person's support for the whole document. And so I think it's very important that we make sure that whatever is in the Constitution now at least remain in statutory law as we change it, because a lot of people have strange ideas, and if you tinker with them, they get mad. MR. MARTIN: Are there any more comments about that? I didn't even want to cut the discussion off, but I thought that y'all could probably work out that language, and we'll get the benefit of y'all's reflections at the next meeting. Any other comments by Committee members or staff? (No response) Let's go into the grants to municipalities, and Mr. George and Jay are here to comment after John gives a little background. MR. KEYS: The second handout, although it's bulky and full of charts and numbers, isn't quite as intimidating as it may appear at first blush. MR. STRICKLAND: Excuse me. Which one is the second one? ~1R. KEYS: It's called-- It's excerpts from a tax reform report --that one, I think, right there-- Georgia State 32 Local Fiscal Trends. All these charts will carry you through 1977, and that reflects the fact that this is about a year and a half-from a report that's about a year and a half old. But I think it'll point out some trends that are important to keep in mind as you wade through the financing tax and perhaps local government articles as well. Given the fact that government is intergovernmental in nature, you can't just look at the state in isolation from local governments. A number of programs are performed jointly by state and local governments. Local governments are faced very frequently with a number of mandates by the state that they have to fund out of their own tax sources, frequently. ~~at I wanted to do was kind of run you through these charts, which will give you a picture of some trends up through '77, and they're continuing to this day, and reversing in some degree, given the fact that, as I mentioned a little earlier, the federal government is under immense pressures to balance the budget. And I think that what will come of those pressures in Washington is drastic cutbacks in past history of federal assistance to state and local governments. We've already seen it in the case of revenue sharing, a very important source of revenue for state and local governments. It's in real danger, and perhaps won't be around three or four years, whatever the extension is on it at present. 33 But anyway, walking you through real quickly, in Table 1 you'll see a history of state and local government general and tax revenues. Now, general revenues are on the left part of that chart, tax revenues on the right. General revenues consist of tax revenues and intergovernmental transfers. Now, intergovernmental transfers, of course, are grants from the federal government and grants from state to local governments. Tax revenues, on the other hand, are what are called own-source revenues; in other words, what a government can do on its own, levy taxes. You'll see that state and local general revenues have increased by about 432 percent over the period '62 through '77, but remain distributed --and you'll see that in this percentage distribution, two columns over on the right-hand portion of that general revenue portion of the chart, and likewise over on that tax revenue side. They remain distributed among state and local governments in about the same manner. You can see that 51 percent of state-local revenues, state and local combined, again --being 51 percent of total state-local revenues being state, 49 percent being local revenues. Now, again, this is general revenues, which consists of tax revenues and intergovernmental revenues. However, when you look on the other side of that chart, tax revenues, those revenues that exclude intergovernmental transfers and service charges, a different pattern 34 emerges. First off, overall state and local tax revenues have increased at a lesser percentage than state and local general revenues. Additionally, the distribution between state and local governments is different over that history period. Local units have increased their percentage share --you'll have to flip over to that percentage-distribution side of that series of columns on tax revenue. Local units have increased their percentage share of tax revenues from about 35 percent in 1962 to about 38 percent in '77--that's that last column, all the way over-- while state tax revenues, on the other hand, have declined from about 65 percent down to 62 percent in '77. Now. there are two primary reasons for these changed revenue patterns, these trends. First off. federal aid to state and local governments increased dramatically in that period. The 1960's, of course, saw the advent of the Great Society programs, where the feds were just pumping money down to state and local governments left and right. The infusion of federal aid is especially evidenced at the local level. And I'll get you, if I could, to turn over to Table 2. Now, this breaks down-- That first table was state and local combined. This shows local government general revenues. General revenues, again, that would be intergovernmental transfers as well as tax revenues. As seen in Table 2, federal intergovernmental aid to 35 local units increased by close to 2,000 percent, which sounds astronomical, but again, these dollars are not adjusted for inflation, so keep that in mind. As may be seen in that table, federal aid increased 1,700 percent, and grew from 3.6 percent of total local revenues --and that'll be over on that right-hand side of that table, under "percentage distribution;" you've got the dollars over on the left, and then percentage that those dollars represent of total revenues. You can see that in '62, prior to the Great Society programs and so on, about 3.6 percent of local general revenues was comprised of federal aid, increasing --these are all Georgia figures, too, I want to hasten to add; we're not looking at national, this is Georgia-- 3.6 percent up to 12 percent in '77. At the state level, as can be seen in Table 3, the same table except this is state government, federal aid grew by 461 percent over that history period, and grew from 27.8 percent in 1962 to 30.8 percent of total state general revenues. Thus, it's apparent that Georgia state and Georgia local governments have come to rely increasingly on federal revenues to a greater extent than in the past. In some cases, this is a natural, I think, political tendency. There's immense pressure to keep down property taxes, for instance, keep down taxes in general. If money is available, take it, 36 and I think that's evident by the figures. And again, this points to an ominous picture for the future as these federal monies get cut back. Everybody wants the services, nobody wants the taxes. So it's going to be a real tough political situation, I think, at the state and local level, when folks want their services, don't want their taxes increased, and the federal bucks ain't there. So that's something that bodes, I think, an ominous picture for the future. Okay. Now, looking back-- if I can get you to flip back to Table 2, state intergovernmental aid. Now, this is where I'll kind of get --I hope, flow smoothly into state assistance to local governments. State intergovernmental aid to local governments, while increasing --you can see on the percentage side, that's Column 3 of that portion of the chart-- while increasing by 328 percent --I'm sorry, back over to the left side; that's "state and other" in dollar figures, on the dollar side of the chart-- increased from $202.1 million up to $864.7 million, a 328 percent increase. While increasing by 328 percent, it's come to comprise a smaller portion of total local general revenues, and you can see that by looking over on that percent- age distribution side of the chart. You can see that state aid actually decreased from about 35 percent down to 26 percent over that history period. 37 MR. MARTIN: tihat are you including in the term "loea] government?" MR. KEYS: That includes cities, counties, and schools. I'm glad you asked that. I should have prefaced my comments with that. Okay. State aid increased, as I mentioned, increased in aggregate dollars, but dropped as a percentage. Now, this is an interesting contrast, I think, to the average U.S. state and selected Southeastern states. And if I can get you now to flip over to Table 4, you'll see a little comparison. These are percentage figures for two years, the two at that time most recent years available. Percentage of total local general revenues from intergovernmental transfers. Now, what you'll see on this chart is --I guess I've included all Southeastern states and the U.S. average state. These are percentage figures of total local general revenues derived from federal transfers and derived from state transfers. Now, I want to caution you here, too, when you look at these figures, keep in mind that the state transfers are --they tend to be overstated, given the fact that a lot of the dollars that go to local units of government from the federal government pass through the state, so that would show up as a state transfer, so it tends to overstate the role of the state government. As you can see in this table, Georgia in 1977 ranked 38 last in terms of state aid as a percentage of total local revenues, and first in terms of federal aid as a percentage of total local revenues. Table 2 data again reinforces the fact that Georgia local units of government have come to rely increasingly on federal aid and less on state aid to help them meet their governmental service demands. Not surprisingly, the bulk of our Georgia state intergovernmental aid is provided to school districts. $737 million of the total $864.7 million in 1977 went to school systems. A comparison of Georgia state intergovernmental aid by recipient unit of government is provided for you in Table 5. That'll break out, again. Southeastern states and U.S. average --well. U.S. total dollars and State of Georgia and other Southeastern states total dollars, and then percentage figures by type of government: county, city. special districts, and schools. You can see from that table that Georgia places the overwhelming predominance of its state intergovernmental aid on school system support, and that's reflected in that last column over on that chart. And you can see that 85 percent of our state intergovernmental aid goes to school system support. compared to the average U.S. figure of 49 percent. Now. 1 want to caution you again --1 hate throwing out all these caveats, but you have to when you're using data --the only data source that's available. which is the U.S. 39 Census Department. A lot of states, and especially Southeastern states, Tennessee, Virginia, and I think North Carolina, their school systems are part of city or county government. So, consequently, their aid to cities and counties will look a lot higher than it actually is. But I think it does kind of point out some trends, and I guess obviously it shows that the overwhelming priority of Georgia state government, in terms of its intergovernmental aid, is on school system support. So I guess-- I hope it's obvious or apparent that federal aid has come to constitute a larger and larger source of revenue, especially at the local government level. And I think that, again, it points out that the future isn't going to look too bright if the federal funds start to dry up, and they're drying up on a daily basis. And I think you'll see more and more pressure on especially local governments to increase their taxes, and that means property taxes, that evil omen that folks do not like too much. And I think you'll see increasing, too, pressures by local governments to share state taxes with them, given the broader tax base of the state and so forth. And again, service demands aren't going to decrease; they'll probably remain constant or perhaps even increase, and folks don't want to pay those taxes, so something's got to give. Now, turning over to IIandout No.3, real quickly, the basic types of grants that are provided to cities and 40 counties are kind of broken out for you on --well, it's Table 8, but it's actually the only table in that handout, second page. You can see that this is broken out for you also by type of government. Counties are the three columns on the left-hand portion of that table, cities are the two columns over on the right-hand side. You can see that three separate grant programs provide funds to Georgia's counties. Now, I'll caution you here, too. This is again an excerpt from a motor fuel tax report, and I've restricted this to motor fuel taxes. There are other grants that go out to cities and counties through the appropriations process, but these are the basic, I would guess the bread-and-butter grants that go out to cities and counties. Three grant programs-- }fR. MARTIN: Just a second, John. You're saying that these grants are only motor fuel grants on this table? lfR. KEYS: Yes, with the exception of the $2.6 million grant program to counties, which is, interestingly enough, based on road mileage, but it's for any public purpose. So it would seem to imply strongly that it's for road construction. That's that third column. And the city programs are for capital outlay. the $9.3 million program is for capital outlay, and the $4.2 million program is for any public purpose except for payment of municipal elected officials' salaries. I put the city programs in there, though, because at 41 the inception of the $9.3 million program back in --'61 it passed, '62 was the first year of funding, it started as a municipal streets program. And I wanted to speak to that issue, because there are some alternatives that the Legislature may want to consider in that area; perhaps turn it back to a city streets program and fund it from motor fuel tax revenues, for infJtance. Anyway, you can see that there are three separate programs to counties. One, instituted in 1945, provides $4.8 million divided among counties based on road mileage, and it's for road purposes, and that's in conformity with the existing constitutional language which restricts county grants for road purposes only. Dollar distributions, you can see, have remained unchanged since 1945, interestingly, and the total amounts have not-- the distributions among the counties are set by statute; each county gets a given amount of money each year, set by law in 1945, and the total amounts have not been increased. Obviously, inflation has had a rather significant impact on that. I refer in here to appendices. That's in the big report. If y'a11 would want to see the statutory language for that, I would be glad to provide it for you. Beginning in 1951 --that's in that second column under "counties"-- $4.5 million was provided each year through 42 the appropriations act. I've been unable to find any statutory authorization for that. As best I can see it's determined, it's set each year in the appropriations act, and it's based on road mileage again. The third basic county program is $2.6 million. which again, as I mentioned. is based on road mileage, but it's for any public purpose. I believe that's the language in there. Okay. As regards municipalities. two basic programs are in effect. In 1960. the constitutional amendment was passed which you all are looking at right now. dealing with municipal grants. authorizing the state to provide money to cities. Under that language. the state provided a million dollars for. as I mentioned, a street program. That was later repealed. I don't know the specific reasons for that, but it was repealed. And in 1965. in place of that street construction and maintenance program, the Legislature authorized a population-based program for municipal capital outlay projects. As you can see, that program too. like those county grant programs. has remained at the same funding level since its institution. Both of those programs have. That second program, as I mentioned, is for any public purpose except for payment of elected officials' salaries. I kind of zipped you through that. but that is the basic, as I mentioned. bread-and-butter areas. There are other programs, as I mentioned. that are funded through the 43 appropriations act: a number of programs for county governments for health and welfare programs, for county contracts for road building, sewer and water grants, and so forth. I would be glad to respond to any questions, comments, if I can. ~fR. MARTIN: Do we have any comments about how that discussion fits in with Paragraph 4? ~fuy is there a Paragraph 4 for municipalities and there's not Paragraph 4 language, similar language for counties and for school boards? MR. KEYS: Well, school boards of course we do provide a lot of aid, I guess close to a billion dollars per year. I'm not familiar if there is a necessity for any language dealing with that, given the general statement that it's the primary obligation of the state to provide an educational system. MR. BROl~l: Jim, Article 8 specifically authorizes the state to provide adequate education. MR. MARTIN: Okay. And what about counties? Why aren't counties included in this? MR. KEYS: That's a good question. The county grant programs are authorized under the legislative article in the motor fuel tax section, and that's that big, windy paragraph, and in the middle of that paragraph there's some language that says --after discussing what motor fuel taxes can be used for, 44 it says, "And for county grants for road and bridge construc- tion purposes." Consideration might be given to just a general statement that the state may provide grants to COtmty govern- ments for public purposes as may be defined by the General Assembly, instead of locking in grants to cOtmties for road building purposes. ~fR. ~ARTIN: Does the Committee have any questions? MS. HUNTER: In anyone's opinion, does the gratuities section prohibit the state from making grants to cotmties and municipalities, or it has to be specifically authorized some- how -- MR. BR01~: You may want to consider having the language regarding grants to local governments transferred to the appropriations division, and have it as an authority to appropriate funds, particularly if you go to a general public-purpose statement. MR. MARTIN: Any other comments? (No response) We have Mr. Elmer George, with the Georgia Municipal Association, and !1r. Jay Ricketts here at my request. I asked them to come and give us some of their comments about that section. Mr. George, glad to have you, and I appreciate your waiting for us to get through our other part of our agenda. 45 MR. GEORGE: tiro Chairman, lady and gentlemen. Ordinarily, I would have had Ed Sumner, our attorney, or Jerry Griffith, who is our legislative representative, over making this presentation. It just happens that I've been with the association now 23 years, and I represent a lot of history, I guess you might say, in some of the things. The question on how the provision on cities got in the Constitution as opposed to the provision on counties, I would like to plead guilty to the fact that the now Attorney General, when he was my representative, that legislation was drafted and presented and voted on in 1962, and when that was voted on, that year there were a lot more suggested constitutional amendments that died than at any time in recent history. And that constitutional amendment passed by the largest majority of any constitutional amendment that was passed that year. So with your permission, I'd like to make one or two general observations that's primarily based on history, and a suggestion. Now, first of all, I'd like to compliment the Committee. I have been very much impressed with the manner in which you're going about your responsibilities. And it's my feeling that any change in the approach to the Constitution, whether you use the limitations you have, that you can't do anything unless it's spelled in the Constitution, to a broader approach, is a very important step. And I recognize that in 46 most states that they do use the broad approach, eiving the General Assembly or the Legislature more responsibility in making determinations under the constitution of those things that need to be addressed, and particularly as change occurs. And frankly, I guess personally, I'm one of that particular school, because nothing stands still. We are in an era of potential growth in this state at the moment, as part of the sun belt. ~~e're going to see more people coming into the area. We're goine to see more demands for public services than we have seen, even during the period following ilorld War II. It seems to me that whatever decisions that are made in the Constitution have effect in city and county government, and I'd like to submit that the provision that you're concerned with, or the provisions you're concerned with, naturally logically interface with say the provisions under consideration, Article 9, and then the article on taxation, general article on taxation. No, this isn't the taxation ... MR. WILLIA}1S0N: Right, taxation. }ffi. GEORGE: Yes, the other ... At the moment, I happen to be sitting as a member of the advisory board to the Southern Growth Policies Board, and I'm on a subcommittee dealing with the future of cities; dealing with the future of children, Southern children; the future of the economy and energy and a variety of other things. And 47 those issues can't be disassociated from the authority that's granted in the Constitution and how the local governments and the state deal with those issues that are facing us in the future. Bill Strickland knows and a lot of you know that we were over a period of years very much concerned with tax equalization, and I think the Seaboard case and a lot of other cases address those issues, and we could go on and on and on. But my concern, and I would plead with you to keep this in mind as you make important decisions, it seems to me we ought to look at intergovernmental systems. Now, whether you can address this in the Constitution, recognizing that any proposed changes in the Constitution are going to impact, it seems to me we might be a little bit putting the cart before the horse as we mentioned in tax reform, as you're going to have tax reform and you're going to broaden the authority of cities and counties and state, or change those relationships; that we ought to know what we're doing, what we are doing, why we're doing it, what the cost effect is, before ~rle make those changes. And it's been the observation of the Tax Reform Commission, does not fully --John, if you're still here-- address some of those things. So we have taken the position --we went to the Governor, and we asked him to set up a state balanced growth policy, broad-based, so that everybody who had a legitimate interest in it, ,'lith sorae sort of bottoms-up procef;s, come Ll and take a good loo}', a t Y,7~lere we are, t,Jhere ',le' re GO in;'" , ",hat our resources are. That