BRADENTON, Fla. - The Florida Taxation and Budget Reform Commission on Thursday gave final approval to a plan that would eliminate property taxes the state requires public schools to levy and allow the state sales tax to increase one cent to make up for some of the lost school funding.

The commission had given preliminary approval to the controversial proposed constitutional amendment last month by a vote of 21 to 4. But a final vote of 18 to 7 last week placed it on the November election ballot. It must pass by 60% of the vote.

The measure would abolish the property taxes the state Legislature requires school districts to levy on Jan. 1, 2011. It does not replace or eliminate a 2 mill property tax that school districts can levy and which they frequently leverage with certificates of participation. It does not impact voter-approved millage rates for general obligation debt service.

The measure authorizes - but does not require - the Legislature to increase the sales tax by one cent as one method of replacing the state-ordered levy of property taxes. It also suggests lawmakers consider other sources of revenue, including eliminating some sales tax exemptions. It prohibits eliminating sales tax exemptions on things such as food and health care.

Another major component of the proposal lowers the amount annual assessments can increase on commercial property and non-homesteaded property to 5% from the current 10%. While the cap would not apply to school district tax levies, it would further erode revenue that cities, counties, and other special districts now raise through property taxes.

"Florida property becomes instantly more profitable," Hank Fishkind, an Orlando economist, told the commission in a presentation supporting the proposal. "This will stimulate construction of non-residential property since it is now more valuable to own. This creates jobs and incomes. Those who own Florida property are wealthier by $80 billion."

"This will stimulate spending in Florida," he added. "Lower property taxes will result in higher levels of population growth."

However, Fishkind's presentation did not examine the affect on school districts, local governments, and the state itself. When the proposed amendment won preliminary approval last month, rating agency analysts covering Florida said it could represent budgetary challenges for the state and local governments.

"As an agency our concern is that the issuers we rate have the ability to repay their obligations and maintain financial health," said Moody's Investors Service analyst John Incorvaia. "The property tax measures that have been adopted and are proposed continue to attempt to limit a major revenue source utilized by all issuers at a time when other local and state revenues are also faltering, and the housing and construction markets, on which the state's economy has been dependent, are under serious stress."

Florida's constitution requires the commission be impaneled every 20 years to recommend changes to the state's tax and budget system. It has the power to put constitutional amendments on the ballot.

Other tax reform measures are under consideration by the Legislature, which is in session through May 2.

 

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