The Hancock Amendment in Missouri is a set of provisions added to Article X of the state constitution in 1980 that caps how much revenue state government can collect, requires voter approval before any local government raises taxes or fees, refunds collections that exceed the cap, and forbids the state from imposing new duties on counties, cities, and school districts without paying for them.1Missouri State Auditor. Missouri State Auditor – Report No. 2009-35 The rules run across Sections 16 through 24 of Article X and tie the size of state government to the growth of residents’ personal income.
The State Revenue Ceiling
Article X, Section 18 sets a formula-based limit on total state revenue in any fiscal year. It starts from a fixed ratio: total state revenue collected in fiscal year 1980–1981 divided by Missouri residents’ personal income in calendar year 1979. That ratio is multiplied by the higher of the prior calendar year’s personal income or the average over the previous three calendar years.2Missouri Revisor of Statutes. Missouri Constitution Article X Section 18 – Limitation on Taxes Which May Be Imposed by General Assembly The ceiling floats with the economy. When Missourians earn more, the state can collect more. When incomes fall, the ceiling contracts.
“Total state revenues” includes all general and special revenues plus license fees, but excludes federal funds.3Justia. Kelly v Hanson – 1998 – Supreme Court of Missouri Decisions The Missouri Supreme Court in Buechner v. Bond (1983) held that money counts as revenue only if it is both received into the state treasury and subject to appropriation, so funds sitting in segregated accounts outside legislative control do not count against the cap.
When Collections Exceed the Cap
Section 18(b) forces a correction when the state takes in too much. If total revenues exceed the ceiling by one percent or more, the entire excess must be refunded to taxpayers on a pro-rata basis, distributed according to each taxpayer’s liability on the Missouri income tax return filed after the fiscal year closes. If the overage is less than one percent, the surplus goes into general revenue instead.2Missouri Revisor of Statutes. Missouri Constitution Article X Section 18 – Limitation on Taxes Which May Be Imposed by General Assembly
Refunds were paid for fiscal years 1995 through 1999, totaling roughly $971 million across individual and corporate taxpayers. Nobody had to file a separate claim; the Department of Revenue calculated each share and applied it as a credit on the next year’s return.
If you receive a Hancock refund, the state reports it to the IRS on Form 1099-G, the same form used for any state income tax refund or credit.4Internal Revenue Service. About Form 1099-G, Certain Government Payments Depending on whether you itemized deductions the prior year, all or part of it may be taxable federally.
Limits on New Tax Increases by the Legislature
Section 18(e) layers a tighter restriction on top of the overall cap. Even when the state is well under the Section 18 ceiling, the General Assembly cannot enact tax or fee increases in a single fiscal year that produce new annual revenue above the lesser of two figures: $50 million adjusted annually for changes in Missouri personal income, or one percent of total state revenues from two fiscal years earlier.5Justia. Missouri Constitution Article X Section 18(e) – Voter Approval Required for Taxes or Fees, When, Exceptions – Definitions – Compliance Procedure, Remedies
If the legislature passes increases that break the threshold, the largest one must be sent to voters first, then the next largest, and so on until what remains fits under the cap. An emergency exception lets the legislature exceed the limit for a single year if it follows the procedures in Section 19 of Article X.
The definition of “increase” is broad: new taxes, higher rates on existing taxes, and expansions that pull new property, activity, or income into the base all qualify. Extending a tax that was already scheduled to expire, however, does not count as an increase.
Voter Approval for Local Taxes and Fees
Article X, Section 22 prohibits counties, municipalities, school districts, and other political subdivisions from imposing any new tax, license, or fee, or raising the rate of an existing one, without approval from a majority of qualified voters.6Missouri Revisor of Statutes. Missouri Constitution Article X Section 22 – Political Subdivisions to Receive Voter Approval for Increases in Taxes and Fees The rule reaches fees and licenses that function as taxes, so local officials cannot avoid it by relabeling a charge. If voters say no, the existing rate stays.
One exception: taxes levied to pay principal and interest on bonds or related contract obligations authorized before the amendment took effect are not subject to voter approval.
The Property Tax Rollback
Section 22 also requires a rate reduction after reassessment. When the total assessed value of existing property in a county or subdivision rises by a larger percentage than the general price level, the maximum authorized tax rate must be rolled back to whatever level would produce the same gross revenue from existing property, adjusted for price-level changes, as the old rate would have produced on the old values.6Missouri Revisor of Statutes. Missouri Constitution Article X Section 22 – Political Subdivisions to Receive Voter Approval for Increases in Taxes and Fees
New construction and improvements are excluded from the calculation, so a building boom does not trigger a rollback. A county-wide reassessment that inflates existing home values does. Local governments that want revenue above what inflation justifies have to ask voters. The rollback applies to real property; personal property is not covered.
Unfunded Mandates on Local Governments
Sections 16 and 21 protect local budgets in two ways. First, the state cannot cut its share of funding for any activity or service it already requires local subdivisions to perform.7Missouri Revisor of Statutes. Missouri Constitution Article X Section 21 – State Support to Local Governments Not to Be Reduced, Additional Activities and Services Not to Be Imposed Without Full State Funding If the state paid 60 percent of a mandated program when the amendment took effect, it must keep paying at least that proportion.
Second, if the General Assembly or any state agency imposes a new activity on a subdivision, or raises the level of an existing service above what current law demands, the state must appropriate and disburse funds to cover the added cost.8Missouri Revisor of Statutes. Missouri Constitution Article X Section 16 – Taxes and State Spending to Be Limited Without the money, the mandate is unenforceable. Most litigation in this area turns on whether a directive is genuinely new or merely a modification of an existing duty, because only new or expanded requirements trigger the funding obligation.
Who Can Sue to Enforce It
Any Missouri taxpayer can bring suit to enforce the amendment. Section 18(e) authorizes enforcement actions by taxpayers and statewide elected officials, and gives the Missouri Supreme Court original jurisdiction when a statewide official sues.5Justia. Missouri Constitution Article X Section 18(e) – Voter Approval Required for Taxes or Fees, When, Exceptions – Definitions – Compliance Procedure, Remedies
Standing works differently here than in federal taxpayer suits. The Missouri Supreme Court has held that individual taxpayers have standing to bring Hancock challenges, but government entities on their own do not. A city or county can appear as a co-plaintiff, provided a taxpayer supplies the standing.3Justia. Kelly v Hanson – 1998 – Supreme Court of Missouri Decisions Local officials who are themselves taxpayers can satisfy that requirement in their personal capacity.
When a court finds a mandate violates the funding provisions, it can bar enforcement until the state appropriates the money. When it finds a tax or fee increase violates the Section 18(e) cap, it can invalidate the offending taxes and fees outright.