includes the ...7ho1e bit, not only the intergovernmental system. I think you beGin at the interGovernmental system to look at the roles, the basic roles of cities and counties. Now, over the last few years, particularly since ~!orld r,Yar II, and particul,qrly since the one"l'1an-one-votc decision, you know, and subsequent to that the civil ri?hts suits, we have seen a distortion of the roles of cities and counties in this state and in the region and, to some extent, across the country, but particularly in this re~ion. There have been a number of influences brought to bear, and I'm sUGgesting to you that 'iV'hatever reallocation of federal or state resources to local governments that is consistent with the authority the cities and counties have is going to have a tremendous impact on the future of this state for many generations to come. I, for one, would like to have a Bood, hard look at what the basic roles of cities are, what the basic roles of counties are. Do the cities really need authority to expand their borders under some legitimate process ,dth a mandate that they should do certain things as a condition to extending those borders, with a court overview to make durn sure they do? Now, George, in your county, I'm not sure what could 49 ever get back of that. Maybe we need to have another approach. But we ought to look at the causes of effects of what in the heck we're doing, and try to make our cities and counties, let them coexist --instead of being counterproductive, they ought to be productive to the people who need the services, and this is not happening. ~e see another element --I mean the fact that we don't have that authority, such as North Carolina and a number of other states, has gotten us in bad shape in this state, to a point where I think Atlanta is going to lose some population. I think we do have a high incidence of impoverished people, a high percentage of welfare, high incidence of crime. All of these things are interrelated; you can't separate them out. ~ow, I'm not suggesting that we can deal with these issues in the article that you're concerned with. But I am saying that as you make decisions on grant of authority or restriction of authority that do impact in some of these areas, for 300dness sakes let's try to understand first of all what the cost effect or the service effect in the future of this state, how it's going to be affected. I think the-- I agree with what John Keys said. There is going to be a conscious effort --and at the moment I subscribe to that-- of reducing the feder,al funds, the grant-in-aid programs for local government. And I say that in face of the fact for 16 years I was on the resolutions 50 committee of the National League of Cities and the ranking member,.working with a lot of people, and helped put some of those programs in place. ~'1e 've got to bring those resources back. \.,Te've got to expand the relationship of our cities and counties and our state government with those cities and counties. As you bring back, hopefully, the responsibility and authority and the tax resources, \Ve've got to make the right kind of judgments. And I think that in so doing that we almost ought to begin in addressing the relationship of our cities and counties and the state within the intergovernmental system. So right now, until such time as-- We have requested a state department to get busy and look at the service needs of the people, identifying the kinds --what are service needs, describe them, and to understand why we do interpret these needs. What do we need in terms of water and sewage to sustain economic development and growth in the face of this energy~efficient growth process that we're going to see coming into the earth? How are we going to provide those resources and those services to accomodate the employment ratio that we need to do the things that we have the opportunity of doing, and at the same time --say this is our farm people. ~le I ve got to atfue same time look at the resources we have in our rural areas, including --and this is something we have distorted with our principles of tax allocation-- including land use, 51 water resources, a lot of other things. Now, this is generalizing and getting off the subject quite a bit, but I'm saying that all of these things are affected. So until such time as we do look at the service needs, as we do identify what they are, looking at who is --what level of government and what government is rendering services and why, and what the cost effect is, it seems to me that our position is going to be maintain the authority we have under the provision on municipal governments, and we would be opposed to extending any more authority to counties until we understand what the intergovernmental effect, what the cost effect, what the effect is going to be on our land use, the water resources, and on our people. And that is a very general statement, but that is our position. I would like to say that as the counties have been given --the counties were permitted, because the big cities needed the money so desperately at the federal level, the counties are authorized to participate in just about any program that the cities do, and the programs originally were conceived for cities where they had the problems of in-migration and a lot of other problems. The state in its investment policy in many cases contributes to this diffusion of responsibility and the overlapping and the resultant improper, in some cases, use of our land. The issue of double taxation, where the county officials double tax over the county area, 52 use the resources in specialized areas outside the city, is creating problems for us. Now, I don't pretend to be smart enough to suggest to this committee how you address it. But I wanted you to understand why we take the position that we do; that we want to keep the city authority as it is, we'd like to restrict the county authority to where it is --and I say that, George, recognizing that the former, on mileage, s \1()(, not do one thing for your county down there, and maybe someway you ought to address the former. So with that ... MR. }~RTIN: Thank you, Mr. George. Let me make sure I understand precisely what you're saying. Is it the position of the Municipal Association of Georgia that we should not change Paragraph 4, dealing with grants to municipalities? MR. GEORGE: Rip,ht. MR. MARTIN: Are there any questions from members of the Committee or staff? Or anybody else. After Mr. Ricketts has an opportunity to speak for the counties, we'll have anybody else who wants to speak to this particular provision, will have that opportunity. Mr. George, we thank you for being with us. A good number of the things that you've talk~d about I presume are being covered in Article 9. MR. GEORGE: Right. 53 NR. HARTIN: Connie, do you have some.thing? MS. HUNTER: Yes, just wanted to say provided that the Constitution permitted grants to municipalities, would you be satisfied if this detailed language were statutory rather than in the Constitution? HR. GEORGE: Well, as I understand that provision, this simply gives the Legislature the authority, the enabling authority to make such grants. MS. HUNTER: Provided the Constitution did give that enabling authority, that would be what you'd want, isn't it? MR. GEORGE: Right. And then I would like --If I might, Mr. Chairman, for your apologies, I'd like to qualify it. And if after we go through this exercise of looking at the roles of cities and counties, who's doing the services --and I'll have to admit that in some cases we'll have to make exceptions, because of conditions like we do have in DeKa1b County. But I think we ought to understand why; and if we are going to move toward consolidation, I think it ought to be a deliberate thing. It ought not to be because of bussing. It ought not to be because of double taxation. It ought to be because in the interest of the people it makes sense. And we would support that at that particular time. MR. MARTIN: Mr. George, the Municipal Association has no problem working with our staff on this provision -11R. GEORGE: None whatsoever. MR. MARTIN: --as we study it, and ... HR. GEORGE: And I do apologize for that long dissertation; just had to get it out of my system. MR. MARTIN: That's fine. Any other questions from members of the Committee or staff? (No response) Mr. Jay Ricketts, with the Association of County Commissioners of Georgia, is here. Jay, do you have any comments to make on this? 1m. RICKETTS: Jimmy, Mike tried to get in touch with me. I've been at Jekyll Island with the tax assessors meeting; I was sort of late this morning. I think it goes without saying that the County Commissioners Association is interested in giving the General Assembly the maximum authority to make grants to counties. I think there is a technical question in this area, and that is just exactly what authority the General Assembly presently has. Obviously, the General Assembly has on occasion made grants to counties for any public purpose. I guess the question was raised, you know, does the General Assembly have clear authority to do that; if not, you know, how would that authority be approved by specific language changes. I think if language were added along the line of ~vhat Canter talked about a while ago, it would seem to me, 55 anyway, that the General Assembly would have clear authority to make grants for whatever purposes. HR. BROlVN: I would, in that regard-- I believe that caution would be the best policy there. "Grant" easily could be construed as a gratuity, and I think that you would want to be extremely careful in making sure that there was that authority to make that gift to local governments, even though you felt like by authorizing public purposes be specified by law, that would be included anyway. Because we do have a specific constitutional prohibition, and I think it very easily could be written as applying to those types of grants. So I think you would be wise to consider a specific provision authoriZing grants to whomever. MR. }~RTIN: Is there a provision like that that gets around the-- or, as an exception to the gratuities provision for counties and for school boards? HR. BROHN: There is for school boards. Article 8 specifically authorizes the expenditure of state funds for local school purposes. Article 9 specifically authorizes the expenditure of municipal funds for independent school system purposes. There are several provisions which authorize grants to counties or imply they authorize grants to counties for specific purposes. For instance, the general one that has been travelled upon time and again is the grants for road and 56 bridge purposes, under Article 3, exceptions to the earmarking provision for motor fuel tax. There are some other ones; for instance, grants to county boards of health, under the general authority provided for health-related matters. There is to my knowledge no specific authority to make general-purpose grants to counties, however, under the present Constitution. HR. HENRY: Jim, I would think that to the extent that a county was performing an administrative function of the state that they would be authorized to make grants for that purpose. MR. BROWN: Well, of course, as a practical matter under the present Constitution, what would happen is that the state would enter into a contract with the county to provide a specific service for the state. That is the method that's been selected to get around the absence of a permanent grant. HR. HARTIN: Mr. Nash? MR. NASH: I'm getting kind of a mixed feeling here as to what we're fixing to look at. It looks to me like special interest groups are saying we've got to have our protection under the Constitution to get this grant for this and that, and purposes out there that are derived by individuals or groups that says "Okay, we've got to have a grant for this." But I think we're getting away from the purpose of who we tax and what we tax for. And I think this is the real 57 importance of this thing, is you can always find a way to spend tax monies, and the purpose is who you're going to tax to get that money from. And this is the thing that I think the Constitution has to address itself to, is who can be taxed and for what purposes they can be taxed for. You can find a thousand purposes, but you've got to have a source for the tax for filling that purpose. And we just got through hearing here that the federal government is going to cut back on these things, and they had purposes for it, so they taxed for it. And now they're going to cut back or we're going to switch it, and this is what the Constitution is going to have to address. I mean this Committee is going to have to address, in my opinion, whether we're going to allow it; that we're going to say that you can tax for any kind of purpose that the Legislature wants. So I think there's got to be some thought of limitation here, as to how far that we will allow the Constitution to go to leave it open to even the Legislature or the General Assembly to make this judgment out there. And if we leave it 8eneral, why everybody that has a purpose comes in and goes through the Legislature. So if you leave too much authority there, maybe you've opened the door too wide. HR. HARTIN: Just a second, Jay. Let me see if any member of the Committee has any additional comment on that. Or Jay, you -- 58 ~1R. RICKETTS: I just have one final comment I want to make, and that was I'm not sure that the legal authority of cities and counties with regard to services is within the domain of this particular subcommittee, but obviously the association doesn't agree with Hr. George's comments that there should be a diminishment of the legal service authority of counties. MR. ~~RTIN: That makes it easy for us, right? HR. BROHN: Jim, in response to Mr. Nash's comments, let me again mention to you that in a way, the Constitution in terms of purposes of taxation has the cart before the horse. All tax money, with certain relatively minor exceptions, goes into the state general fund. You can't earmark those taxes for any purpose, you can't even state the purpose for which it's levied, theoretically, in the bill authorizing the tax. It's really a holdover from the old days when you could earmark the funds. That list doesn't serve as a prohd.bitionon taxing anybody. It serves as a prohibition on appropriating money that has been raised by taxation. And I think legitimately if there are going to be restrictions on the use of taX funds, there are legitimately restrictions upon the power to appropriate funds, not on the power to tax. Because those funds, once it gets in the General Assembly, you cannot find where that money came from in the general funds. It's all in the 59 same pot. And I think that if you did feel that there needed to be some limitation on the expenditure of these funds, legitimately that should be dealt with by the people considering appropriations powers and not taxation, because you cannot identify those funds to limit the purpose for which they're spent once they're in the general fund, in any event. I would also like to again recommend to you, however, that the list of powers that's now authorized in the Constitution, when taken together, is so relatively broad, that by adopting a general provision, I don't think you're greatly expanding the current power of the General Assembly. But I do think that in terms of all the specific technical language that's written into the Constitution on these various authorities, you're giving more flexibility to the General Assembly to adapt step-by-step to changing times and of changing needs of the appropriations process. But I don't think as far as substantive grants of power you're really going to expand it that much. Look at that list and look at the other articles of the Constitution. iVhat can you find that isn't authorized one way or another, except just making outright gifts; that's the big prohibition now. The other ones, the State is already authorized to act in just about any given nlajor subject area of public involvement. The question is will you permit the 60 General Assembly to technically adapt to changing circumstances within those broad grants of authority. I really think that's the issue y'a11 face. But again, I think you need to look at those powers. If you feel like they need to be restricted, have restrictions on the appropriations process and not on the taxation process. MS. HUNTER: In other words, you're saying that a general statement, "for public purposes as provided by law," would be adequate for this article, and in the appropriations article anything, prohibitions on gratuities, and then on the other hand the permission of grants, too? MR. BRmiN: I think in a logical arrangement of the Constitution and in a logical analysis of what the restrictions are in fact imposed upon, that restrictions or limitations are on the appropriations process, because all tax funds flow into the general revenue fund as a practical matter, and the purposes for which those funds are spent can't be isolated by the source of the tax. MR. HARTIN: Are there any other comments? Mr. George. MR. GEORGE: I just want to agree with you, Hr. Chairman, and others who have expressed it. that I too agree that some of the things that we're concerned about addressing ourselves to, another subcommittee, but they are interrelated. And I think that at some point in time, probably we would come 61 to an agreement that probably there should be some general language that would be generally applicable. I simply raise the question as to whether or not we ought to do it at this particular point, until we get down to addressing some of the other things first, because it might be counterproductive to some of the problems that we already have. 11R. !1ARTIN: Jay Ricketts and Mr. George, we appreciate the comments both associations have given us. Are there any other people here who have comments, not only on what we discussed concerning Paragraph 4, but also the general discussion that we had. And after this, we're going to make some decisions about our agenda and how we're going to proceed, so this may be an appropriate time for anybody else to make whatever comments you'd like to make. (No response) Any members of the Committee have any questions or ... (No response) Okay. The next thing that we have on our agenda-John, thank you for your presentation, too, very helpful. --is a discussion of our work plan and how we're going to start dealing with some of the issues that have already been raised. Does everybody have a copy of this proposed work plan for the Subcommittee? (Distributing documents) I'm sorry I didn't make 62 enough copies for everybody. The purpose of this work plan is, as we've heard now on two different meetings, general comments about the task that's ahead of us for this section, to make some judgments about how to divide that up, and based on this work plan make some decisions about meeting dates and how many days we want to meet, and things of that nature. I've divided it, after having read it and gone over it with Mike and looked at the minutes from the last meeting, into three basic issues. The first issue is action on the provision stating the purposes of taxation. The second issue is action on the provision for payment of revenues into the general fund. And the third major area is action on the other specific provisions in Section 2, which are the ones dealing with the promotion of agricultural commodities, grants to municipalities, and the industrial development commissions provision. Do y'all have any thoughts about it? Is that a fair division of the issues that are facing us with Section 2? (No response) Silence is assent, I guess. Under the three different alternatives --we've got some alternatives and some decisions to make, and the alternatives we can add others to, the Committee can expand this list. tty thought at this point is that we use this outline as a way 63 to schedule our work; that it would probably --and under the alternatives on the provision dealing with purposes of taxation, are a general statement, which we've already instructed our staff to begin working on, and secondly a specific statement, which would then involve decisions about whether we should just leave the list unchanged, whether we ought to add something, whether we ought to delete some provisions, and what provisions throughout the Constitution should also be incorporated in this list. Obviously, if we make a decision to go with a general statement, we don't need to do the work under the specific statement. My proposal is that at our next meeting we make a decision about the general statement. I think that at this point it looks like the consensus of the Committee is moving in that direction. I had thought we might want to schedule a second meeting, if necessary, to talk about the specific issues if we don't decide at the next meeting about a general statement. Then, under two, our options there are to clarify the current provision if we believe that's necessary to reflect current practices. For example, if there are things that are not being paid in the general fund under whatever authority, if we need to clarify the provision to include that exception, that's one alternative; the other is to add-- is to prohibit the earmarking of funds that are currently earmarked. And then 64 the other alternative maybe is to add other revenue sources into the provision that deals with payment of all revenues into the general fund. And then the third would just be a matter of us deciding what we're going to do with the three specific provisions. I see that dividing up into at least three days of work, maybe four. How do y'all-- What's your reaction to that? HR. BROHN: Jim, if I might mention that should the Subcommittee decide to go with a general statement on powers of taxation, I think your Area No.3 there, the amount of work involved will be greatly reduced. Not totally, but primarily the reason these things are in the Constitution was as an exception to the powers list. There are some other things in there, but I think if you do go with the general statement you'll be able without any harm to delete almost all of the language. MS. HUNTER: Well, in "A", that's the earmarking prohibition, also the tax on that orie, and something about the industrial development commission -- MR. HENRY: Yes, the industrial development commission. I did some research on that, and I haven't been able to find anything that exists that's called or that has been-- I found no legislation implementing that paragraph. I don't know, there's maybe someone here that would know different. 