Making Sense of the 2010 State Referendums

Jeremiah Knupp -- October 29th, 2010

Referendums. Those pesky little surprises that blind side us at the ballot box on Election Day. Meals tax? What meals tax?

On November 2nd voters in Harrisonburg and throughout the state will face three referendum items that if passed will modify the state’s constitution. These items have already been passed by the state House and Senate and signed by the governor. A majority vote by Virginians will make them law.

Question 1: Property Tax Exemptions for the Elderly and Disabled

Shall Section 6 of Article X of the Constitution of Virginia be amended to authorize legislation that will permit localities to establish their own income or financial worth limitations for purposes of granting property tax relief for homeowners not less than 65 years of age or permanently and totally disabled?”

Virginia law currently allows localities to give full or partial real estate tax exemption for the home or personal dwelling of the elderly and those with permanent disabilities who have “an extraordinary tax burden” in comparison to their income. This is defined as a combined income of up to $50,000 or a net worth of $200,000. Localities, if they choose to offer exemptions, set their standards up to maximums allowed by the state.

The proposed amendment would remove the state mandated “cap” on income that qualifies for relief and allow localities to establish their own standards independently of the General Assembly on which elderly or disabled persons should be exempt from real estate tax on their home.

According to June Hosaflook, Harrisonburg’s Commissioner of Revenue, City Council has established an combined gross income of $30,000 and a net worth of $75,000 as the maximums allowed for city real estate tax exemption (for Rockingham County residents the limits are $32,000 and $70,000). Because these numbers are well below the state standards Hosaflook says if the proposed law passes it will not cause a change in the city’s tax exemption standards.

Question 1 has been officially supported by the Republican Party of Virginia.

Question 2: Property Tax Exemption for Certain Veterans

Shall the Constitution be amended to require the General Assembly to provide a real property tax exemption for the principal residence of a veteran, or his or her surviving spouse, if the veteran has a 100 percent service-connected, permanent, and total disability?”

This proposed amendment would exempt any veteran declared by the federal Department of Veterans Affairs to have “a one hundred percent service-connected, permanent, and total disability” from real estate taxes on their home. After a veteran dies their spouse can continue to claim the exemption as long as they don’t remarry and continue to live in the same property.

Hosaflook said that under the current law a disabled veteran can qualify for tax exemption based on their income and net worth, but the proposed amendment would do away with this requirement and base exemption solely on disability status.

Question 2 has been officially supported by numerous veterans’ organizations as well as the Republican Party of Virginia.

 Question 3: Revenue Stabilization Fund

Shall Section 8 of Article X of the Constitution of Virginia be amended to increase the permissible size of the Revenue Stabilization Fund (also known as the “rainy day fund”) from 10 percent to 15 percent of the Commonwealth’s average annual tax revenues derived from income and retail sales taxes for the preceding three fiscal years?”

The Virginia state government keeps a Revenue Stabilization Fund that is used to make up for deficits in tax revenue and keep the state budget balanced without making cuts in programs or services. The fund is currently limited by law to an amount calculated as 10 percent of the Commonwealth’s average annual tax revenues from income and sales taxes from the preceding three fiscal years. The proposed law change would raise that limit to 15 percent, which would increase the amount of money in the fund by 50 percent (Example: 10% of $1 is 10 cents. 15% of $1 is 15 cents. 15 cents is 5 cents more than 10 cents, or 50% larger).

Historically, the state government has kept a general fund revenue reserve that totaled millions of dollars. In 1990 the General Assembly authorized the stabilization fund to become a permanent part of the state budget. The proposed amendment was ratified by the voters in 1992. Money in the fund, when not in use, is invested and earns interest.

Dan Timberlake, state director of the Office and Budget and planning explained that the term “rainy day fund” is somewhat of a misnomer. The fund is not an emergency stash of money that can be drawn from to meet a specific need, but a calculated fund based on tax revenue that will go into the state’s general treasury to make up the difference between expected and actual tax revenue.

Timberlake noted that the fund had been used five times since its inception 18 years ago, all between 2002 and 2010.

