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State Offices Disagree on Tax Refunds

October 14, 1997
State Capital Bureau

JEFFERSON CITY - Missourians are awaiting tax refunds of anywhere from $695 million to four times that amount -- depending on the state office with whom you talk.

That translates to a dispute about the average amount owed to a taxpayer from $165 to more than $600.

The discrepency involves a disagreement between the Administration Office and State Auditor Margaret Kelly's office over what is covered by what is called the "Hancock Lid."

That lid, adopted by voters in 1980, imposes a limit on the total amount of revenue state government can keep. Revenues in excess of that lid must be refunded to the taxpayers.

Refunds for past years, however, have been tied up in the courts.

The Administration Office announced (Oct. 9) that the state owes $319 million to taxpayers from excess revenue raised during the last fiscal year which began July 1, 1996.

In addition, the administration has reported that earlier years, the state owes taxpayers another $376 million in refunds that have been tied up by the courts -- for a grand total of $700 million.

"Our calculations are consistent with the constitution," said State Budget Director Mark Ward.

But the state auditor disagrees.

Frank Ybarra, spokesman for the auditor's office, said Margaret Kelly's method of calculation would push the state even further over the tax lid.

"It could triple or quadruple the size of refunds being offered," Ybarra said. "We think they're engaging in accounting gimmicks and they think we're wrong."

Ward said the issue may be tied to Kelly's political aspirations.

"The issue kind of arose when the auditor considered and ultimately decided to run for governor," he said.

The two offices' disagreement is the subject of a case the state Supreme Court will hear Dec. 4. After the decision, the issue of which calculation method is constitutional should be settled.

Ward said taxpayers could be getting the refunds by December 1998, if the court were to issue a decision quickly.

Either way, the figures mean the state has now exceeded the Hancock tax lid for the third year in a row.

The lid rises each year in the same proportion as the growth of personal income of Missourians.

Rep. Chuck Graham, D-Columbia, said it remains to be seen whether or not the money will actually be refunded directly to taxpayers.

Graham said there are some in the General Assembly who would like to use the money to aid Missouri's Transportation Department.

"I think that legally, it has to be refunded to the taxpayers," Graham said, but the Hancock amendment doesn't specify how those refunds should be allocated.

He said it would cost about $1 million just to send the checks out to Missourians.

But despite all the complications, Graham said he would "rather deal with the problems of a budget surplus than a budget deficit."