65 This creates an industrial development commission to make loans to be secured by second mortgages. I would imagine the reason it's in there, because the state is not generally in the loan business. But this, if implemented, would allow the state --and in fact, some people I talked with on the legislative council were not even aware that that was even in there. Do you know anything about it, Canter? MR. BRO~~: I've got to be honest, I don't. I would point out, though, that it really doesn't relate to this article in the Constitution. There is a prohibition in Article 9 on the state loan and credit-- not Article 9; wherever it is, the state loaning its credit to any private businesses. That's what the exception is --would more logically belong as an exception to that provision. MS. HUNTER: The thing I ask, with reference to Item 1, it seems the consensus is for a general statement. I don't know Nr. \Jade's feelings or Senator Holloway's. I don't know if they felt that there were some things we needed to do in order to make that fly, but were leaning in that direction, too. However, if we would consider Items A through D, provided we didn't use a general statement, should we consider those with regard to what we would recommend would be statutory? Now, I believe Mr. Strickland did not think we needed to, but it seems to me if we would need to consider these as part of the Constitution, we ought to also make recommendations for 66 those items. MR. l'U~RTIN: You're sugges ting we maybe add an "E" there to say what provisions can be made statutory under those specific statements? MS. HUNTER: (Nods head affirmatively) HR. HARTIN: A recommendation has been made that we add to the alternative under specific statements that if we get that far in our deliberations that we think about if we're going to maintain a specific statement, what provisions can be made statutory as opposed to constitution or part of that section. t1R. BROWN: If I might in that regard, Jim, mention to the members of the Subcommittee that the draft that our office did send out shows the language which we feel could be struck without any violence, or at least that I do. And it may give you an indication of the types of deletions which could be made without harm. MS. HUNTER: Of course if it's included just automatically some way, doesn't seem a really important issue. MR. MARTIN: Okay. Are there any more comments about this work plan? (No response) For our planning purposes, we need to adopt this as the plan that we're going to operate under, and we can of course change it at our next meeting or as we go through. Is there a 67 motion that we adopt? NR. STRICKLAND: I'll move. MR. WILLIA}ISON: Second. HR. HARTIN: All in favor, say "aye." (Chorus of ayes) MR. MARTIN: Okay. Now we need to decide about three meeting dates, and we'll just follow the work plan in that order. We may want to deal with Part 3 at our next meeting, to make a decision about the general statement. Does everybody have their calendar? !1ike, when do We have to have our final report in? MR. HENRY: I believe it was by that September 24th meeting, when the full Committee is going to meet again. HR. KA.~E: He'd like to have the drafts in by the 15th of September. MR. MARTIN: Does anybody want to suggest some dates? George, how is your calendar? I know you are ... MR. WILLIA}lS0N: I'd like to suggest that it not be on August the 28th. We can have it on election day, or November the 4th. (Private discussions around table) MR. !1ARTIN: Y' all are going to need some time to do the research we talked about. Looks like that begins, then, with the week of August the 4th as the first possible time. Is there a date during that week that we can get together for 68 our next meeting? Any preference on that? HR. NASH: August the 4th suits me all right. MR. ~~RTIN: Commissioner Strickland, is the 4th MR. STRICKLAND: Yes, Monday would be a good day, August the 4th. HR. HARTIN: How about you, Representative Hilliamson? HR. \HLLIAHSON: That would be fine. MR. MARTIN: What time is a good time? MR. STRICKLAND: How about ten or earlier? MR. MARTIN: Why don't we do it at ten. MR. STRICKLAND: Same room? MR. HENRY: Probably it will be the same room. Ive'll be getting a notice out. ~m. MARTIN: Now, we'll need to schedule two more dates. What about the next week? Monday's taken on the next week for me. Is the next week a bad week? MR. NASH: Tuesday or Wednesday of the next week would work for me. MR. MARTIN: Twelfth or thirteenth1 HR. NASH: Yes. MR. HENRY: The thirteenth would be a bad staff day. MR. MARTIN: 1{hat about the twelfth? That's a Tuesday. MR. WILLIAMSON: Fine. 69 MR. MARTIN: Okay, and then we need to schedule our last meeting, when we'll make all our things permanent, resolved. The week of the 18th is bad, is that-- let's see, the 12th. What about the week of the 25th? MR. HENRY: The 18th is fine with staff, as far as I can tell, that week. MR. STRICKLAND: The week of the 25th is bad for me. MR. NASH: I couldn't be here on the week of the 25th at all. MR. MARTIN: Can we say that preceding week, the 18th? That would mean meeting every week for one day. MR. NASH: The 21st would be about the earliest date I could be here for it, 20th or 21st. Probably the 21st would be the earliest date I could be here, myself, which would be on a Thursday. MR. BROvlN: You may find it will be possible to do your work in those first two meetings; take a longer period just to reflect on these things. MR. }1ARTIN: Well, let's just schedule the first two meetings, and then if we need to schedule more ... MR. STRICKLAND: I think that would be better. MR. 1~RTIN: Do we want to, before we adjourn, make a decision about the suggestion that Mike has made that we delete the word "methods" from the title of this section, so 70 that it's just the purposes of taxation, since the section doesn't deal at all --and I agree with Hike. That's your observation, and I don't see that that MR. HENRY: That's my observation. Now, whether the Committee wants to develop some limitations on the methods, I think that would be within the ambit of your charge, given the fact that that's the title to the section. MR. l1ARTIN: What's the preference of the Committee on that? HR. NASH: I'd prefer we leave the word "methods" there until we arrive at how far we're going to go with this other, because there may be a reason that we have to leave the word "method" in there before we get through. Unless we have to make the decision now, I'd rather just leave it as is until we get down to the final draft. It'd be very simple; if we don't need it, we drop it out. MR. ~1ARTIN: \fhat about the issue on grants to municipalities? Do we feel like we're in a position to make any decision today on that, or do y'a11 want to postpone that? MS. HUNTER: \~at are the decisions we want on that? MR. HARTIN: I guess the options are to go with it, take it out, or to instruct the staff to do some more research on it, or to change it. MS. HUNTER: I think other than changing the language, if we could include that particular provision with some general 71 provision that would include the other kinds of grants that the state permitted. I think that would be the direction we'd want to go. MR. MARTIN: \{hy don't we instruct the staff on those three provisions dealing with agricultural products, grants to municipalities, and industrial development commission, consider that in developing your general language, and give us an alternative to maintaining those provisions, and we can decide that at our next meeting-- MS. HUNTER: As far as intergovernmental transfers are concerned, which is what we're talking about, the only major source of revenue to local government is its property tax. It's a very unpopular tax, and it's about bearing its weight. The only other alternative is to give them some other choice, which no one has really come up with, no really major source; and the other alternative-- MR. STRICKLAND: How about local option sales tax? We've got 68 percent of the people now living in local option-- MS. HUNTER: Okay. That's fine if-~m. NASH: It's still not an equalized tax. I don't care how you put on local option. debate. MR. WILLIA~fSON: Well, let's don't go into that. MR. NASH: No, I don't want to get into that; I'll avoid it. But I think that the people that are taxed should 72 be the ones that are using, making use of --You don't pay tax on other people except in general sales tax. MR. STRICKLAND: You ought to be on the ~~RTA board with me. MR. ~1ILLIA}1S0N: We need Bob's county represented on MARTA. ~1R. NASH: But this is one of the things that's causing the problems in this state, caused in every state, is people who don't pay taxes are demanding most of the services. MR. KEYS: If I might, there's a big problem, too, in that when you have the state levying taxes for its purposes, locals doing the same for their purposes, you have a problem with mandates. The state legislature may decide that it's a necessary program to be performed and the local government is going to have to do it. And if you would preclude state assistance to local government, you'd have mandates coming down and no way to fund it except by local tax increases. So I think there may be a valid purpose for state assistance to local governments. MR. l1ARTIN: John, will you work with Mike and David and Canter on this general language in that consideration? MR. KEYS: Sure. MR. MARTIN: The final thing of those special-purpose articles or paragraphs that I'd like to ask the Committee for permission to do, I'd like to be able to write to bond counsel 73 and everybody I can think of about that provision dealing with industrial development commissions and see if it does exist and see if anybody wants it, and have a report back for the Subcommittee at our next meeting. Is that acceptable with the Committee? (No response) Any other matters for us to discuss? (No response) I appreciate y'a11 all coming. (Meeting adjourned.) -000- C E R T I F I CAT E GE 0 RGI A DEKALB COUNTY The foregoing transcript of the proceedings was taken before me as a Certified Court Reporter, and reduced to type- writing by me personally; and I certify that it is a true, correct, and complete transcript of the proceedings. This 25th day of July, 1980. ., /' .. I ;{':j. :21:i-,--- JoHN R. THO~tAS, CCR-B-240, CVR Notary Public My Commission expires 6/5/81. INDEX Committee to Revise Article VII Subcommittee Meeting Held on July 16, 1980 SUBCOMMITTEE MEETING, 7-16-80 Section III: Purposes and Method of State Taxation Proceedings, pp. 3-6 Presentation: Mr. John Keys, Tax Reform Commission on Earmarking. pp. 6-17 Paragraph I: Taxation; purposes for which powers may be exercised. pp. 17-31 (also general discussion on limitations) Paragraph III: Grants to counties and municipalities. pp. 31-44 Mr. Elmer George, Georgia Municipal Association, City Growth. pp. 45-54 (Grants to Municipalities) Mr. Jay Richetts, Association of County Commissioners. pp. 54-61 (Grants to Counties) Scheduling of Meetings - Proposals. pp. 61-73 2 3 4 5 6 7 8 9 10 "z 11 j: .'oa".. ~ 12 ~ ~r~ !.14 I :r 15 .:. Cl ..'";) 16 ~ a Z 17 : 18 19 20 21 22 23 24 25 PAGE 1 STATE OF GEORGIA SELECT COH~lITTEF. ON CONSTITUTIONAL REVISION COt~1ITTEE TO FEVISE ARTICLE VIr SUBCO~fr1ITTEE ON prn~ER OF TAXATION, ARTICLE VII Room 40l(a) State Capitol Atlanta, Georgia July 18, 1980 Friday - 9:30 a.m. PRESENT WERE: 2 C0l-1HITTEE HEl'1BERS: 3 Rep. Don Castleberry, Chairman Mr. Larry Blount 4 Dr. George L. O'Kelley 5 SELECT CO~~1ITTEE STAFF: 6 Hr. Melvin Hill Mr. Hike Henry 7 ~s. Vickie Greenberg 8 OFFICE OF LEGISLATIVE COUNCIL: 9 Hr. Cantor Brown 10 Czl 11 ... .'"o."". @r21 ~ ~14 ... VI ~:r 15 ~ Cl '";;;) 16 ~ Cz ~ 17 : 18 19 TAX REFORH COMNISSION: Hr. Steve Vaughn Dr. Jack M. Martin OTHERS PRESENT: Hr. David Kane Mr. Harold Williams Hr. Homer Brewer Mr. David Godfrey Mr. Steve Holley Ps. Gwendolyn Braun 1'1s. Lisa Gill l1r. Jim Ne,man Mr. Jim Kittrell Mr. Richard Bray 20 21 22 23 24 25 PAGE 2 P.-\GF 3 PRO C E E DIN G S 9:30 a.m. CHAIRMAN CASTLEBERRY: I believe this morning on our agenda we have with us two members of the Tax Reform Commission, the Executive Director and his Assistant; Mr. Jack Martin and Steve Vaughn. They have been asked to report to us on three areas. The first one classification of tangible property and exemptions and the bank shares provision. So, Jack, who's going to be first. MR. cTACK MARTIN: It probably depends on which way you want to go with us. CHAIRMAN CASTLEBERRY: It doesn't make any difference just whoever wants to go first. MR. MARTIN: We have done some work in these three areas and I think that is primarily why Mel asked us to provide some information for you and possibly even answer a couple of questions that you may have with respect to these three particular parts of the Article of the Constitution. Steve actually has actually done more work, more staff work, as far as the area of classification of property for property tax purposed. So he will tell you briefly what we've done. What we attempted to do was to look at the broad question with respect to alternative methods of,or alternative standards of property tax assessment, those standards being those other than the traditional fair market value concept. Consequently by look- 4 ing at those alternatives particularly as it applies to certain types of property we did get involved with the uniform provision of the Constitution, which is what you have before you for discussion. So, Steve, if you want to -MR. VAUGHN: Okay. Basically we looked at the classification system as a tool which could be used (a) either to provide general property tax relief to certain types of property owners or (b) as a possible method to assist in the preservation of farm land and open land. Basically what we did, Was we tried to examine what classification systems were now in effect and how those classification systems evolved in the various states. We found that within recent years when states have shifted over from a uniform system, or shifted over from a legally uniform system to a classification system, that it has generally been in response to Judicial pressure of one form or another. In particular Arizona and Tennessee which had some problems in this area with respect to the Courts. We last year had someone who worked in Arizona during the time that they switched from a uniform to a classified system and they were strongly determined to try to find a classification system which generally upheld what the current system was illegally prior to the Court action. As a matter of fact they made, he indicated, they made over a hundred computer runs to try to determine what type of classification system would best uphold what was currently going on in i'\CE 5 the state outside the legal realm. So what we have found is that,by and large,states were not actively pursuing classification as a viable alternative but it was more of a reaction to a Judicial crisis. We tried to examine when we looked at classification in terms of tax relief or farm land preservation, we looked at it in relation to another tool which is used particularly ~or farm land preservation and that is the use of the use value system. We found significant differences in the impacts in which classification would have in rural areas versus what use value may have in rural areas. Basically one thing we found that people talked about .with the classification system is that they want to somehow ad- just the tax Durden among different types of property here in . the state or in the county. That residential property or farm property should in the aggregate bear only a certain amount of the tax burden within that jurisdiction. So they will, they see classification as a way of implementing that in terms of shifting the burden through the assessment process. We have found what has happened or what can happen potentially is that, while there may be an initial shift, there are other factors which will determine in the long run whether or not that initial shift will continue to hold constant. If I can I would just like to pass out one of the charts that we have had in our reports which shows some differ- 6 ences in what would happen if you had a shift due to classification and the property growth rates between different types of property remained constant were changed over time. And I think it is probably generally agreed upon that within the past ten to fifteen years the assessed value and the actual value of farm property has probably risen more so than anyother property as a class in the state. This is due to a number of reasons, but, nonetheless, I think there is general agreement that that has occurred. If you look at the table this basically shows that in years by you have gone from a uniform system to a classified system. Let me just give you an idea of what it basically shows. As you can see in year zero through year four we're assuming that the four major types of property; residential, commercial, industrial, farm -- in the aggregate each contributed 25 percent to the assessed value in the jurisdiction whether it be in county or state. And in year five there was a classification system implemented which left commercial and industrial at 40 percent and changed residential to 25 percent of fair market value and then changed the farms to 20 percent of fair market value. What you can see in the first diagram is what would happen if you made that shift and the property growth rates held constant over a long period of time. For example you would assume then that the growth and the value of commercial, industrial, residential and farm each increased at about the same rate over the next ten years, 5 percent or 10 percent or whatever you want to say. So you can see that there is actually indeed a shift and that that shift will remain permanent so long as those growth rates are stable. But as you can see in the second chart you have some differences there. You start out at year zero in each sector contributing 25 percent of the assessed value in the property. But instead of having stable growth rates as you see in Footnote 2, the growth rate is different by different types of property and we simply assume that residential growth rate was 8 percent annually, commercial and industrial growth rate was 5 percent annually and farm growth rate was 10 percent annually. As you can see what would happen is that from year zero to year four you've got a shifting in the aggregate burden of taxes from these different sectors. In year five you can see that the shift approaches the initial shift that was found in the top sector with the commercial and industrial segment occupying a greater or having a greater share of the tax burden; residential being in the middle and farm having the lowest tax burden. But look what happens during the ensuing ten years when you've got this differential growth rate. You can see that in year fifteen the farm and the industrial and the commercial sectors actually once again have the identical aggregate tax liability as they did in year zero and that in essence residential would then comprise a lower or have a lower tax liability in the aggregate. So you can see that if commercial, or if the " 8 classification system is supposed to be done to shift the tax burden between different types of property you've got to examine the annual growth rates and you may indeed be forced to have a system which would have to be updated very frequently to maintain those same differences in the burdens,which the General Assembly or whoever originally designed or originally want it. In addition one of the other major reasons for classification is in essence a practical one to simply reduce the property owners' tax. They want to see an absolute reduction in that tax. In the long run you have to look at not only the growth in the values, but you also have to look at the millage rates. I think a number of people have indicated particularly with the millage rates that if you've got a jurisdiction which has -- let's say you're using a farm and a residential property to lower the assessment rates and that 90 percent of the property in that millage rate is residential and farm. Then what is going to happen is that the millage rate is going to be altered so that they have the same amount of revenue before classification and after and that the actual decline in property taxes will be extremely because they've got nowhere to shift it. The greatest potential for shifting and the greatest potential for reduction in the property owner's tax is in jurisdictions which has a small amount of eligible property relative to the amount of ineligible property. So again the classification system will have differential impacts in different jurisdictions depending upon ['AGE 9 the ratio of eligible property and non-eligible property. In terms of looking at classification and use value as a tool in farm land preservation, we found no major studies which have been done in the last ten years indicate that tax incentives alone have had any significant impact on long range retention of farm land in agricultural use. There has been studies that have shown that use values in classification in some areas have resulted in sizeable decreases in property taxes for certain types of property taxpayers. Particularly there was a study which was done in New ~ersey with respect to use 'I ~c.., ~value over the last 1964 to 1974 just after the implementation of use value, \vhich showed a substantial reduction in terms of 'J ~:anywhere between 50 and a 100 percent reduction in property . taxes for those which were eligible for the preferential treat- 1-j " mente The study was not able to show that that in any way contributed to the retention of farm land for productive use. Basically we found that classification and use value have dif- ferent impacts depending upon what the goal is in trying to en- 1\ act that type of legislation and that if you are going to look at classification and use value you have to be aware of the differential impacts in terms of what it can do to Urban fringe- land and what it can do to heavily rural land in terms of the goals you set forth. The staff report did not find that by the classification and use value in and of themselves is going to be valuable in the retention of farm land in the long run. We did suggest that as a tax relief tool, if you are doing it sole- ly for tax relief, that use value is probably more beneficial to farm land as a tax relief measure than classification is as a general rule. If you look at the difference between urban and rural farm land you will find in many cases that classification would be more beneficial to heavily rural farm lands than it would to urban fringe farm lands. This primarily results from the fact that you've still got the developmental pressures on urban fringe farm land that will keep that value going up. And that you will have those growth rates over time being higher than you would with use value. Basically that's in a nutshell what we had found with respect to those two areas. And I'd be happy to try to answer any question with respect to classificatiori. ,. CHAIRMAN CASTLEBERRY: Steve, did I'm sure that y'all used those studies at the University of Georgia has done II., for us over the last few years on this. You got some of those didn't you? MR. VAUGHN: Yes, sir. Let me see if I have any foot- notes. There was one agr~cultural research did on the, "Affect of Taxation and Land Use Controls on Agricultural Land Transfers in the Urban Rural Fringe". There was another one. Mr. Logan did, "The Analysis and Tax Burden for Commercial Farmers in Georgia", as a Master's thesis and that information was present- ,1 PAGE 12 background, we felt that we could initially go into the income I tax records and identify those people that file Schedule F re- turns for farmers, and that that would give us an idea of the farmers, bonafied farmers, in the state. We couldn't find very many people who filed the Schedule F in the state. When we too~ random samples we found them significantly under represented from what we had expected, and we had expected somewhere in the neighborhood of perhaps ten to thirteen, and we found like one or two percent. So, therefore, we had to go to a different method and what we have done is to work with the farm organi- -zations in the state to get a random selection of names from their rolls and then search the property tax records in the i 'r' \ \ '1. ~ ~county. As well as to search out their individual tax returns, i ".