“Tax revenue and the state budget are much larger than when this fund was established in the early 1990s,” Timberlake noted as the reasoning behind the law change. “So the amount of need could be potentially greater than when the fund was first conceived.”

The process by which the fund is calculated, maintained and can be used is complicated, but those interested in understanding it better can read more in this Department of Legislative Services report.

chart graph

Question 3 has been endorsed by the Republican Party of Virginia, as well as the Harrisonburg Democratic Committee. In a press release the committee stated “This coming election Democrats are urged to vote yes for this progressive initiative to improve Virginia’s fiscal stability.”

The Virginia State Board of Elections has an informational site where voters can confirm their registration or find their polling place. You can also view a sample ballot  to make sure you’re aware of the local offices and issues that you will face at the polls on November 2nd.

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16 Responses to “Making Sense of the 2010 State Referendums”

  1. The problem with increasing the rainy day fund is that the anti-tax, “something for nothing crowd” last used it as an excuse not to find a sustainable revenue stream for transportation funding. Yes, I’m looking at you Sen. Obenshain. Without an fiscal impact statement to the local tax base, it’s no to all three.

  2. Thanh says:

    Thanks Jeremiah for posting this information. Very helpful. When I first read the referendums on the sample ballots I didn’t’ know where to begin understanding them. Your inclusion of comments/explanations from June Hosaflook on how things are today in Harrisonburg also helps put into perspective for how the proposed changes may or may not have impacts in Harrisonburg.

    Also, after reading this post I did some digging around online and also found this webpage from the Virginia State Board of Elections that shows the actual language/text changes proposed:

  3. Nice work on this whole series, Jeremiah. Voter education is so important and you did a good job of laying out the facts about city council, school board, and the referenda.

    I’m a little uneasy about the tax exemptions provided by the first two initiatives when people who are really in need already have a way to be exempt from property taxes. Who will this benefit that isn’t already being helped?

  4. Jared Stoltzfus says:

    While tax breaks for low-income elderly, and disabled veterans makes a lot of sense, I would argue against letting localities set their own income caps. I’m currently living in Phoenix AZ, and a little town called Sun City has been setting its own caps for years. This is a city full of retirees, vacation homes, and otherwise ‘high end’ folks that decided to become incorporated so they wouldn’t have to pay taxes to support the school districts they were a part of. The logic used was ‘we don’t have any kids, why should we be paying for them?’
    The intent of the referendum, as I understand it, is to protect vulnerable elderly from losing their homes. Allowing each locality to set the caps could turn into a situation where Harrisonburg tries to attract wealthy retirees by significantly cutting their property tax burden- to the detriment of the tax base overall.
    Has this potential abuse been addressed, or is there only one side of the proposal being discussed?

  5. Joshua says:

    According to Garren Shipley, Communications Director for the RPV, both over the phone today and on the Republican Party of Virginia’s website on Oct. 28, “Several people have called RPV to ask if the party has an official position on these (the amendments). We don’t.”

    Even though I don’t like going against the RPV’s position, I will do so in certain circumstances. Nevertheless, please don’t say that the RPV supports these amendments when they haven’t taken a stance one way or the other.

  6. Renee says:

    Thanks so much for explaining these clearly and including helpful additional info!

  7. cook says:

    Where no one is willing to step forward and champion these amendments, where the first two appear to be blank checks for local politicians to buy votes, where the third appears to permit the collection of additional tax money for future spending — I’m voting No unless someone takes the time to convince me otherwise.

  8. David Mc says:

    Thanks for clarifying what the proposed changes might really mean. It definitely changed my mind. ( From yny to nnn)

    • David Mc says:

      PS: I remember in the 80’s when everyone started saying we needed to tip in restaurants 15 to 20% instead of the customary 10% due to inflation.

      Ref. #3 sounds like the same kind of thinking.

      Do people not understand what a percentage is?

  9. I wonder how many voters really understood the amendments they overwhelmingly voted for yesterday. I’m not sure I did, and I spent a lot of time reading about them.

    I find it odd that the third amendment passed (although by a narrow margin) with such a strong Republican/Tea Party turnout. The message was clear as mud: “Cut government spending, lower taxes, but let the government hold more of our money for God knows what.”

    I don’t get it.

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