~ regardless of whether or not thet tiled the Schedule F. We have i~ ~found we've had fairly good success with that in terms of look- ing at the property tax records and finding that the people that we have selected are people which by in large have generally larger landholdings than the average person. We've found peo- ple that supposedly are on their rolls that don't have any farm land registered in their name, but that's a relatively minor aspect and we are proceeding with that. DR. O'~ELLEY: Now how many states, Steve, actually have some kind of classification system in effect? MR. VAUGHN: Nine or ten. Hassachusettes was the most recent, and theirs I beleive went into effect this year. PAGE 12 ed to us by Dr. Fred White last Summer. 2 CHAIRMAN CASTLEBERRY: Okay. Does anyone have any 3 question on the Classification and the Use Value? 4 DR. o'KELLEY: Yes. I would -- Steve, Dr. White's 5 study as done by Logan, we reviewed it but did we not dismiss 6 it largely because of the sampling procedure? 7 t~R. VAUGHN: Yes, sir. The sampling procedure was 8 what we considered to be dificient in terms of the fact that 9 there were very -- in a number of significant income catagories, 10 there was an inadequate amount of data to support the conclu- 11 "z j: .'0G".o. sions that they found. 12 '" DR. o 'KELLEY: Many of us, and I ask you, do you not e r l think there was sufficient information there to justify further ! 14 t- investigation along these lines instead of just dimsissing it? ' 16 .~.. that the classification system provides a subsidy for people Q 17 Z g~ who receive preferential assessments and those classifications 18 of property that don't receive preferential assessments bear the burden of that subsidy? 19 ~lR. VAUGHN: It's definitely a shifting impact and 20 that's the whole emphasis on classification is that you are 21 shifting it among different types of property. 22 23 MR. BROWN: In a state like Georgia if you've got 24 such a tremendous amount of farm property where would you shif 25 ti1e burden in order to make up the lost taxes. ~']hat other PAGE 18 classifications of property are there that can bear the 2 increase in taxes? 3 CHAIR}~N CASTLEBERRY: Utilities. 4 MR. VAUGHN: There are generally a number of categor- 5 ies depending upon how detailed you want to get them. If you 6 look at just the major ones you are talking abour residential, 7 industrial and commercial. 8 HR. HARTIN: Another thing that you need to be care- 9 ful of is that it is going to have obviously a very different " 10 impact from county to county depending upon the mix and types 'z" 11 i= .0.'."... 12 '" @rel ..14 ! I:z: 15 .:I '"'"::) 16 ...zIII Q Z '" 17 III of property that are there. 11R. VAUGHN: That's right, the mix of property. HR. BRmJN:' Would it be f~r, to say that by and largE if you shift the burden to commercial and irtdustrial property and ,utility property that all or a major portion of the cost of that increased burden will be passed on to the taxpayers in Georgia? 18 MR. VAUGHN: To a certain extent that is certainly 19 going to happen. 20 HR. BROVIN: If that's the case isn't it true that 21 presently you can deduct property taxes from your state and 22 Federal Income tax? Would you be able to deduct a pass througl 23 tax so in fact it theoretically could increase the tax rate 24 paid by everybody? 25 tiR. VAUGHN: It could theoretically could increase the tax rate? PAGE 19 2 HR . BROTtlN : In terms that you are not having your in- ,"" 3 come tax benefits but you are payin~ an increase price of . 4 products as a result of higher prices paid by industry and 5 commerce. 6 HR. VAUGHN: In some instances that could occur. 7 DR. 0 'KELLEY: Well now this is a popular exercise in this 8 area but let's examine the other side of this issue. Now if 9 you make these changes, I think your right in this assumption. 10 This is the trend that would follow. But if you don't make the change, Steve, then you continue the inequity that you have at present and therefore, the people who are carrying the burden most heavily ~dll not only continue, but it will in crease with the passing of time; is this correct? MR. VAUGHN: Well it depends on what you are talking about in terms of an inequity. If you are saying that resi- dential and farm property should only contribute a certain 18 amount to the overall property tax burden in any jurisdiction 19 say in County A. And if you find in the next five years that 20 their taxes are increasing faster than industrial and com21 mercial, then yes indeed you are talking about the inequity 22 that you have defined. But as a technical matter t.'1ere is no inequity 23 nO''J because you have strict uniformity. It's a question of 24 the fact that that property is increasing more rapidly than 25 other property. As a result the shifting is occurring. The PAGE 20 question is whether or not you want to stop that evolutionary 2 or that natural trend. 3 DR. O'KELLEY: Yes, but I even question this. The 4 local school support is dependent entirely on property tax. 5 So this then ,lith the passage of time this problem becoT'1cs 6 even greater. It prohibits a movement of a portion of this tax 7 burden of the property o~nler to other elements of the cornmuni- 8 ty, who I think are equally responsible for the support of the 9 schools. 10 CHAIRHAN CASTLEBERRY: What would you do in the county 11 "z j: though where you don't have the other elements to shift it to? .I0..I...: 12 II: DR. o 'KELLEY: Well this is -- @rl CHAIRMAN CASTLEBERRY: You knovJ, \Je do have counties ! 14 that don't have much commercial and industrial. I- O:zI:l 15 q DR. o 'KELLEY: Well I would think they don't really "a: :;) 16 z.'.". have this problem. It is a question within the county as to 17 0z II: '" hmv much taxes they vJant to levy knm-ling that the taxes 'viII 18 have to be borne by the property ovmers in that county. There 19 is no other source of income. < 20 CHAIB}~N CASTLEBERRY: You assume they have to have 21 the saITte amount of revenue or they'd just have to raise the 22 millage. 23 DR. o'KELLEY: That's right. 24 CllAIBJ'1AN CASTLEBERRY: And you'd be paying the same 25 so you still wouldn't be -- PAGE 21 DR. o 'KELLEY: Of course, then you get into some kind 2 -- as we have in the school business -- some kind of equaliza- ~- 3 tion procedure to -- and I don't know what problems that would 4 raise with people. Then also the issue of intangible tax, I 5 think, would enter into it. But of course. you are saying that 6 in some of those rural counties there is not that much intangib- 7 Ie property available to tax. Is that 8 CHArmfAN CASTLEBERRY: That's ripht. 9 DR. o 'KELLEY: -- I would guess that's right. 10 CHAIID1AN CASTLEBERRY: Canter? "z 11 j: ~1R. BROWN: Mr. Chairman, I just wanted to point out 12 I0..l..l..: Ill: that in my line of questioning I ,vasn' t trying to suggest that @ r l or didn't feel that homeowners and farmers were bearing an un- ! 14 fair burden of tax. I think what's happened is that over the I- 15 ':z": .:I last hundred years when our system of accumulating of county 16 "Ill: ;:) Iz..I.I wealth has changed from land to incomes or stocks and bonds and 17 az Ill: III other thing, which is what Dr. Kelley \-las pointing out, from 18 everything that I have seen,the Tax Reform Commission has done 19 in other reports that the Hays and Mea.ns and the Bankinp; and 20 Finance and Insurance Committees have looked at it,the only 21 way to provide true relief from homeowners and farmers in prop- 22 erty taxes is to shift allay from property taxes; at least on 23 tangible property and to better utilize other forms of taxatior 24 so as to recognize their proper place in terms of ,;,yeal th in 25 our present day society and not hinder our tax structure by PAGE 22 basing it on a system of wealth that's been outdated for fifty 0 2 seventy-five years. But I have never seen anything that has 3 shown me that if you adopt the classification or use value 4 system you are going to help out in the long run any farmers 5 or any homemmers in Georgia. And if anybody has seen any in- 6 formation that proves that I'd sure like to see it. And as I'm 7 sure Jack VJould point out to the commission, although they 8 certainly -- Tax Reform CoTTlt'1ission -- although it certainly 9 did not reject out of hand the idea of classification, declinec '.~. 10 to adopt a classification recommendation as part of its recom- III 11 Z j: mendations to the General Assembly for many of those same rea- ..'0."... 9 r !l12 '" sons. CHAIrof~N CASTLE~ERRY: Anybody else on this line? 14 ... this subject? ~1mv, Jack, what have we got next? On ': " 16 ~... The last column is subject to implementation by local Q Z 16 .~.. off a little bit or warm up a little bit on it. Q 17 gZ; HR. VAUGHN: Canter, I do think that in any instance 18 whether it be by local Act or local Constitutional Amendment, 19 that it's got to be subject to review. I think it's critical 20 to having exemptions which are even going to be workable. I 21 think there was some discussion. For example there was a juris- 22 diction which had some problems betvleen a regular exemption and 23 an elderly exemption, which were going to cause the elderly to 24 miss out on some exemptions for at least the next two years. 25 There's is one exemption w'hich, if enacted, will probably PAGE 40 eliminate between seventy-five and ninety percent of all resi2 dential property on the tax rolls. 3 CHAIR}~N CASTLEBERRY: It sure is. 4 HR. VAUGHN: There are a number of minor, if nothing 5 else,technical problems which I think with a little staff work 6 with a little review by substantive committee could be cleaned 7 up very easily. 8 MR. DROWN: An I correct in understanding though that 9 in the Governor's charge to the Constitutional Revision Com- 10 mission and its Subcommittees and that Mr. Harris' charge that .11 "z j: one of the main objects of this Constitutional revision effort o.l.. ~~: ~ W V :::n::e:::O::d :::: :: :::::::em::: :::::::::t:o:ot:::eG:::::1 ! 14 Assembly to do these things by lmv rather than have to COll- I- -clI> 15 :J: .:l tinually add provisions to the Constitution? "l ;;) 16 ~ HR. VAUGHN: I don't knmv. I would assume that that Qz 17 : would probably be a desirable goal. I don't really know. 18 ~1R. HENRY: I think you could probably retain your 19 extraordinary majority. 20 MR. VAUGHN: Oh, you keep that exact same conditions. 21 As a matter of fact by local Act it would be a little more dif- 22 ficult because you'd have to advertise it. Whereas you don't 23 have to advertize a Constitutional Amendment. 24 11R. HEtiRY: I think what I understood you to say was 25 the Tax Reforn COmP1ission would rather see more overvie\J rather PAGE 41 than having them pass through as local courtesy so that some- 2 one could determine impact 'tvhether you have local Amendment or 3 local Act you're not going to have that overivew. So somehow 4 if you could work it into a general law type thing where you 5 would have to have where it wouldn't f!.0 through as local cour- 6 tesy or just exempt it from local courtesy and say it has to 7 go before the entire body. You knmv I think the problem of 8 overview is an important one to solve that. 9 ~1R. BROWN: Isn't that question really, as he's say- 10 "z 11 ... ..'o".... ~ 12 ~ ~r~! 14 ... '" :I: 15 ~ "'::"> 16 .~.. Q Z 17 : ing, a question of the General Assembly's own policy toward creating legislation? It's not a really Constitu -- there's not really anything in the Constitution about local courtesy an~lay. And it seems to me that that's something if the General Assembly desired to do it simply could do. It doesn't need to pass a law. It doesn't need to do anything. It just does it. Really it doesn't seem fair to hamstring the Finance Article of the Constitution with all this surplus when in fact 18 the Constitution itself could preserve all the require~ents of 19 having these local Amendments adopted and yet permit it to be 20 done outside the Constitution. 21 CHAIRMAN CASTLEBERRY: It could be. All we'd have 22 to do is change the rules. 23 t1R. VAUGHN: That's right. 24 MR. BROHN: And again I think it's important just 25 bear in mind the Governor's charge and that was to vlherever PAGE 42 possible without damaging the integrity of the Constitution 2 permit the General Assembly to do things by Rule and by Law, 3 which is, as far as I am aware, the entire ebb and flow of the 4 Constitutional Revisions processes in the other states for the 5 past thirty years. 6 CHAIID~N CASTLEBERRY: Are there any other questions 7 or comments on the exemptions that we want to discuss at this. 8 time? 9 MR. BROWN: Hr. Chairman, could I mention one thing 10 in that regard? CHAIID1AN CASTLEBERRY: Yes. MR. BROWN: Jack mentioned being able to eliminate an awful lot of surplus language particularly so far as the work of this Subcommittee goes in the language on granting exemp- tions. Our office will mail to each member of your Subcommit- tee within the past couple of weeks a proposal which is intend- ed to highlight the types of organizational language changes 18 that you would make 19 CHAIID'IAN CASTLEBERRY: Excuse me just a minute. I \Vas 20 going to get to that next. So while you're on that I want you 21 to stand up and explain what you've done to this Corrrrnittee and 22 not just sit there. 23 HR. BLOUNT: He can have my seat, Hr. Chairman. 24 CHAIID,lAN CASTLEBERRY: He does better standing up. 25 He won't talk too long. PAGE 43 HR. BROHN: That's right. Let me explain real quickly 2 how this came about. Representative Collins, who, as many of 3 you know, is the Chairman of the Hays and Beans Cmmnittee in 4 the House of Representatives and a member of this Task Force 5 and Mr. Thrower, the Chairman of the Task Force,have requested 6 me to prepare a draft which would illustrate for you the types 7 of organizational changes and language changes which could be 8 made in the Finance Article pursuant to the Governor's charge, 9 which would not hopefully reek any substantive havoc on the 10 protection on the Finance Article. CzI 11 j: The recommendation for review that we've made to you ..'o.". \v8.s mailed out to you a week or two ago. I've got a number of e ; j copies here if anybody \l1Ould like them. ! 14 CHAIRHAN CASTLEBERRY: Excuse me just a minute. You I- UI 15 % ~ might tell them that this is the way we've done the Revenue CI '::"> 16 .~.. az 17 ::; Code and the Alcohol and Tobacco Tax . MR. BROWN: Yes, sir. I think that particular was 18 Mr. Collins' impetus for requesting this draft. The Ways and 19 Means Committee in the House in cooperation \.lith the Senate 20 Banking Finance and Insurance Committee in the past three or 21 four years has undertaken and finalized a complete recodifica- 22 tion of all the State's Revenue Laws and Alcoholic Beverage 23 Laws. It was done in order to reorganize the laws for clarity, 24 to change the language, to make it as simple as possible and 25 to use clear modern present day simple English wherever possib PAGE 4L~ le in the law. That's the basis for this draft essentially. 2 It's not intended to either make your decisions for you or to 3 venture far into any substantive areas, but simply to show you 4 the types of organizational changes that can be made without 5 any substantive affect, but which will make a much clearer and 6 more readable Finance Article in the Constitution. Particular- 7 ly as Jack Mentioned I think you ,Jill find in the exemption 8 provisions that a great deal of language that is included 9 presently in the Constitution could easily be handled by statu- 10 tory law. Host of that language you ,vill find marked through 11 "z .i0c.=.o...: in this draft and we've adopted the usage in the General 12 co: Assembly of underlining new language and striking out language Q r l which is presently in the law, but which is to be dele.ted. You !.. 14 want to be careful because in the organization of this Article ." 16 .~.. desire to try and draft an entirely new provision we, of course, Q Z 17 :-:<; would be available at your request to assist you. We felt that 18 'vi thin our charge from Mr. Thrmver and Hr. Collins that we need- 19 ed to work based upon we have here. 20 MR. HENRY: Canter, in your opinion would a authori- 21 zation from the General Assembly to provide for exceptions by 22 law, would that run afoul of the gratuities prohibition in 23 Article three assuming the gratuities prohibition stays as it 24 is now? 25 HR. BROHN: I think if you had an express authorization PAGE 48 to pass laws granting exemptions subject to certain limitations 2 just the general doctrine of Constitutional interpretation is 3 the specific would overrule the general. I can't see that the 4 Court would call that a gratuity at that point. You know, 5 assuming that it was otherwise Constitutional under the equal 6 protection. 7 HR. HENRY: Has it not been called a gratuity before 8 though? 9 HR. BROWN: Generally tax exemptions have not been 10 considered gratuities so long as the law under which the ex- emption is granted was in force at the time the tax liability arose. Because you really can't give something away until you finally are certain that it is yours. And there wouldn't have been ascertainment of that until the la\J -- until the tax inci- dent arose. CHAIRHAN CASTLEBERRY; Any other questions or comments on this proposal that Legislative Counsel has presented? 18 DR. O'KELLEY: I wanted to pursue the question just a 19 little further with Canter. This idea of discarding this docu- 20 ment and starting from the beginning I think has a lot of 21 attractions. I would think we would come up with a clean 22 has anyone tried it? 23 l1R. BROWN: I'm not aware of anybody that has tried 24 it in this Article formerly. The other revision efforts in 25 the past twenty years have primarily just worked from what we PAGE 49 have. As you rnir-ht expect as has been the case in Georgia law- 2 makers have been pretty conservative when they were dealing 3 with the tax law. There's an awful lot of Court decision, in- 4 terpretation, regulation based upon this long-standing document. 5 I think they've been hesitant just to abandon that. Again I 6 think for many reasons it could be desirable to do that but 7 there ,('I7ould be an awful lot of resistence I think to it. 8 DR. o 'KELLEY: Hut it could be substan -- if that 9 would -- you would come up with a substantial shorter document; 10 is ti1is true? zCI 11 I- HR. BRmV-N: Yes, sir. And I do believe that even if ..'o.".... @;i you work with the present Article that you can come up with a document substantially shorter than the recommendation that ! 14 \'I7e're making to you all without any reeking havoc upon the I- '<"l 15 :E: .:I state. For some reason we've just al\vays felt like everything CI 16 '":::l .~.. needed to be 1;vritten into the Constitution. I think the exper- Cl Z 17 .~.. es. We have found in the past t~at this tends to be a question Q 17 Z : that comes up quickly in Committees and we present the material 18 and it's soon found not to be very relevant to their 'vvork. So 19 I mean vie -- David Kane had put together and 'Ie did send a 20 memo to all the Committees with provisions from the Finance 21 other Articles of about seven or eight other Constitutions witl 22 respect to classifications. We already have some information 23 from other states and we'd be glad to provide more. But my 24 ovm feeling \vould be that Canter feels that this draft 'vas ~ rather conservative in the kinds of things that could be elimi PAGE 52 nated and my thought would be if we would give the Office of 2 Legislative Council an opportunity to take this draft and at- 3 tempt to reduce it even further based on their OvID sense of 4 what could be eliminated without doing damage to policy matters. 5 That perhaps would be the best next step or maybe both. I 6 mean we'd be happy to provide additional information on the 7 states and also have Office of Legislative Council take their 8 first conservative draft and perhaps draft one that's less con9 servative and then you'd have a good bit to work with you at 10 your next meeting. "z 11 ~ CHAIPJ1AN CASTLEBERRY: I would like to have some in- @;;..Iol..l..: fonnaticn from the other states on it so that He can be studying it and looking at it. But I also believe that my opinion . 14 ~ of it is that \'le've got to sell the House and Senate on v-lhat- I- 15 ':: 15 ~ Committee makes and I think Canter would agree that in a lot a cc.r::I :::> 16 .~.. instances you really can't tell '''hat their structure of taxQ Z 17 : ation is without havinp.; the body of their Judicial opinion 18 that has construed that Constitutional provision. For instancl 19 in Florida they have half a page but we would need someone tha 20 would know how their Supreme Court has interpreted that. Be- 21 cause if \Je just whole scale knocked this out and put in 22 Florida's well the Georgia Supreme Court would sit over there 23 and they wouldn't know what to do. They would have to go back 24 to their previous opinions and modify them to take account of 25 this radical chan8e. So that -- the utility of other State PAGE 5L~ Constitutions I think is in the language that you may want to 2 use once you adopt a policy decision to do something rather 3 than as a way that our Finance structure should be set up. 4 CHAIID1AN CASTLEBEP~Y: I agree with that. I feel that 5 the infoITuation that we get from other states would be useful 6 to us as far as. you know, it might be somethin~ we can use 7 and can't. Now I've been on these tax study committees about 8 eight years nov] and vJe get this information from these other 9 states and it just v1On't fit Georgia. But one day \'I7e might 10 luck up on one that vlOuld help us. " 11 z j: MR. BROHN: MY.". Chairman, I'd like to point out t:lat ...oQC II. @;I since you've accused me in the past so often of trying to just wholesale pass Florida's tax law into Georgia I'm not recommen- ! 14 ... ding the adoption of the Florida Finance, although I do think '~" 15. ~ it's a good one. "QC ;;) 16 .~.. CHAIRHAN CASTLEBERRY: I don't know whether you all iIll Z ~ 17 : know it or not but Canter wrote the Greenbelt Law in Florida. 18 Well what other general I mean is it agreeable witl 19 the Committee for Canter to take this back and try to go back W over it and see what else that he can do to it to make it con- 21 form and cut it down a little bit and still be conservative?' 22 (No response.) 23 CHAIRMAN CASTLEBERRY: Canter,do you think you could 24 improve on this some? 25 ~1R. BROWN: I'd be happy to try that, Hr. Chairman, PAGE 55 and I -- what I'll do if it's alright with you is to in a num- 2 ber of instances prepare probably some alternatives for given 3 provisions for you to look at. 4 CHAIRHAN CASTLEBERRY: On separate sheets. 5 MR. BROWN: On separate sheets, yes, sir. I'll 6 footnote it. 7 CHAIFMAN CASTLEBERRY: We have to watch Canter. 8 HR. BROWN: But I 'Jill be happy to try and do that. 9 I'd certainly like to be able to work with the staff of your 10 Subcomittee while it's doing that. CzI 11 ... 9 ; ;."o0."<. CHAIR}iAN CASTLEBERRY: Oh, yes, sir, by all means. HR. BROWN: Preferably in St. Thomas. CHAIFl'iAN CASTLEBERRY: No, sir. 14 !... Well is there any other comments any staff or any ':"r 15 oll committee or anybody wants to make? CI 0< => 16 .~.. cz 17 : (No response.) CHAIRMAN CASTLEBERRY: I would like to suggest and I 18 don't know whether it would be agreeable. I'm not trying to 19 say anyone way's right or anyone T,'JaY' S "Jrong, but the ~Jay 20 we did in taking these drafts that Legislative Council would 21 make on the Revenue Code and the Alcohol and Tobacco Laws, vJe 22 would take the original. One person would read and the other 23 follow here and that ''lay we would see what the changes were 24 made and we could ask questions and be sure that the changes 25 we wanted to make we could do it. They would make notes and PAGE 56 come back with a new draft. Would you all like to follow that 2 procedure or just do it individually? Hmv do you think? 3 MR. BROWN: Mr. Chairman, in one way I can make it 4 a little easier for you than your task was with those other 5 two codes because I can provide you, as is the case with this 6 draft, with verbatim all the present language as well as the 7 reconnnended new. So even though you read it it can all be 8 right in front of everybody. 9 CHAIRl-'ll,\N CASTLEBERRY: \-!e I ve got an updated cOMputer 10 down there where we can do that haven't we? 11 ".zj.:, MR. BROWN: Yes, sir. We've tried our best . .o..... @ ; j CHAIRl-fAN CASTLEBERRY: Would you like to folloVJ that procedure at our next meeting if you can have that? ! 14 t;; HR. BRmm: When we send out this next draft or serie~ -xc 15 ~ ".., ;:) of them whatever it is, I caution you again if something is 16 ~... zc underlined, don't just assume that it is new there. It may 17 ~ ";rell have been transferred from somev-lhere else and if some- 18 thing's struck out that you say, "'VJRit this is important!". 19 Please look through it to ascertain that it's not in fact in 20 there somewhere else. 21 CHAIB}1AN CASTLEBERRY: Well you have your notes -- 22 HR. BRm.JN: Yes, sir. 23 CHAIRHAN CASTLEBERRY: -- as to what that is to ex- 24 plain it at the next meeting. 25 HR. BRmm: And I will certainly answer individual PAGE 57 questions and go through it item by item with you, yes, sir. 2 CHAIID1AN CASTLEBERRY: Well is there anything else 3 anybody here knmrVs that we need to take up today? 4 (No response.) 5 CHAIRMAN CASTLEBERRY: If not then I don't -- let's 6 see the next meeting is 7 HR. HILL: The next meeting is scheduled two 'rVeeks 8 from today, Friday, August 1st, 9:30 in this same room. 9 CHAIm1AN CASTLEEERRY: Right. If Canter has this and 10 we get started on it T think if it's agreeable with the Com- I:l Z 11 j: ..'o".... @;I mittee we're probably going to have too if everyone can. Because as we and we need to get at it. to meet that afternoon say time is drawing nigh ! 14 ... ':z": 15 ~ I:l '";;) 16 .~.. 17 ogz; So if there's nothinp, else I appreciate everyone being here and let's try to get all the rest of them here at the next meeting . (Whereupon, the meetinr, was adjourned at 11:30 a.m.) 18 19 20 21 22 23 24 25 PAGE 58 C E R T I F I CAT E 2 3 I, Mary Lou Stokes, G.C.C.R #B-36l, do hereby certify 4 that the foregoing 57 pages of transcript represents a true 5 and accurate record of the events which transpired at the time 6 and place set out above. 7 8 9 10 "z 11 ..joa..::.. @;i ! 14 ... '" :I: 15 ~ "a: ;;;) 16 .~.. D Z 17 : 18 19 20 21 22 23 24 25 INDEX Committee to Revise Article VII Subcommittee Meeting Held on July 18, 1980 SUBCOMMITTEE MEETING, 7-18-80 Proceedings, pp. 3-4 Section I: -Po-w-er-o-f Taxation Paragraph II: Taxing power limited. pp. 22-27 (Taxing of bank shares) Paragraph III: Uniformity; classification of property; assessment of agricultural land; utilities. pp. 4-22 Section II: Exemptions From Ad Valorem Taxation Paragraphs I: Unauthorized tax exemptions void, and II: Exemptions from taxation of property. pp. 27-42 (Home- stead exemptions) Paragraph III: Exemptions which may be authorized. pp. 43-50 2 3 4 5 6 7 8 9 10 " 11 z j: '.o..".... ~ @\r~12 ~ !... 14 I:z: 15 ~ "'":;) 16 .~.. Q Z 17 ~ 18 19 20 21 22 23 24 25 PAGE 1 STATE OF GEORGIA SELECT CO~fr1ITTEE ON CONSTITUTIONAL REVISION COHHITTEE TO REVISE ARTICLE VII SECTION I SUBCO~1ITTEE ON TAXATION AND FINANCE Room 40l(a) State Capitol Atlanta, Georgia Friday, August 1, 1980 9:47 a.m. PRESENT WERE: 2 COHHITTEE HEHBERS: 3 4 5 6 7 8 9 10 "z 11 ~ .'o.".... @;I 14 ~ ~ ':"r 15 .:l ":':"> 16 .~.. cz 17 : 18 Representative Don Castleberry, Chairman Dr. George L. O'Kelley Prof. Larry Blount Mr. Abbit Hassey Mr. Henry D. Robinson SELECT CO}~ITTEE STAFF: Mr. Melvin Hill Mr. Mike Henry OFFICE OF LEGISLATIVE COUNSEL: Mr. Canter Bro\vu TAX REFORM COMMISSION: Hr. Jack Hartin OTHERS PRESENT: Mr. Glenn Strickland Mr. Harold Williams Hr. Jay Rickets Mr. David Kane Mr. David Godfrey Mr. Clint Sweezea Mr. Jim Kittrell Mr. Jim Newman Mr. Ken Jones 19 20 21 22 23 24 25 PAGE 2 PAGE 1 PRO C E E DIN G S 2 9:47 a.m. 3 CHAIRMAN CASTLEBERP-Y: Do you think, Hr. Hill, that 4 we might need to vJait a few minutes on 5 MR. HILL: I think not, Mr. Chairman. I would suppose 6 that a couple of people will be joining us, but we can bring 7 them up to date. 8 CHAIRMAN CASTLEBETTY: Okay, Canter. 9 HR. BR01rJN: Hr. Chairman, if I could I \vould like to 10 go all the ,Yay through this draft, of course, taking any ques- 1z:1 11 i= .'"o".". @;~ tions as we go. It is my intentionas I mentioned in the letter sending out this draft earlier this week to suggest to you that there are two major areas that are still within the abbr.e ! 14 t- viated version of the draft, which I feel were you so inclined '0"( :z: 15 o!) you could further reduce the size of the Section without harn1:1 '::"> 16 .~.. ing the substance of it. I think both of those considerations Q Z 0( 17 ~ though involve some political considerations that your Subcom- 18 mittee may want to weigh particularly carefully and that is ,,;Thy 19 I didn't attempt to change them in this draft. 20 SECTION I, PARAGRAPH I is the general prohibition on 21 the state granting away its power of taxation. As I think we 22 discussed at the last meeting the very earliest forerunner of 23 this provision was written into the Georgia Constitution as a 24 result of the Yazoo land frauds. It was then mightily beefed 25 up in the 1876 -- '77 Constitution? -- '76 Constitution as a PAGE 4 result of a series of Court cases relative to grants of tax ex- 2 emptions contained in railroad and utility charters. The 3 Courts held that a grant of the power of taxation in several 4 railroad charters in the l830s constituted a permanent grant of 5 tax exemption in perpetuity and that any attempt by the state 6 to revoke that exemption vJOuld be an impairment of the obliga- 7 tion of the contract embodied within that corporate charter. 8 The General Assembly or the Constitutional Commission 9 in 1876 decided they didn't like that one bit and attempted twe 10 things with this rewritten PARAGRAPH 1. One vJasto just gen- 11 Czl i= erally make sure that the state didn't ever do that again. And e ; j..'o."... I think you will see in this language in PARAGRAPH I that they not only nailed every nail into the lid of the coffin, but they ..14 ~ came back and sealed over some of them. I really think that I'" :I: 15 ,:, they went much further than they needed to to accomplish their 1:1 '":) 16 ~... objective. ..Q Z They also added the SECOND PARAGRAPH which you will 17 : see in the struck-through and underlined copy relating to the 18 power to tax corporations. That paragraph was specifically 19 aimed at these exemptions that were granted in the railroad 20 charters. It was not felt, to the best of my understanding, 21 that PARAGRAPH ONE didn't cover it. It was that they wanted 22 to make clear that when they attempted to tax those railroads 23 that the Constitution specifically spoke to that question. 24 Well they turned around after this was approved and became the 25 Constitution and did attempt to tax those railroads. The Court PAGE 5 said, "You cannot tax them" period. Now that question has beer 2 to the United States Supreme Court three or four times in the 3 last hundred years on that specific question; the latest I 4 think in 1949 and the Court in every instance has said that 5 those railroads cannot be taxed; at least so long as certain 6 conditions in the charters are met by the railroad. As far as 7 I know there are only two of these railroads left; the largest 8 one being the one right outside the door here from here to 9 Augusta. 10 This -- for the purpose -- the SECOND PARAGRAPH served " CzI 11 j:: specifically being aimed at those railroad exemptions. It did .'0.".... 12 '" not, the Supreme Court said it did not serve to revoke those exemptions. I think, consequently, the deletion of that para- 9 r l! 14 ... graph which you will see embodied in this draft of mine does '<:"zl:: 15 .:l not harm the Constitution because to prohibit it in the future CI '::"> 16 lD Z is already provided in the FIRST PARAGRAPH and the Court has 0 Z 16 III Z to the uniformity requirement. For instance we -- "le-;'; in~ ..Qz !;; members and I will work and see if we can't come up with some- 16 ~ o1M MR. BROWN: Yes, sir. I'll do that. Z 16 ~... going to make a broad limitation it seemed appropriate to put Q Z ~ 17 : that limitation right up front and that's what I've done with 18 it. Okay. 19 Paragraph Two -- at the last meeting I handed out a 20 draft that had been sent to y'all previously which attempted 21 more or less just to edit the language that is currently in 22 the Constitution relating to exemptions from taxation. I 23 think it was primarily those provisions relating to exemptions 24 which y'all wanted me to try and reduce substantially. We 25 talked about a new method for permitting property tax exemp- PAGE 28 tions and that was to get it out of the Constitution, but con- 2 tinue it being subject to the same general restrictions as are 3 applicable to Constitutional Amendment. Now that's what I 4 have attempted to do in a new draft of paragraph two. Let me 5 make one thing clear before everybody gets real excited. All, 6 under the draft I've handed out to you today, all of the ex- 7 emptions that are presently in the Constitution are continued 8 as exemptions. And nobody's exemptions -- if this was adopted 9 verbatim as I have given it -- would be taken away by adopting -"0' 10 this new Constitution. In that regard let me point out to you 1z:1 11 i= 0..'..".. 9 r12 u'" ii: i ii 14 '"I .>..- '~" 15 olI If 16 .:'z:."3. ..0z 17 '" the language that is contained on the last page of paragraph five and that language reads as follows. "Property which is totally or partially exempt from ad valorem taxes -- __ CHAIR}~N CASTLEBERRY: Wait a minute, Canter, wait a minute. vJhat page are you on? MR. BROWN: It's page twenty-two in the struck-througr and underlined draft or page seven in the other draft. Para- 18 graph five. Okay? ,": 19 "Property which is totally or partially exempt from 20 ad valorem taxation on the effective date of this Constitution 21 including but not limited to homestead property shall continue 22 to be so exempt until otherwise provided for by law". Okay, 23 now a conmrron misunderstanding is that the Constitution itself 24 exempts all this property from taxation, the present Constitu- 25 tion. That is not true. As far as I know there are only five PAGE 29 exemptions for property tax granted in the Georgia Constitu- 2 tion. Three of those are homestead exemptions. One of those -~ 3 is the exemptions of intangibles of domestic subsidiary corporc- 4 tions, which is a particular intangible exemption and the other 5 relates to the disabled veteran's exemption. All of the other 6 exemptions that are in the Constitution are permissive. The 7 General Assembly now has the authority either to grant them 8 or not to grant them. Okay? So where in this paragraph -- 9 COURT REPORTER: I'm sorry I'll need to change the 10 tape. .."z 11 I- (Brief pause while reporter changed tapes.) .0...... 12 COURT REPORTER: Ready . @rl MR. BROHN: Right. ! 14 So in that new paragraph five that we just read where I- '<"C( .15 :z: olI it says, "until otherwise provided for by law", I want to make ":::l 16 z.I.I.I clear to you that the General Assembly under the present Con- ..Cl Z 17 16 ~ CHAIRHAN CASTLEBERRY: And then you come back the Q 17 z : second year and introduce 0ne and it passes and" the Governor 18 vetoes it then we're giving up our right to override his veto 19 now. 20 HR. BROWN: What you could do it's perfectly \vithin 21 your power to si~ply provide that laws that are subject to 22 referendum pursuant to that paragraph aren't subject to a Gov- 23 ernor' s veto. 24 CHAIRMAN CASTLEBERRY: I think it would need to be put 25 in there. PAGE 36 MR. BROWN: You know, you can just add a line doing 2 that and then you would have essentially the same process as 3 a Constitutional Amendment. The only difference would be that 4 all. the administrative details and procedural matters could be 5 handled just by a regular bill not subject to extraordinary 6 majority or referendum and the referendum could be held at any 7 time the law specified as opposed to just once every two years. 8 CHAIRMAN CASTLEBERRY: You know, we had that in 1973, 9 I believe it was, \~len Carter vetoed all those homestead ex- 10 emptions. HR. BRm~N: That's right. CHAIRMAN CASTLEBERRY: We came back and everyone of them was overridden. I think we need to bring that point out. MR. BROWN: If you did decide to go by a procedure similar to the one I suggested to you you can there would bE no problem making or writing in that one line to exempt it froTI the veto. And that would put it on the same basis as the pre- 18 sent Constitutional Amendments. For the purpose of doing what 19 you are doing it wouldn't change it at all. 20 CHAIRMAN CASTLEBERRY: Well I suggest we add that in 21 there and get it worked out so that we won't Eive up our right 22 to vote to override. 23 MR. BROWN: All right, exempt from the Governor's 24 veto. 25 Okay. Bill Alexander asked a minute how this would ';-1 PAGE 37 relate to local property tax exemptions. I have made 2 a provision in here that you will see in the struck-through anc 3 underlined on page four, lines twenty-eight through thirty- 4 three relating to local ho~estead exemptions. You face the 5 same problem and as far as property tax exemptions that is the 6 big category of local exemptions, homestead exemptions. There 7 must be a couple of hundred of them of one kind or another in 8 the present Constitution, something like that. I said you can 9 grant a local homestead exemption subject to a local law and 10 a referendum. Now that is somewhat different. I haven't re- I:l 11 Z I- quired a two-thirds vote. But as a practical matter a two- .'o"".-. @;I third vote is not required now. A General Assembly, as many of you know, most times operates under the principle of local ! 14 courtesy. That is on laws only affecting local governments if I- ': 16 .~.. wants it the General Assembly passes it. The only time that I Q Z ". law going back to what they thought it was to begin with. I gzQ 17 don't think the Constitution mandates it. The Court would give 18 a presumption of correctness to a legislative interpretation 19 which would have to be overcome and they would give a reasonab- 20 Ie discretion to the General Assembly in making that interpre- 21 tation. I think if the General Assembly wanted to pass a law 22 now restricting what the Court has said that exemption relates 23 to, I personally believe that as long as it was done carefully 24 that the Court would uphold it. 25 CHAIRMAN CASTLEBERRY: Is that also true under by PAGE 40 by statute by law and by the historical exception exemptions 2 and the -- what I'm tryin8 to say is do you think the General 3 Assembly now by law could pass something limiting a certain 4 amount of property could be owned by a municipality or some- 5 thing like that or something by law? 6 MR. BROWN: In terms of public property again that is 7 a permissive exemption. The Constitution does not grant an 8 exemption to public property. 9 CHAI&~N CASTLEBERRY: It's still by statute? io ~R. BROWN: Yes, sir. As you will see in the next i! 11 paragraph here there are only a few exemptions granted in the er~ Constitution and that is a very common misconception. A lot of people think this whole long list is written in steel in 14 ~ their or concrete. It's not. It's subject to law now. Ii 15 ~ me. 16 CHAIID1AN CASTLEBERRY: I know in years past -- excuse In years past I wasn't much interested in this old stuff 17 ~ but the older I get the more I get interested in it and I know 18 in some small communities you've got some folks out there work 19 ing getting all this stuff marked and then putting it on the 20 historical and just taking just house after house and property 21 after property off the tax books and shifting that over to 22 the other folks. 23 MR. BROWN: Well one of the things about the problem 24 you are mentioning is that you really can't address that. Our 25 Constitution is so restrictive now that I don't see how you PAGE 41 can make it any tougher to get those things. The way to re- 2 strict it is for the General Assembly as a part of its procedu- 3 ral rules to provide that tax related bills and resolutions go 4 to the Tax Committee rather than the Local Affairs Connnittee. 5 CHAIR}~N CASTLEBERRY: We're working on that. 6 HR. BROWN: And that -- I honestly don't know any way 7 you can Plake the Constitution tougher on stuff like that. I 8 mean you've ?ot -- I guess you could make a statewide vote for 9 every single one, but it's the procedural handling of it in 10 the General Assembly that makes it relatively easy now. Czl ... 11 oj: Go @.2j .1/ 1 14 .>..'0"( :I: 15 ~ Cl ::l 16 .~.. oz 0( 17 ::: CHAIRHAN CASTLEBERRY: Yes, sir. t1R. KANE: My question to Canter concerns in the unlikely event an exemption were passed pursuant to this Legislative procedure and later it were determined that the exemption should be revoked, what would be the -- how would it be handled? MR. BROWN: As is presently the case you just pass 18 a law revoking it. 19 MR. YJ\NE: So the majority that passed the law could 20 revoke the exemption. 21 MR. BRO\oJ'N: And except fo r the four or five exemptiom 22 that are presently granted in the Constitution that is the 23 it is the same now. That there's not -- that,that doesn't 24 change it. 25 MR. KANE: But the General Assembly under this pro- PAGE 42 cedure outlined in your draft could grant any type of exemptior 2 it desired? It would not be restricted by the per~issive pro3 visions of the present Constitution? 4 MR. BROWN: Right. Although their attempt to do 5 that would be subject to the same requirements and limitations 6 as are presently the case. 7 HR. KANE: Yeah, I understand that, but I'm say that 8 you say presently the rule is that it could be a permissive 9 exemption which is granted by a majority which is executed by .j '. 10 an act passed by the Legislature by a majority vote can nOvl be 11 rescinded or revoked by a similar vote, but under this new pro cedure an exemption passed pursuant to a two-thirds majority and then referendum could likewise be revoked by a simple majority? MR. BROWN: Right. And the reason that I had done it that way is because that is in fact the present way it can be done. 18 MR. KANE: But it's a little different in that if 19 a mandated examption for instance passed in the Constitution, 20 if for instance a legislator wanted to insure that his provi- 21 sion or exemption would not be later subject to revocation by 22 a majority in the General Assembly,he would go the Constitu- 23 tional route? 24 MR. BROWN: Right. 25 MR. KANE: He would then be protected from that PAGE 43 eventuality. Okay. 2 HR. BROWN: He can still have that option. There is 3 no way as I mentioned earlier to prohibit somebody from offer- 4 ing a Constitutional Amendment on whatever they want to. Even 5 though you have a procedure to otherwise handle that type of 6 thing in the Constitution. I think though as a practical mat- 7 ter that the General Assembly in its leadership can encourage 8 people to go the new route. And I think once you get estab- 9 lished in that it would continue to be utilized. But you . 10 can't -- there's no 't~ay to tell a member of the General Assemb - Czl 11 i= ..'0..".. ly he can't. I tried that one time and it doesn't work. @r l12 '" CHAIRl1AN CASTLEBERRY: H'hat you in other 'tmrds have reference to is I think is it's written into the Constitution ! 14 I- on the Freeport tax how to go about repealing, you know, re- III ::I: 15 0: pealing that and also on Cl '";:) ... 16 zIII ~1R. BROWN: Now you will notice too that on that one Q Z '" 17 III particular thing, although I do want to have something to say 18 about it, that the Freeport is less substantially intact in 19 this draft. It takes up about a third to forty percent of thi~ 20 draft we're working on. 21 CHAIRMAN CASTLEBERRY: You had to because of the 22 lengthy Constitutional Amendments that were passed. 23 MR. BROWN: Yes, sir. 24 Okay. 25 MR. HENRY: Canter? PAGE 41+ MR. BROWN: Yeah. 2 NR. HENRY: The Governor would again have authority 3 to veto a local bill granting tax exemptions. 4 MR. BROWN: Well, I would assume you would want to 5 apply the same, if you want to exempt one from the Governor's vetc 6 you want to exempt them all. What I would suggest doing is 7 that on line -- on page five in this struck-through and under8 lined draft, lines one through four are the exception to the 9 requirement that these bills originate in the House, permitting 10 them to originate in the House or Senate, I would include just in that provision that the laws subject to the requirement of referendum as provided in this sub-paragraph shall not be subject to the Governor's veto. MR. HENRY: These bills would go through under local courtesy assuming that rules were'nt changed and assuming that you did want to have greater oversite wouldn't the Governor's veto be a vehicle by which you could achieve that? 18 MR. BROWN: I guess theoretically it would. You know, 19 the Governor pretty much signs bills just like the General 20 Assembly passes them if the local delegation wants them. 21 CHAIIDiAN CASTLEBERRY: We've got a problem with that 22 paragraph, Canter, on that local legislation nine veto. We 23 are going to need to look at that good and see if we can't 24 come up \vi th it because there have been ins tances where a legi::- 25 lator would introduce one that would sail through and then fine PAGE 45 some mistakes in it and then run down there and ask the Gov- 2 ernor to veto it. I mean I knml1 that's happened several t"imes. 3 HR. BROHN: Yeah. 4 CHAIRHAN CASTLEBERRY: l.]e made need to put and if, 5 and or some options in there that could be 6 MR. BRrn~N: Okay, yeah, well this is just a draft for 7 y'all to consider. None of y'all by any stretch of the imagina- 8 tion are cormnitted to this just because I -- 9 MR. HENRY: Canter, can I ask just one more question? 10 MR. BROWN: -- give it to you. Sure Mike. Czl 11 i= ..'o".... @;i 11R. HENRY: I don't mean to beat a dead horse, but following up on what David said,and I'm not sure I understood this, if a legislator wanted to go by this process by a two- ! 14 thirds vote and the law was a mandatory exemption could that I- ': -. 16 .~.. as a disabled veteran got a free license plate. Is the posoz 17 ~ sible ha~ so great that you can't take the chance on letting 18 it be handled by law. I have tried in most instances in going 19 through here that if I felt that it was something that was 20 particularly sensitive to leave it in. But it is inconceivable 21 to me that the General Assembly is going to run amuck granting 22 free license plates, you know, to disabled veterans. It 23 doesn't seem like a real threat to the integrity of the state 24 and its Constitutional processes. So I had to leave language 25 that will give the General Assembly more flexibility and I PAGE 58 would encourage all of you to be very careful in looking a.t 2 that language that I have deleted. It is my personal opinion 3 that the deletion of it isn't goin8 to harm the state and in 4 fact will just give the General Assembly more flexibility in 5 carrying the original intent of the authority. I hope so. 6 CHAIID1AN CASTLEBERRY: Canter, but if we decide and 7 think it's right to include the language -- 8 MR. BROWN: Yes, sir. 9 CHAIP~N CASTLEBERRY: -- adopting the language here 10 as general law like it is, then that would be the safeguard 11 i~ to start off with? ! 8;:! MR. BROWN: Right. Yes, sir. MR. HILL: Mr. Chairman, we would love to do that. 1 !i mean it would help us in many different places other than just % 15 011 ~ this Article, but we haven't reached a general agreement among 16 !II all the people involved that that can be done legally, that it i17 '" would not run into problems. We are not sure you can just by 18 virtue of stating that you've created a statute that you have 19 done it. I mean Canter says Florida did it and evidently 20 didn't run into problems and so there is a precedent for it. 21 But we haven't decided yet and I don't think that you can 22 assume that that will be done. It is still under discussion. 23 CHAIRMAN CASTLEBERRY: I said if, you know, we decidc< 24 and found out that we could do it then that would take care of 25 the problem without having to 80 back and pass all these laws. PAGE 59 MR. BROWN: Yes. 2 CHAIRHAN CASTLEBERRY: What bothers TIe is when we go 3 back and try to pass a law you've got sOMebody in one or the 4 other of the Houses that's going to want to Amend it to add 5 something else to it and then we get into trouble and we don't 6 get it, you see. If the route that you all are thinking about 7 going could be checked out and done and be 8 MR. BROWN: Now bear in mind that this draft is 9 predicated upon all the sta.tutory stuff being in place prior to 10 the thing being approved. And even given the problems of the 11 Czl j: legislative process I just don't see that's a real problem. ....oIll: There are methods by which you can safeguard that from happen- e;1 ing. ! 14 CHAIRMAN CASTLEBERRY: We,had real good success with ~ 15 ':z": ~ the Revenue Code and the Alcohol and Tobacco Laws and that by Cl Ill: ::> 16 .~.. assuring them that this had to be and just letting them know 17 oz : we've got to pass it just like it is. This is the way it's 18 got to be if you want to introduce a bill, do it. 19 MR. BROWN: Right. 20 HR. HILL: vIe foresee a legislative package probably 21 for each Article or perhaps all together that will have to be 22 considered at the same time because there's a lot of things n that are being changed radically here -- 24 CHAIRMAN CASTLEBERRY: That may be the right -- 25 MR. HILL: -- so we would not vlant to make them PAGE 60 statutory so that, but as Canter says we're going to have two 2 different sessions to work on it. We're going to have the 3 eighty-one session next year, which hopefully we will have the 4 -- we'll have the eighty-two session I mean which would follow 5 the special session at which the Constitution will be adopted. 6 So we will have the eighty-two general session and then we'll 7 have the eighty-three general session because the effective 8 date will not be until July 1 of '83. So we'll have two dif9 ferent sessions to try to develop all this statutory complimen 10 tary material. CHAIRMAN CASTLEBERRY: That may be the same route as we use. COURT REPORTER: Excuse me, I need to change my tape now. (Brief pause while reporter changes tapes.) t1R. BROWN: The reason that the Revenue Code was done was to prepare for the revision of the Finance Article and 18 although it does not cover all of the language that's been 19 deleted I don't see any reason whY,every year we have an annual 20 revisor's bill to the Revenue Code for the purposes of cor21 recting errors and improving the administrations of it, why 22 that bill itself can't just deal with all this stuff. I mean 23 the concern about getting into statute although it's a real 24 one and certainly a valid one, I don't think it's a real big 25 one. Practice has just shown that the General Assembly will PAGE 61 respect the integrity of something that needs to be done that 2 is not changing or radically altering the substance of the law. 3 CHAIR1'1AN CASTLEBERRY: Canter, one minor question. 4 Probably nothing applies, but do you know if every exemption 5 authorized by the Constitution has been granted by the General 6 Assembly? 7 MK. BROWN: Everyone on this list has been. 8 CHAIRMAN CASTLEBERRY: On 'the list has. Okay. 9 MR. BROWN: Yes. They are all in there. There is 10 a - - "z 11 i= CHAIR11AN CASTLEBERRY: The reason I asked the questior ..'o".... 9;1 because like if it was like domestic animals or something if it were authorized but not granted it could now be approved by ! 14 ... a majority of the General Assembly. But if this is changed 'x" 15 .:I it would then take two thirds. "'";;;) 16 .~.. MR. BROWN: As far as Q Z 17 ::i CHAIID1AN CASTLEBERRY: That's the only thing. There 18 could be a minor change there if anything has not been granted. 19 MR. BROWN: As far as this big long list of exemption~ 20 in that big paragraph, which is the body of it, the Revenue 21 Code itself has the same paragraph. It's a little more "Jell 22 organized I hope, bu t i t I s the s arne thing. 23 CHAIR~N CASTLEBERRY: Where are we now? 24 MR. BROWN: We were on page 16 of the struck-through 25 and underlined draft. PAGE 62 COURT REPORTER: Excuse me, could we close that door 2 I seem to be picking up a lot of conversation from out in the 3 hall. 4 MR. BROWN: In the middle of the page, page 16, this 5 is page three of the other draft. I hope that will give you 6 an idea about if you do decide to go with this 7 CHAIP1~N CASTLEBERRY: Or something similar. 8 MR. BROWN: Similar. Look at the vast difference. 9 You've gone from sixteen pag;es to three and you've still got c: 10 everything you started with. It seems to me that you have an 11 ":z j: opportunity to make a great contribution to the revision effort. .'.0".... 12 u'" Line two is the present exemption dealing with harvested agri- @ r ..ii: j: % cultural products . ~ 14 I ..>....- MR. HENRY: Canter, could I ask you one question on <:rI 15 olI the disabled motor vehicle? My motor vehicle happens to be ~ "'" 16 I.%I..I disabled at the present time, but Cl % 16 .~.. in it . Most of the exemptions don't make enough of an impact Q Z ~ 17 : to matter. Now that was not true with the original homestead 18 exemption. The original homestead exemption was intended to 19 radically shift the burden of ad valorem taxation to business 20 property. It reduced the average tax burden about twenty-five 21 percent. Isn't that right? 22 DR. HARTIN: At that time probably more. 23 t1R. BRmvN: ProbablY twenty-five to say forty percent 24 It was a radical shift. It was intended to be. Of course, 25 inflation has really minimized that. That did contain languagE PAGE 64 about bonds because clearly, you know, you could have impaired 2 the obligation of some of these bonds with that major a shift. 3 These other ones that are really minor exemptions relative to 4 the total tax burden in the state. They don't impair anybody' E 5 bond so by and large they just left that out. 6 CHAIRM..AN CASTLEBERRY: They're getting fewer and 7 fewer now. 8 MR. BROWN: It's too much of a hastle. It cost more 9 to go through the process of collecting taxes just for the 10 bonds than it does just to exempt them. "% 11 ~ o A. 12 ~ @rl CHAIRMAN CASTLEBERRY: Lead on. MR. BROWN: Okay. Now having, again we mention again this preparatory ! 14 ~ language business and in paragraph three (a)2, there on line :f 15 olI fourteen on page sixteen there was all this language about why ~ 16 il % ~ they were exempting these agricultural products and there may % 17 ~ have been a very good political reason at the time that this 18 was drawn up to have that in there, but there is no legal 19 reason of which I am aware and I have deleted that language. 20 The same exemption is there. It's just that we've eliminated 21 the preamble to it. 22 CHAIPJ1AN CASTLEBERRY: Now wait a minute now. I've got a question on that. This language was adopted in the 24 Constitution 25 MR. BROWN: Yes, sir. PAGE 65 CHAIRMAN CASTLEBERRY: -- for the purpose I think as 2 you stated. It might not have been in there to begin with or 3 something. Anyway, but the language I know is the rule of the, 4 rule of the Department of Revenue, but go ahead -- I'll check 5 on it. MR. BROWN: Okay. 7 HR. MASSEY: Hr. Chairman, I want to cormnent on this 8 before you leave. Are you through with the forrest products, 9 harvest section there? 10 MR. BROWN: Yes, sir. "z 11 i= .'oG."o. MR. 11ASSEY: I wanted to mention to the rest of the @;i Committee and the others the point that I mentioned briefly to you and the Chairman. If you would look on page six of the ! 14 I- big draft. the one that shows the changes, on line nineteen. ':"r 15 .:I "'";;;) That was the original farm products exemption in the Constitu- 16 .~.. tion that the General Assembly should further have power to Q Z 17 ::i exempt from taxation farm products including baled cotton 18 grown in this state and remaining in the hands of the producer 19 but not longer than the year next after their production. Now 20 it's my opinion that this may have been drawn originally just 21 to say, "exempt for taxation farm products". The reason I 22 say that is if you will look at the comma after,"baled cotton" 23 that is not in code section 92201 and it's not in the -- 24 tiR. HENRY: That is a clerical mistake or something. 25 MR. MASSEY: Yes, and it's not in the 1945 Constitu- PAGE 66 tion. , 2 HR. HENRY: Righ t . 3 MR. HASSEY: . So it's a clerical mistake and there' 4 no committee action in the 1976 Constitution. So in my opin- 5 ion when this provision was drawn someone felt that, why would 6 you name baled cotton and not name other commodities. Someone 7 felt that baled cotton vlas not included so I think, "including 8 baled cotton" vlaS added with this other language relating to 9 baled cotton as it would without the comma. In other they 10 exempted farm products, authorized the exemption of farm 11 products and they authorized the exemption of baled cotton grown in this state and remaining in the hands of the producer The comma may cloud that interpretation and I think the comma should come out now. Following up on that then that was not broad enough to cover the tobacco situation that's in this secti'on that Canter, just went over, the possibility of attract ing a plant to Georgia came. I~ve, forgotten the year. Some- 18 body may remember, but to bring one industry into Georgia this 19 provision was drawn to expand on the farm products section, 20 but somebody and wisely so since it's a mandate at a higher 21 level, either who introduced it or whoever drafted it or some 22 combination, rather than amending the farm product part, which 23 basically it does, put it in the mandated section. So now we 24 are looking at the draft and what we're l-oking at is your 25 farm products language and I realize it's covered, Canter, but PAGE 67 it's not specifically named in there though it's been in the 2 Constitution all these years, but the one special situation is 3 in there. I would like to see y'all, as I mentioned to you 4 earlier, I don't know whether you've had time to look at it, 5 but I would like to see you and the other professional folks 6 on the Committee think about the possibility of combining these 7 two Sections and mandating the farm products exemption that 8 has been in the Constitution, through all versions of the 9 Constitution and has been in the Code all through the years 10 and clear up this language. I don't know why baled cotton CzI 11 i= ..'o..".. needs to be mentioned if you're not going to go and name the 9;1 other things. I think that could very easily be done in one Section and I would strongly recommend that we try to do that. ! 14 I'" :J: 15 .:I CI '":::l 16 .~.. Q Z 17 : CHAlro~N CASTLEBERRY: I can tell you about baled cotton. I can tell you about tobacco too in the paragraph. Baled cotton was included at a time when the government and people -- they were paying for storage of the cotton through 18 independent warehousing before they started doing a lot of 19 storing themselves and that got into something you know that 20 they didn't want to pay inventory on that cotton to farmers 21 that the warehouseman was storing for the farmers. So it was 22 grant -- it went through and got the exemption. That's the 23 reason that bale cotton is in there. And the addition to the 24 tobacco plant down here around Macon, somebody introduced a 25 bill just for that and it was just exactly what I mentioned PAGE 68 while ago, somebody took that and added something they wanted 2 to it and got it by. 3 MR. BROWN: That's right. 4 CHAIID1AN CASTLEBERRY: So I think if it's possible 5 we can clear up the language without broadening anything that 6 probably needs clearing a little bit on those things. You 7 know, combine them or something like that. That's just a 8 little gist history behind it. I remember exactly and I can 9 name the men. 10 MR. MASSEY: I know the reason on the basis you did the draft, Canter, and I know part of what you are talking about there, Don, still I would hate to see us list the one special situation item in there and not mention ,even though it's covered,the farm product thing that is so important and that has been in there forever. MR. BROWN: One of the things that I'm going to do and in a way I hate to since I think it flows in the opposite 18 direction from what my good friend Abbit is suggesting. ~fuen 19 we get to this draft one of the two areas that I am going to 20 suggest to you to consider for further elimination is the 21 Section or mandate exemptions,for reasons that I'd like to 22 wait until we get through to go over. But I think as you look 23 at what is mandated you realize that relative to what is per24 missive it's relatively insignificant and if those major ex- 25 emptions which are permissive in the Constitution can responsi PAGE 69 bly be maintained statutorily as well as grandfathered into 2 statute or by this Constitution which this draft does do. I 3 don't personally see any real need for these that are mandated 4 to be in there. Now as we go through them I think you will 5 see why that's the case. 6 MR. ~~SSEY: And I want to argue that point with you 7 if this special slight addition to the big part of the farm 8 products las is in there then I think the whole thing should 9 be, but if you change the mandated things I won't argue against 10 that point. I just think these two provisions -- MR. BROWN: Well I agree with you totally about that. It does.n't make any sense to treat one any differently than the other. t1R. KANE: Canter, I just wanted to echo what you just said and I think that what process we are going through now is merely -- well not merely, but taking what we have now without making any fundamental policy and decisions about what we want 18 to do and I think that we need to make those fundamental de19 cisions about such things as mandate exeMptions. The entire 20 exemption process I really think we need -- the Sub-committee 21 really needs to address that and I think that was one of the 22 charges of the Sub-committee. It was to address the fundamenta~ 23 policy issues which are contained in Section I. 24 CHAIRMAN CASTLEBERRY: I hope I stated earlier that 25 we will come back and address each of these issues. On a one o PAGE 70 on one basis instead of in general, but I -- and we will do 2 that. 3 HR. BROWN: Mr. Chairman, the other mandated exemp- 4 tions from tangible property tax right now are free of the 5 homestead exemptions. Now I want to point out to you that 6 there are two other statewide homestead exemptions that are 7 not mandated nOvl and those are the exemptions authorized from 8 school taxation for elderly people. They are permissive now. 9 In fact the amount of those exemptions is set now by law. The 10 amount of the exemption is not even set by Constitution. But we do have three that I'd include here that are mandated. Now the first one is just the standard statewide homestead exemp- tion from state, county and school taxes. Now I would point out to you that the mandated exemption is only twelve hundred and fifty dollars. The Constitution presently provides that you can't have more than two thousand dollars. This is of the assessed value of property. So I have written in a mandated 18 exemption of not less than twelve hundred and fifty dollars 19 for homestead exemption there. I think theoretically if you 20 I.vanted to completely do it the way it is now it would have to 21 be not less than twelve fifty and not more than two thousand, 22 but since you are grandfathering in the two thousand exemption 23 we already have by paragraph five and since the grant of any 24 new exemption above two thousand dollars would have to be votec 25 on in" a referendum I think you are in the same position even PAGE 71 though you don't have that written specifically into this and 2 that's why I left the two thousand out. But the mandated ex- 3 emption now in the Constitution is twelve hundred fifty dollar~, 4 okay? 5 t1R. HENRY: Canter, this couldn't be seen as a new 6 substantive authorization of the General Assembly? 7 CHAIRHAN CASTLEBERRY: I had that same thought. 8 MR. HENRY: I would think that the General Assembly 9 could say, "Yeah, l;vell we could do it under statute, but we 10 have this new power right here and we can go as high as we .11 ;"z: want to". e ; i.oa.... MR. BROWN: Well, you can go to twelve hundred and fifty dollars. You know -- again the Supreme Court and the ! 14 Court of Appeals aren't blind. You know, they can see that you ~ ..15 ': r don't -- 16 .~.. MR. HENRY: Yeah . o Z 16 .~.. Q Z 17 ::: those definitions again could very responsibly be handled by law. The exemption is still granted or the authority to grant these exemptions is still in here, but I have eliminated the definitions assuming that they would be written into law prior to the effective date of this Constitution. I've also elimina ted some language that said that it could only be granted in twenty, forty, sixty, eighty and a hundred percent increments . Again I felt like the status at which the exemption could be 18 granted once you have already authorized the exemption or 19 mandated the exemption could be provided by law. \{hy shouldn't 20 you grant it at twenty-five if the law said. It didn't seem 21 like something that belonged in the Constitution. 22 CHAIID1AN CASTLEBERRY: I didn't think Freeport be- 23 longed in there' anyway. 24 MR. BROWN: Yeah, well that's another issue. Now 25 as I say even cutting out what I did out of that, which cut ou PAGE 76 1 about a page of it, maybe a little bit more, you've still ~ot 2 a lot of language in there. It's different to one extent from 3 the other exemptions and it's important. It is a self-actuat~ 4 ing authority for the grant of exemptions from taxation by 5 local governments and that's very different. The General 6 Assembly doesn't have to do anything now on Freeport and even 7 if yqu adopted my draft so far as the authority to grant the 8 exemptions they wouldn't have to do anything. Local governments 9 have that power subject to a referendum locally, but you may 10 well want to cast a very careful glance at whether or not you ! 11 \Vant to accord this particular exemption the priority of being ~ I 12 a third of the entire exemptions the power of taxation provi- @ r l ~ion implys. It seems to me that you could authorize the g~ant " 14! of this power and probably require the referendum to be held ~ i 15 ~ and I think as a practical matter you would need to include I! 16 the limitations that's presently in there on not being able to 17 I have a referendum to repeal it for five years and if that 18 referendum proves repeal of it it can't become effective for 19 another five years. Ithink that's a safeguard that the indust- 20 ry people would probably insist upon. But other than that I 21 think you could take all that stuff out of there. But it is 22 a very sensitive issue and it is different from all the other 23 exemptions in the Constitution in that it grants power to local 24 governments directly to do this. 25 CHAI~~N CASTLEBERRY: We'll probably get some input PAGE 77 on that from GMA and the County Commissioners. 2 MR. BROWN: I have tried to be relatively conserva- 3 tive in the editing that I did in it, but I just want you to 4 know that I think that the entire thing could be reduced to 5 three or four sentences and the state could still get along 6 and no local governments in the state would be hurt. 7 There is one additio~al exemption on the solor energy 8 equipment. I've edited it somewhat. It's found on page twent - 9 two, lines four through eleven. Now what I did in the first 10 draft that I' handed out to you the last time I edited it. This time I just grandfathered it in. Now the reason that I just grandfathered it in is this. It is automatically repeG~e three years to the day after the new Constitution becomes effective. I felt like for a three year period you could just adopt it by reference and have an automatic repeal where it'll just get it out of the Constitution as soon as that point is reached. It saves you about a page in the Constitution and I 18 think it will serve perfectly well without, you know, actually 19 having to restate everything'in there again. And again that 20 exemption will only be viable for three years. 21 CHAIRMAN CASTLEBERRY: There's no way then after you 22 take it out of here it would be lumped up under this other and 23 then changed by statute or extended, would it under what you 24 say you're doing? 25 MR. BROWN: No, sir. Again I think where you have an PAGE 78 express provision relative to something that that's going to .. ' .,.\.. 2 supersede any general. I think that exemption clearly under 3 the language I have suggested be repealed automatically July 4 1, '86. 5 CHAI~N CASTLEBERRY: That's another battle I lost. 6 MR. BROWN: Again as we went over it before, Paragrapr 7 five is the grandfather provision. That makes sure that all 8 of the exemptions that are in effect on June 30, 1983 are going 9 to still be in effect at midnight that night when this new 10 Constitution comes into effect. 11 "5z CHAIro~N CASTLEBERRY: You briefly mentioned something ..o.... @-. . I ., ' 12 : back here awhile ago on these mandated exemptions nmv and say there was only three of them that you said -- ! 14 l;; -e :I: 15 oll III Ill: :) 16 .~.. zQ 17 ~ MR. BROv.JN: Yes, sir. CHAIm-iAN CASTLEBERRY: And I can't find anything about the double homestead exemption on school taxes for the elderly . HR. BROv.7N: Okay. As I say 18 CHAI~N CASTLEBERRY: That never was a Constitutional 19 Amendment ? 20 MR. BROWN: -- that is now a permissive authority. 21 It is not required in the Constitution. It is not mandated. 22 And consequently -- 23 CHAI~N CASTLEBERRY: You mean each local system can 24 do it or not do it? 25 !1R. BROWN: It's the -- PAGE 79 CHAIRMAN CASTLEBERRY: Revenue Department? 2 MR. BROi~~: -- the present Constitutional provision 3 authorizes the General Assembly to do it in its discretion 4 and it further authorizes the General Assembly to do it in any 5 amount it desires. There are no -- 6 CHAIRMAN CASTLEBERRY: By statute? 7 MR. BROWN: By statute. And that exemption is present- 8 ly granted by statute although it would come under, of course, 9 the grandfather provision in Paragraph Five of this draft 10 until otherwise changed by law, but it is not presently man- \:I 11 Z j: dated in the Constitution. Now there -- as a matter of fact ..'o".. let me point this out again, other than those that are listed @;I in Paragraph Three here, the three homestead exemptions, the ! 14 harvested agricultural products and the disabled veteran's cars I- 15 ' 16 .~.. a responsibility on the part of the members. But I think ~t Q Z < 17 : was seen and as you mentioned earlier with both the new Revenue 18 Code and with the Alcoholic Beverage Code the General Assembly 19 can recognize and act upon its responsibilities. There's no 20 historical tradition here that forbids that. Both of those 21 bills and all the revisers bills that have been enacted pur22 suant to them opened up the entire tax structure of the state 23 to any sort of legislative action they wanted to take and both 24 Houses of the General Assembly chose not to because they recog 25 nize their responsibility. And I don't feel like there's any PAGE 84 reason you need to assume that they won't recognize the same 2 responsibility with the flexibility you are granting them under 3 the recommendations that I have made to you. 4 CHAIRMAN CASTLEBERRY: Thank you. S Any Committee Member want to add anything to this. 6 I think you got through. didn't you, Canter, down to 7 the end? 8 MR. BROWN: Yes, sir, as I say, of course,I'll be 9 happy to answer any questions or provide any information I can. I would recommend that you do give some thought to possibly eliminating the mandated exemptions and to vastly reducing the Freeport. And certainly if you wanted me and your staff to work in cooperation with the County Commissioner's Association and the Municipal Association in drafting a possible revision of the Freeport to eliminate some of that stuff, I'd be delight~ ed to do that as well. CHAlmiAN CASTLEBERRY: Since Canter did a good job I 18 think of reducing this thing down and we didn't get it until 19 day before yesterday, we probably haven't had time to put the 20 study to it that we need to, you know,unless you think we do 21 need to -- You've got some points you want to start working on 22 it this this afternoon. If you have we can come back and work 23 on it. If not we might give ourselves a little more time to 24 look into it. What do you think about that? 2S Dr. O'Kelley? PAGE 85 DR. o 'KELLEY: Well I'm not prepared to argue the 2 specifics from my part. 3 CHAIRMAN CASTLEBERRY: I don't: think any of us are. Hm 4 about it, Professor Blount, Staff,any of you? 5 }ffi. BROWN: I'd really encourage you,Mr. Chairman, 6 to take some time. 7 CHAIR11AN CASTLEBERRY: I think 't.ve need to. That's 8 the reason I want to be sure that they was thinking the way 9 I was. 10 And the members of the Committee I would like to ask 11 "z~ you if we could change this next meeting on the 22nd either ..'o".... ~ ~\ri~ 12 '" to the 20th or the 15th. MR. BROlm, We're fixing, -- ! 14 CHAIR..MAN CASTLEBERRY: Excuse me, we're fixing to -- I- '0"( 15 ~~ I'm on a special Worker's Comp Study Committee and we are fix- "'":;) 16 ~ ing to hold ten public hearings and they have set these things oz 17 : up on these dates that we've had this one meeting set up on. 18 MR. BROWN: Mr. Chairman, if I could the only, of 19 course, there's no reason y'all can't meet if I'm not here, 20 but in those two weeks that you mentioned the only day that I 21 would be. able to meet with you is on the 15th. I'll be gone 22 every other day those two weeks. 23 MR. HILL: That's better for us as well because we 24 have another meeting on the 20th. So the 15th, two weeks from 25 today would be better. PAGE 86 CHAIRMAN CASTLEBERRY: Two weeks I think that would 2 give us plenty of time too to get into it and everybody else 3 too. So if you will let's change that from the 22nd and move 4 it up one week to the 15th. 5 MR. }~SSEY: Same time. 6 CHAIRMAN CASTLEBERRY: Same time. 9:30 and get start- 7 ed at 10:00. y'all come at. 9:30 and it'll be just right. 8 PROFESSOR BLOUNT: Mr. Chairman, given the last 9 connnent, I would apologize to the Committee for my tardiness 0- 10 this morning, but assure everyone that professional matters i~ 11 delayed my departure from Athens and not general recalcitrance, I\- lZ; ~ but I do apologize to all of those who were here on time. ~JI CHAIRMAN CASTLEBERRY: You weren't the only one, Mr. i! 14 Massey just did get here, and one or two more. I15 011 But I think we have gone through this thing this 16 morning now and Canter has pointed out what we need and we % 17 Ii can go back and we can give everybody else a chance now with 18 two weeks to look into it and we can come back and start 19 arguing the points at the next meeting on the 15th. 20 COURT REPORTER: Mr. Chairman, there are persons 21 that I do not having appearing on the record. 22 CHAIID1AN CASTLEBERRY: Yes, Ha' am. If you would 23 gentlemen. 24 (Whereupon, the meeting was adjourned at 11:51 a.m.) 25 PAGE 87 C E R T I F I CAT E 2 3 I, ~1ary Lou Stokes, GCCR #B-36l, do hereby certify 4 that the foregoing 86 pages of transcript represents a true 5 and accurate record of the events which transpired at the time 6 and place set out above. 7 8 9 10 I!I .Z 11 j: .2.. @;I ! 14 I':"z: .15 olI I!I ;;;) 16 .~.. cz 17 : 18 19 20 21 22 23 24 25 . INDEX Committee to Revise Article VII Subcommittee Meeting Held on Aug. 1, 1980 SUBCOMMITTEE MEETING, 8-1-80 Proceedings. p. 3 SECTION I: POWER OF TAXATION Paragraph I: Taxation; limitations on grants of tax power. pp. 3-4, 5-6 Paragraph II: Taxing power limited. pp. 4-5, 6-13 Paragraph III: Uniformity; classification of property; assessment of agricultural land; utilities. pp. 13-26 SECTION II: EXEMPTIONS FROM AD VALOREM TAXATION Paragraph I: Unauthorized tax exemptions void. pp. 26-27 "': Paragraph II: Exemptions from taxation of property. pp. 27-75 Paragraph III: Exemptions which may be authorized locally. pp. 76-78 Paragraph IV: Current property tax exemptions preserved. pp. 78-84 .- 2 3 STATE OF GEORGIA PAGE 1 4 COMMITTEE TO REVISE ARTICLE VII 5 6 of the 7 CONSTI'l'UTION OF GEORGIA 8 9 Subcommittee on Purposes of Taxation ...... 10 "z 11 i= ..'o".... @;j ! 14 I:zii: 15 oll "'";:) 16 .~.. Q Z 17 :;:; 18 19 20 21 22 Room 402 State Capitol 23 Atlanta, Georgia 24 Monday, August 4, 1980 10:13 a.m. 25 PRESENT WERE: 2 SUBCOMMITTEE MEMBERS: 3 JAMES MARTIN, CHAIRMAN CONSTANCE HUNTER, VICE-CHAIRMAN 4 ROBERT NASH W. E. STRICKLAND 5 REPRESENTATIVE GEORGE WILLIAMSON 6 SELECT COMMITTEE STAFF: 7 MS. VICKIE GREENBERG MIKE HENRY 8 MELVIN HILL 9 OFFICE OF LEGISLATIVE COUNSEL: 10 ." III Z 11 12 i..==0=.... @rl 14 ! l- ll> :I: 15 .:I =III ;) 16 .Iz.I.I =az 17 III CANDLER BROWN OTHERS: CHARLES TIDWELL DAVID KANE DAVID GODFREY KEN JONES ROBERT SUMNER SAM OTT 18 19 20 21 22 23 24 25 PAGE 2 :~. 1 PAGE 3 -PR-O--C-E-E-D-I-N--G -S 2 CHAIRMAN MARTIN: Can we go ahead and get started? 3 The court reporter needs to get everyone's name so she can 4 identify you when you speak. 5 I'm Jim Martin and I'm the Chairman of the 6 Subcommittee. 7 MR. HENRY: Mike Henry, I'm with the staff. 8 MR. NASH: Bob Nash, I'm with the Georgia Farm 9 Bureau. 10 MR. HILL: Melvin Hill with the staff. MR. KANE: David Kane with the staff. MS. HUNTER: Connie Hunter, member of the Committee. MR. STRICKLAND: Bill Strickland, member of the Committee. MR. BROWN: Candler Brown, Office of Legislative Counsel. MR. TIDWELL: Charlie Tidwell, Governor's Office. 18 MR. GODFREY: David Godfrey, Natural Resources. 19 MR. JONES: Ken Jones, Georgia Municipal Association. 20 MR. SUMNER: Rob Sumner, Georgia Farm Bureau. 21 CHAIRMAN MARTIN: Do we need to pause so you can 22 get those down? 23 THE REPORTER: No. 24 CHAIRMAN MARTIN: We're about ten minutes late in 25 starting, but hopefully this will be a short meeting. I was PAGE 4 telling Mr. Nash and Mike earlier it will either be a short 2 meeting or a long meeting. 3 There are a couple of administrative details we 4 need to handle first. You have all received the minutes that 5 Mike prepared of our last meeting. Are there any changes to 6 those minutes? They were dated July 18th. Do you have a 7 motion they be approved? 8 MR. NASH: So move. 9 MR. STRICKLAND: Second. 10 CHAIRMAN MARTIN: All in favor say aye. i"z 11 (Ayes. ) 12 C" CHAIRMAN MARTIN: I have a tentative agenda for the 9;-1 meeting we can go over and decide on and then proceed. 14 ~I At our last meeting we left for this meeting the 15 ! .:I difficulties here of deciding what to do with the provision 16 :~: I in Article VII, Section II that deals with the purposes for IzII 17 i which the power of taxation can be exercised by the State. As 18 I recollect from the last meeting, we had instructed the 19 staff to come up with some language that would be a general 20 statement authorizing the State to spend tax revenues for 21 public purposes and for y'all to -- for the staff to come back 22 with some recommendations for us. As I see it, that is our 23 first item on the agenda, to discuss that language. You have 24 a number of options in coming up with the general language 25 that we can discuss as part of that. PAGE 5 Of course if the Subcommittee decides that a general 2 statement is something we have trouble with and we need to ~ .~ 3 go into the specific list contained in the current 4 Constitution, purposes for which the power can be exercised, 5 we may have to stay here a little while longer. 6 There has been some helpful work done already by the 7 Tax Reform Commission and by the Select Committee on some 8 changes to that specific list, if we have to get into that. 9 That will be the first item I propose on the agenda. 10 The second would be then to give some directions to 11 5CzI pur staff about research and information that would be helpful e -I.o.. 12 ~ to our decision at the next meeting which we'll deal with, the eanoarking of general revenue funds. which is the other major ! 14 issue before our subcommittee. I- '-"c :I: 15 ~ Are there any changes to that or any suggestions =CI ;;;) 16 ~ about other ways that we could proceed? Okay. We'll use that Q 17 -zc : format then. We can always change it as we get into it. 18 I have one other administrative matter. I think all 19 of y'all have received the written statement from the Georgia 20 Municipal Association concerning the remarks that Mr. Elmer 21 George made at our last Committee meeting. Has everyone 22 received that? I think it's a written restatement of what he 23 said in person and what we'll do is we'll have this statement 24 filed with the records of the commission. 25 Okay. Now we get to the hard part. How do y'all wan PAGE 6 to proceed, Mike? 2 MR. HENRY: I'll introduce -- This is the staff 3 proposal of Article VII, Section II, Paragraph 1 for your 4 consideration pursuant to your request of the staff to draw 5 up some language.and'w.'ll be happy to explain it or answer 6 any questions on it. 7 CHAIRMAN MARTIN: live forgotten one thing. For the 8 benefit of giving credit to the people who have done research 9 for us and also maybe to refresh all our memories, we've 10 gotten -- we've received a number of documents and research material concerning this issue. And with the danger of misstating same of this stuff, we'd like to just state what we have received and what we have before UB in the way of information before we make our decision. Mike Henry did a good bit of analysis of this entire article, a portion of which dealt with this issue and as ! understand that research based on the case law Brown versus Martin and in a couple of 18 the cases dealing with the local option sales tax, Blackman 19 versus Golia and, what's the other one, the City Council of 20 Augusta versus Mangelly,theseprinciples sort of developed. 21 one is that the State has the power of taxation and that that 22 power is only limited to the extent there's an express 23 limitation contained in the State Constitution. The ability 24 of the State, however, to spend the proceeds of that tax is 25 limited by the current Constitution. That limitation is that PAGE 7 unless there is a specific grant of power in the State 2 Constitution or that the authority of the Legislature to spend 3 tax revenues generated from the taxation power is limited 4 expressly in the State Constitution. That list is contained -- 5 There's a long list of specific purposes contained 6 in our section, but there are also a number of other provisions 7 in the Constitution where authority for the expenditure of 8 public funds is also contained. Mike has done some research 9 on that as well and has listed 47 other provisions in the 10 State Constitution that deal with the power of taxation. 11 "z j: Finally, we have -- So that's -- As I understand it, that's the r@);1Io..l..l..: legal basis on which we're operating. Are there any -- Does the staff have any comments ~ 14! about that or I- III , but I think 3 it's -- as a matter of course it would be very difficult to 4 identify a particular tax fund. So really What bas happened 5 over time is that what had originally been a lfmitation on 6 the way you could exercise the power of taxation has really 7 become a limitation on the power of appropriation and as Jim 8 pointed out in the recent sales tax cases, has been 9 interpreted as a limitation on the power of appropriation. 10 It had been suggested to you at the last meeting ~h~t thia list, as well aa these other 40 some odd provisions throughout the constitution really comprised an authority for op*rat.ion to do just about anything that it wants. Now I don't think that would necessarily apply with respect to specific details of a given program, but t think there is authority generally contained throughout the Constitution to 18 Act in just About any area of governmental operation that the 19 State desires, that is with the caveat that the Constitution 20 does prohibit the State from granting gratuities except as 21 provided in the Constitution. The Constitution also limits 22 the State from owning stock of private corporations, lending 23 the State's credit to private corporations and really otherwise 24 interfering with the operation or contributing to the operation 25 ,of private enterprise. PAGE 9 So within that context, I am suggesting to you, 2 and I think your staff joins with me, that this list in any '{; 3 event doesn't belong in the'taxation article since it is not 4 a limitation on the power of taxing any more. It is a 5 limitation on appropriations. Then I'm suggesting to you that 6 in fact because these 47 grants of authority that are now 7 contained in the Constitution authorize the State to act in 8 so many different subject areas, other than with regard to 9 specific details of given programs, it doesn't really serve as 10 any complete limitation on the authority of the General III 11 Z j: Assembly to appropriate. I think it really serves more as a 0..'."... @ r l12 '" bottleneck in keeping the State from filling out the details of programs rather than prohibiting them from exercising the ! 14 ... power within the broad subject areas of those programs .- '" % 15 oll CHAIRMAN MARTIN: Thank you. III '";;) 16 .zC.D. MR. BROWN: And one other thing with regard to the Q 17 Z '"CD concern about giving the General Assembly unbridled authority 18 to specify the purposes for which taxes may be raised. You've 19 still got limitations on gratuities, you've got limitation on 20 interfering or contributing to private enterprise and you 21 have the requirement in the appropriation section that all 22 appropriations have to be fixed by previous laws. So you have 23 a double requirement of passing two lawa . to appropriate any 24 money even if this change does broaden the General Assembly's 25 authority. PAGE 10 CHAIRMAN MARTIN: Thank you, Candler, ~at's helpful. 2 In the final bit of information that. David and Mike 3 have put toge~er is an analysis of what other states -- 4 similar provisions in other state constitutions on this 5 issue. To summarize that, we may be unique in the specificity 6 with which we list these powers in our Constitution. 7 Is that an accurate statement, Dave? 8 MR. KANE: Well, I think that would be at least an 9 overstatement. At this point I haven't looked at every :-:~ 10 Constitution, but those that I did look at, particular in the I1J I Moutheastern region and some of the larger stat.es, we would be e,':, ::::. ::U~ unique as ""t. lUdght, 1'ilat's 6' Ilur iliilli. I mK>' 14 s going to present this language? DO any memberiii of th& I:5': "I'.: SUbcommittee have questions at this point? J6 (No response.) J7 CHAIRMAN MARTIN: Who's goin~ to present the 18 language and explain" it? f~' 19 MR. HENRY: I'll basically state we've provided that 2f> taxation over the whole state may be exercised for any lawful 21 purpose and tried to effectuate the grandfathering in oj a11 22 purposes for which this state could exercise the powers on 23 June 30, 1983, which would be the day before the effective 24 date of the new Constitution so that these powers that are 25 contairi.d -- These purposes that are contained in the PAGE 11 Constitution at present would be -- would continue to be 2 purposes for which the State could spend money unless otherwisE 3 provided by law. I think that the unless otherwise provided 4 by law would allow them to come in and either expand or 5 retract from same of the purposes that are presently listed. 6 Also, I think you need to take into account that although 7 these purposes are listed for which taxes may be spent the 8 General Assembly could fail to fund any program which comes 9 within the ambit of these purposes at present so that you're 10 really not giving them that much more authority than they \!1 11 5Z presently have by adding that language. e;1..o.... CHAIRMAN MARTINs Mr. Strickland? MR. STRICKLAND: Maybe I I 11 get the answer later, ! 14 but if you're going to grandfather these things in then what t; :~z: 15 olI are we doing really? Ca:l ;;) 16 .~.. MR. HENRY: Right zQ 17 ~ MR. STRICKLAND: We're not adding to or deleting 18 from, are you? 19 MR. HENRY: Well, these would be, I think, envi.ionec:i 20 that it would be provided by law. 21 MR. STRICKLAND: By statute. 22 MR. HENRY: By statute. I think they would be 23 provided for in a statute. I agree with you, but in order to 24 make sure that nothing- happens, no adverse effect cQmes from 25 the adoption of a paragraph such as thi~we want to retain PAGE 12 these provisions. I think it's the most politically feasible 2 way to do it. 3 MR. STRICKLAND: Still taking care of confederate 4 pensions. 5 MR. HENRY: I think there's one confederate widow 6 receiving a pension, is that right, Candler? 7 MR. BROWN: One or two, there are. 8 MR. STRICKLAND: Really? 9 CHAIRMAN MARTIN: It might be helpful at this point 10 to read the actual language into the record 80 that that will 11 5I be --- ! @rI grap~ Excep~ ~hill 12 ~ MR HENRY: Staff proposal for Article VII, Section n, l?..r .. I 18. as othlllrwU. l?rovid.a 1n ! 14 Constitution, the power of taxation over the whole state may i I taxa~iOll ~he s~a~e 15 oil be exercised for any lawful purpose. Any purpose for which 16 the power. of over whole could have been 17 I-< exerci.ed on June 30, 1983 shall continue to be a purpose for 18 which such powers may be exercised until otherwise provided by 19 law. n 20 CHAIRMAN MARTIN: Why don' t we continue the 21 discussion? Does anyone else on the Subcommittee have any 22 questions or observations about that language? 23 MR. NASH: Once these have been made a statute is 24 there then -- the General Assembly could come in and change 25 them one way or the other? PAGE 13 MR. HENRY: Yes. 2 MR. NASH: The Constitution wouldn't restrict them 3 from coming in and doing any of those that's already been made 4 a statute rather than part of the Constitution? 5 MR. HENRY: They would then become -- 6 MR. NASH: So there would be a difference there then? 7 Now they can not because it's part of the Constitution. Once 8 you do this then they could. 9 MS. GREENBERG: I think this would, as you say, 10 grandfather them into the Constitution. So wouldn't that 11 "z j: require a constitutional amendment to repeal any purpose? ..Iol..l..: MR. HENRY: It says until otherwise provided by law. ~\ ~ 12 The Constitution has authorized the law to cover this, to deal ~r~! 14 ... with this pUrPOse ':z": 15 ~ MR. BROWN: Mr. Chairman, I think in regard to the "Ill: ;;) 16 .~.. point raised you have to again look at the fact that this Q Z 17 :i provision of the COnstitution is now read as a limitation 18 upon appropriations. As a limitation upon appropriations it 19 does not require appropriations for any of these purposes. In 20 fact, the General Assembly now could fail to appropriate for 21 any purpose specified in that list unless, of course, it is 22 contractually obligated for some reason. So the General 23 Assembly for all intents and purposes can void this provision 24 without any amendment to the Constitution or any part of it 25 by simply not appropriatin9 money. It would still have that PAGE 14 authority under the new proposal. I would suggest to you that, 2 in faot, with regard to these speoific purposes you're not ., 3 really changing the power of the General Assembly. They could 4 either carry out or not carry out these purposes now. 5 REPRESENTATIVE WILLIAMSON: Am I correct that the 6 second sentence is basically just comfort for anybody who 7 thinks that maybe their program is mentioned in the old 8 Constitution and won't be mentioned in the new Constitution? 9 MR. BROWN: Yes, sir. :~: I10 REPRESENTATIVE WILLIAMSON: But as a practical 11 iIllitt."'.... really prObably could do without the .""olld .eIltence e." I ~ 12 iJ CHAIRMAN MARTIN: If I may just insert something tW flU. Gil that and tet the etaft re.pod to Uat. All % . ! 14 understand the difficulty with the general language; it is !IS making sure that in adopting a phrase like public purposes or 16 , Llvtut purpoae. we don't restrict powere that we alre4dy have 17 in the State Constitution sinoe we're dealing with two differen 18 tyPe of approaches to the problem. One is it speeific list'tlbic ., currently exists, the other general language. We're concerned, 20 at least I'm concerned as a member of this Suboommittee;that 21 not in adopting the short langUAge in the interest of 22 constitutional revision limit existing powers that we have and 23 cause some problems down the road. I think that is the issue 24 \hat really is before us. 25 There are a number of options that we have and this -_ --- -_. --_ ...._- ..... .._--_._-_._---_._---------------~~.....-.-.. PAGE 15 is one. There have been several other approaches to this 2 problem that I've been able to see from the rearch. One is 3 to have a general statement and at the S5me time have a 4 state statute that would implement a statement the same as in 5 the State Constitution. Another is a -- which was done back 6 in 1970, was a general statement along within a list that said 7 that you could exercise the power for public purposes, that 8 those powers would include but not limited to the same list 9 and that would be, I think, Really, we would be -- As 10 Commissioner Strickland has already pointed out, we just 11 "z j: wouldn't be doing our job if we did that. Another option is I..ol..l..: @;i that:, kind of language. It seems to me the one issue thou9h that may be before us in adopting this language we do change ! 14 the Constitutional provisions. slightly and I think the to ':z": 15 ~ difference is this: If we were to say that you -- the public "Ill: :::> 16 ~... purposes included those purposes that were contained in the azQ 17 Constitution in 1976, we would then in effect be locking those 18 provisions in the State Constitution. We'd be saying that 19 whatever other public purposes the~e are the ones that 20 currently exist are, in fact, public purposes. This language 21 says we would incorporate those public purposes in the 22 Constitution of '76, but we will allow the legislature 23 subsequently to delete or add -- to delete essentially from 24 that.. list since we're giving them the authority -- a broader 25 authority than is contained in the list. That may be a PAGE 16 miss~a~emen~. I'd like the staff to help us with that if 2 that's a -- Is that the basis of the issue that's before us? 3 MR. HENRY: I think so. I think these purposes would 4 then become lawful legislative purposes once this is adopted 5 if it is adopted in the Constitution of 1983. 6 MS. HUNTER: I ~hink Vickie's ques~ion spoke to how 7 would the word provided by law be interpre~ed a~ the very end 8 of ~hat. 9 MR. HILL: And whether or no~ they could, in fac~, 10 eliminate one of the purposes that you have grandfathered in. 11 I I think in that .itua~ion they would have a hard ~ime by law I12 eliminating a purpose, but why would they wan~ to? That's @ r l kind 6f the whole thrust of your proposal is t.hat. what.ev$r i a. 14 I purpo8e the General Assembly should provide, exce~ IIS .- otherwise prescribed by the gratuity prohibit.ion or the other 16 prohibitions in the Constitution, whatever purpose they want I17 to indicate for a particular law well that will be valid so 18 ~hat -- You know, it seems to me i~'s not a practical problem. 19 The General Assembly is never going to want to draw back. 20 Even with the widows, I mean why would they want to in fact 21 eliminate ~hat as a purpose? It will just die of its own 22 accord. 23 MS. HUN'l'ER I They just don't fund it. 24 REPRESENTATIVE WILLLAMSON: I think Candler pointed 25 out we could do that now, we just don't fund it. We have the PAGE 17 authority, but if we don't want to fund the confederate widows 2 there's nothinq in the Constitution that will make us fund" 3 the confederate widows. 4 CHAIRMAN MARTIN: Maybe Vickie or Mike or Candler, 5 y'all can answer that speoific question thouqh because I don't 6 read: it the way that Mel read it. The way I read that 7 statement is the statute by leqislature oould, in fact, 8 eliminate one of the powers we currently have in the State 9 Cons~itution. Is that an accurate readinq when it says -these 10 powers shall continue to be a purpose for which such powers 11 E"z may be exercised until otherwise provided by law"? .o..... ~---!12 ~ MR. HENRY: You've qot to consider that you're adopting an entirely new Constitution and you're providing en ! 14 !;; entirely new way of indicatinq purposes for which tax revenues :z: 15 oll can be spent and that's by law. These are continually "or: ;;;) 16 ~ leqislative, lawful purposes that the state can spend its az - as a matter of policy for this committee and what you're l- U:zI: 15 .:I working with you want to be safe that you leave it here and 1:1 ~ ::l 16 .Gz..l if at some later point it is decided that we should try to 1:1 17 Z ~ Gl handle this together we'll have to look at that at that time. 18 But for now I wouldn't want to drop this language because of 19 the dangers that are possible, but I have another question. 20 Candler, will we have to -- Will a lawful purpose be implied 21 by virtue of the enactment of a law or will there have to be 22 a law which states that there shall be a public purpose for 23 which funds may be expended and then subsequently all general 24 laws would have to meet one of those? 25 MR. BROWN: Let me respond in two different ways to PAGE 22 that question. The first is that if we didn't have all this 2 historical baggage in the Georgia Constitution, this legacy 3 of purpose of taxation, I don't think you'd need this 4 provision at all. I think the only reason it's in there is 5 to make clear that the State can continue to do whatever it 6 has been doing and to eliminate the need to amend the 7 Constitution in the future to do what it's going to do. So my 8 first thought is that I don't think you need this at all. 9 There has been a lot of concern expressed about well, we may be inadvertently closing up programs because the court might interpret that to be limited to the old historical sense of public purpose or whatever else. So in order to overcome that concern you do put in a statement that the General Assembly can decide what it spends its tax funds for. And in an abundance of concern, this last sentence to make clear that although -- It's a limitation on the power of taxation. You just don't need it at all because we could exercise the power 18 of taxation for any purposes. It's whether we can spend the 19 money once you've raised it. So if you can build any 20 substantive limitation in the Constitution I think it needs 21 to be a limitation on the power of appropriation and the only 22 reason in my opinion you need this provision at all, it's just 23 a safeguard within the context of historial continuity in the 24 Georgia Constitution, the right of the General Assembly to ~~ raise taxes, but you don't need it. It's just a precaution. PAGE 23 CHAIRMAN MARTIN: That gets us into what Mr. Nash 2 Go ahead. 3 MR. NASH: Well, what my question is, he's talking 4 about just not funding some of these things would take care of 5 it. .There is some in here that the Legislature does not fund-.- 6 t.he General Assembly does not fund. They fund it otherwise. 7 For example, your commodities, they're not funded. It's 8 collect.ed and never goes into the general funds at all so it's 9 not budgeted. 10 MR. BROWN: Mr. Chairman, on that one point I'd like 11 "z j: '..0".... to point out that the commodities provision is separate from 12 '" this provision. The commodities are not included within e r l ~aragraph 1. What is it, Paragraph 3? 14 ! lo-n MR. TIDWELL: Two. :I: 15 0 CHAIRMAN MARTIN: OUr intention is that if we "'";;) 16 zC..D. resolve this general statement that same of the other Q Z 17 '"CD provisions in the section will fall into that and I think 18 MR. NASH: And it won't affect them? 19 CHAIRMAN MARTIN: Well, your point is well taken. 20 There are two parts. One is the earmarking of the special 21 fund for commodity commissions, the other is the use of those 22 funds for that purpose. One part of that would be covered, 23 I believe, under the general statement, that is the 24 authorization for the expenditure of those funds. One of my 25 thoughts is that at the next meeting the issue concerning the PAGE 24 earmarking of funds for the commodity commission would be 2 discussed and finally the staff would have some recommendations 3 about those specific provisions that we could consider based 4 on our decision as to the general purposes and the earmarking 5 issues, but that's a point well taken that we need to be 6 concerned about this specific -- those other paragraphs in our 7 section. 8 MR. NASH: This'last sentence then would include 9 them in under the general statement, but then you would have 10 to tend to them some other way, is that correct? MR. HENRY: It would deal with the earmarking when we consider that issue. MR. HILL: Candler, if I can go back agaip, so the answer then to the question I was asking before is that no, there is no need for a statute that specifies what the purposes are because every purpose is lawful or it wouldn't have been enacted? 18 MR. BROWN: 1 1m sorry, I changed your question on 19 you and I didn't really mean to do that. I think that if this 20 provision is read as is the present provision which is more 21 or les8 a limitation on the appropriations that it will be read 22 in light of the other requirement that appropriations be 23 fixed by prior laws and I think if that appropriation is fixed 24 by prior law it will be a lawful purpose for purposes of this 25 section. So I don I t think you I d have to have every law that PAGE 25 you pass authorize a new program. We had a sentence say that ;.': 2 taxes can be raised for this purpose. I think if you fix it .."~ 3 in the same manner as is provided for a prior law to authorize 4 appropriations then in my personal opinion that would suffice 5 for this purpose and I had intended to use the word lawful to 6 denote that. That's why I chose that work. 7 MS. GREENBERG: Are these purposes ennumerated in 8 the statutes or are they strictly in the Constitution 9 presently, the purposes liste4? 10 MR. BROWN: They're not listed in the revenue code. CzI 11 i= ..I0l..l..: MS. GREENBERG: Then if they're not statutory this @ r l12 Ill: second sentence appears to have no meaning unless you go back to the Constitution of '76. 14 .~. MR. HENRY: They'd be part of the legislative '~" :I: 15 01) package. CI Ill: ;:) 16 zC..D. MS. GREENBERG: To statutorily enact it? Q Z ~ 17 Ill: CD CHAIRMAN MARTIN: Maybe I'm misunderstanding the 18 question, but I think the answer is no. I think that the 19 statement is there. What that statement does is it incorporates 20 into the concept of lawful purposes those purposes that are 21 listed in the COnstitution of 1976, whether or not there's 22 a subsequent statute or an existing statute. What that 23 language means is that when this is passed lawful purposes 24 include those specific purposes, not only the list in Section 25 two, but also the 47 other provisions where there's a lawful PAGE 26 purpose provided in the State Constitution. Is that -- 2 MR. BROWN: I agree with that, Jim. If you were 3 going to prohibit expenditure for one of these purposes by law 4 you would just say -- pass a bill that says the payment of 5 pensions for confederate widows shall not be a lawful purpose 6 for the exercise of powers of taxation of the whole state. You 7 wouldn't amend anything in the code, you don't need to. That 8 second sentence makes it -- authorizes it. It's just if you 9 intended to prohibit it that you would need to pass a bill. 10 Why you would ever do that I don't know. CHAIRMAN MARTIN: That's an important statement because when we get to the policy decision we may need to talk about that. Candler, what you're saying then is that a statute could be passed after this provision is enacted which would say tbi't 16 z Do we have any comments from the committee about that~ Q .. 17 -Zc '" What's your pleasure on that sentence? Does anyone want to 18 make a proposal? 19 MR. BROWN: Mr. Chairman, could I just for the 20 committee's consideration, again with the context that this 21 provision as we presently read the whole paragraph is that 22 appropriations limitation and I'd like to s~ggest for your 23 consideration the same language that I mentioned earlier to Mr. 24 Tidwell and that is that the sentence read "the power of 25 taxation over the whole state may be exercised for any purpose PAGE 40 for which the state may make appropriations". 2 CHAIRMAN MARTIN: Okay. That observation is 3 recorded. 4 MR. TIDWELL: Where would you look to to find that 5 though, Candler? You see, before you had a laundry list. 6 MR. BROWN: Well, you'll still be keeping the second 7 sentence and to make clear that those are purposes, but I think 8 you just look to the appropriations provision which says "you 9 can appropriate funds within the context of the Constitution ") lQ for any purpose fixed by prior law" and that would require .J-,I! ~l ~at a separate statute have already ~een en~cted and either 12 approved by the Governor or veto overriqden before yoU could 'llPropriate fundB and then I think u.e Qf t!1at lll!!91lflllO wq1!lll \4 t ge~ u. Qut of this bind we're in on purposes of taxation becaus~ lSI' we used to specify purposes of taxation .nd permit us jus~ to 16 raile funds to fund the appropriations act and let the l7 limitations be with the appropriations. MR. HENRY: Canter, can I ask you one thing? I agree l~ With you somewhat that none of this is needed, that it is 20 iqner~t unless you otherwise limit the General Assembly, but 21 in ~ffect when we say the power of taxation over the wnole 22 ~tate may be exercised what we're really saying is the General 23 A~,embly can appropriate money for these purposes. TO say what 24 you're saying we would be saying the General Assembly can 25 ~pp~opriate for any purpose for Which the state way ~ke PAGE 41 appropriations. In effect, -- 2 MR. BROWN: That is the effect, but the problem is 3 you're dealing with specific language presently in the 4 Constitution which itself does not properly deal or treat the 5 subject that it's trying to deal with. It's trying to treat 6 appropriations by limiting taxes and it just doesn't work that 7 way. The only way I think you can get out of that trap is to 8 have a sentence that the actual meaning really is. You can 9 appropriate for the things you can appropriate for, but you 10 have to do that by twisting out of this historical baggage in 11 "z j: the Constitution limiting the powers of taxation. That's just ...IoI< Go gJ;~1 the way you have to do it. CHAIRMAN MARTIN: Thank you, Candler. ~ 14! MS. HUNTER: I disagree with Candler. That has a lo-n ~ 15 :I: oll lot of unnecessary language given that we don't need this "II< ::> 16 .~.. section at all as long as we're going to provide for it. I Q Z 17 ~ ::: am really much more inclined to say the exercise for any 18 purpose authorized by law which is the same thing that Candler 19 says but doesn't take quite as many words to do it. 20 CHAIRMAN MARTIN: Would you make that as a recommen- 21 dation so we have something before the Subcommittee? 22 MS. HUNTER: I move that the first sentence, Section 23 II, Paragraph 1, read "Except as otherwise provided in this 24 Constitution, the power of taxation over the whole state may 25 be exercised for any purpose authorized by lawn. PAGE 42 CHAIRMAN MARTIN: Is there a second to that? 2 REPRESENTATIVE WILLIAMSON: Second. 3 CHAIRMAN MARTIN: Is there any discussion? Okay. 4 Let's vote on that then. All in favor of adopting that first 5 sentence of Article VII, Section II, Paragraph 1 say aye. 6 (Ayes.) 7 CHAIRMAN MARTIN: Okay. Let's go on to the second 8 sentence. We've heard a good bit of discussion about that. 9 It's my understanding that the purpose of that sentence is 10 to say that those, powers that existed in the Constitution in III 1976, which would be that date, June 30, 1983, the day before 12 31 the effective date of our new Constitution, would be @ l l preserved and that they would continue as a purpose authorized i14 1 I by law until authorized -- provided by law, until another IIS 011 statute would be passed. For purposes of discussion, if it's 16 alright with the Committee why don't we just assume that that 17 I sentence is a proposal before us in its entirety and then 18 have some discussion? Is that alright? 19 (No response.) 20 CHAIRMAN MARTIN: I have some problem with the last 21 phrase, "until otherwise provided by law", and I'll try to be 22 as concise as I can. A number of issues that are in that 23 list affect areas that are not necessarily politically 24 attractive areas for the Legislature to deal with. Those 25 include the school lunch program, public assistance benefits, PAGE 43 a number of other programs where because of'-a, court decision 2 the state is prevented from engaging in a program, a ,~' 3 constitutional amendment voted on by the people had to be 4 passed and I'm concerned about taking that decision by the 5 people, voted on by the people in a referendum, and allowing 6 the Legislature by a simpl~majority to come back and change 7 that decision that was made for fear that some of the less 8 attractive programs may -- not given the current leadership 9 and direction of the state, but we can't be sure of what will 10 happen in the future. It might be in jeopardy and I believe I!J Z 11 j: .0~ ..... that since we have defined lawful purpose broadly, it's been 12 ~ our decision to do that, that we ought to assume as a @Jr l subcommittee that that term~awful purpose authorized by lawn ! 14 would include those purposes contained in the Constitution of I- '" :z; 15 011 1976 until another constitutional amendment is passed that I!J ~ ::;) 16 ...zIII would say no, we will not engage in, for example, the school Czl 17 ~ III lunch program or Agricultural Commodities Commission, but the 18 operative legal device to change that decision would be another 19 constitutional amendment, another vote by the people. Now 20 that's my feeling about that provision. 21 Are there any other comments about this section? 22 REPRESENTATIVE WILLIAMSON: I'll make a short comment. 23 I think that the posture you would put the General Assembly 24 and the people of Georgia in is that if the purpose was an 25 unacceptable purpose to the General Assembly we would either PAGE 44 try to do away with it, which would take a 2/3 vote and then 2 clutter up the ballot, or more probably we would just stop 3 funding it. 4 CHAIRMAN MARTIN: That's correct. 5 REPRESENTATIVE WILLIAMSON: So I don't know if it 6 makes a lot of difference one way or the other. I think the 7 results are going to basically be the same. 8 CHAIRMAN MARTIN: I agree with the observation that 9 the decision annually with the Legislature is what programs to 10 fund and how much and that's an appropriations decision that is not really relative to this section given the problems of the gratuities provision and the court decisions in the past. I am concerned personally that we not do anything to step back what decisions that have already been made by the voters, that these are in fact pUblic purposes and not in violation of the gratuities provision which essentially is the protection that having this specific activity listed in this particular 18 paragraph provides. The Legislature has and will continue to 19 make the decision about how much money, if any, to spend for 20 these different programs. My concern is that that issue would 21 be distorted by a statute that would prohibit expenditure of 22 funds so the decision in the appropriation process would be 23 foreclosed. There would be no decision about that because the 24 answer would be no, we can't do that since there's a statute 25 that prohibits us from doing that. PAGE 45 REPRESENTATIVE WILLIAMSON: I really can't see the 2 General Assembly doing that. I really can't see a governor 3 signing a bill that the General Assembly passes that in the 4 future you can't expend funds for this purpose. I know that 5 I realize more than I used to that we need flexibility. We're 6 in a rapidly changing world and nobody knows where we're going 7 to be five years from now or ten years from now. 8 MR. BROWN: Mr. Chairman, as the author, I guess, of 9 the suggested language here, I don't feel you would be doing 10 any harm whatsoever to the language by deleting tha~ un~il 11 "z j: otherwise provided by la~ If you have any concern about it .o.'."... @;~ my recommendation would be to delete, just as Mr. Williamson said. The check is on whether or not the money is actually ! 14 ... spent and does no harm a~ all to have it authorized '<"C % 15 oll MR. KANE: I think by doing that, Jim, it should "'";:) 16 .~.. also alleviate any concerns you have since you're writing in Q Z 17