Chancellor White Addresses Destructive Impact Of Amendment 4

By John A. White
Chancellor, University of Arkansas

The University of Arkansas is facing a crisis of disastrous proportions. If Amendment 4 passes in the election to be held on Tuesday, November 7, the University of Arkansas will be faced with an immediate budget reduction of at least $4 million for the current fiscal year. We do not know if the Arkansas Supreme Court will remove Amendment 4 from the ballot; if not, since there are indications that the Amendment might pass, we are beginning the process of identifying areas in which budget cuts will occur.

Designed by Fort Smith attorney Oscar Stilley, Amendment 4 is a ballot initiative that - if approved - will significantly impact the University of Arkansas, as well as all publicly supported education in the state, K through 12 and higher education.

This is a time when Arkansas needs to strengthen education across the board so that Arkansans can compete in an unforgiving global economy. Instead of shifting into reverse, we need to continue moving forward with more, not less, pressure on the accelerator. If Amendment 4 passes, all of the progress that has been made in basic and higher education over the last decade will be reversed.

In fact, this ballot initiative will do more than cripple basic and higher education. It will seriously damage the many public services that Arkansans depend upon.

As the ballot language states, Amendment 4 to the Arkansas Constitution is proposed to "abolish the state and local sales and use tax on used goods, to prohibit the increase of taxes without voter approval at a general election, to provide for a three-year statute of limitations for actions to recover taxes, by the taxing authority or an aggrieved taxpayer, to provide procedural safeguards for taxpayers, and for other purposes."

Here’s what will happen, should Amendment 4 pass:

Beginning November 8, 2000, the state, cities and counties will no longer receive revenue from taxes on used goods.

The total loss will be $164.3 million dollars a year. By November of 2002, the state, cities and counties combined will have lost $328.6 million dollars. This money cannot be "made up" or compensated for in any other way. That’s because Amendment 4 takes away the public’s right to approve a tax increase or levy a special tax for two years—until the next general election in 2002.

The lion’s share ($111.7 million per year) of this lost revenue will come out of the Educational Excellence Trust Fund. This fund was established by Act 10 of 1991 from additional revenues passed through the legislative session of 1991. These revenues represent dedicated taxes as specified by the legislature for transfer to the public school fund and institutions of higher education.

If Amendment 4 passes, our public schools will lose $192.8 million over the next two years. This translates into budget cuts, increased class sizes, postponed building repair and maintenance, eliminated programs such as band, music, and art, delayed computer purchases, and reduced bus services. If these and other cuts do not make up the deficit, it is predicted that teachers will be laid off and retiring teachers will not be replaced. Teacher salaries are so low already that many teachers leave Arkansas for states that pay competitive salaries. Arkansas public schools will fall even further behind, particularly in the use of information technology. The result: a generation of students less prepared to work in the world we live in.

Colleges and universities in Arkansas will lose $55 million over the next two years. This is a budget cut of 7 percent. To make up the loss it is likely that scholarships will be restricted or eliminated as well as other critical services to students. Our colleges and universities are already struggling to sustain themselves with very small increases in state funding. A cut of 7 percent is disabling because the need to keep pace with technology is increasing at the same time that students require more access to technology as part of their education. Students will go where their needs are met, and growing numbers of the most talented students - the students Arkansas can ill afford to

lose - will go to college in other states.

This is of particular concern to the University of Arkansas, where our budget would be cut by $8.8 million over the next two years. As you may know, the University has made a concerted effort to stop the "brain drain" of talented students to colleges in other states by raising admission requirements and instituting an expanded Chancellor’s Scholarship Program to attract superb students. We have seen tremendous success in this regard, to the point where there are nearly 1,000 Chancellor’s Scholars on our campus this fall. This success in attracting these talented students vastly increases the likelihood that they will spend their productive lives in Arkansas after they graduate, helping our state improve its standard of living and its ability to compete economically on a global scale.

Although we have not identified where specific budget cuts will occur, we know that faculty and staff salaries, scholarships, library funding, class sizes, physical plant services, and departmental operating budgets will be impacted.

Arkansas already ranks at or near the bottom in spending for education. Any further reduction in this investment in our future will drive the state so far behind it will never be able to keep up with other states.

But Amendment 4 goes far beyond education. Arkansas cities and counties will lose $40.4 million in two years. Many counties already are struggling to meet basic expenses. If Amendment 4 passes, they will have to cut back in local services, such as 911 emergency systems, police and fire protection, services for senior citizens, and much more.

Even without the specter of Amendment 4, the outlook for state revenue is not good. Due to a recent tax cut and a cooling economy, the rate of increase in state revenue has slowed considerably. Available new revenue in 2001-02 is expected to be about $125 million, which is only about 2.7 percent above this year’s amount and not enough to even keep pace with inflation. If Amendment 4 passes, our universities, schools and public services will be damaged beyond repair.

Let me repeat a few key points about Amendment 4 that underscore the threat it poses to Arkansas’ future.

The amount of revenue lost cannot be recovered in any way until the next statewide general election in November 2002. Under the restrictions imposed by Amendment 4, even if voters want to fund public school and colleges and universities, even locally, they cannot do so until the next statewide election.

Amendment 4 is not just a simple elimination of a tax on used cars. That’s where so much of the confusion begins. Amendment 4 is a major change in the rights of voters to make decisions in how the will of the people is expressed. This amendment changes our form of government while subjecting our state to disastrous budget cuts, challenges to minor fees, and lawsuits.

Under Amendment 4, neither the governor nor the legislature nor a quorum court nor city council - all of whom have been elected by the citizens to represent them - would be able to respond to a critical need. The state already has millions of dollars in unmet needs, from teacher salaries, college scholarships, and technology improvements to roads and prison construction. Amendment 4 will change our democracy. Because of the uncertainty and instability of projected revenues, elected state and local officials will be deprived of the ability to make budget decisions.

In its use of language, Amendment 4 is nothing more than a "stealth" initiative to destroy the public sector in Arkansas. Amendment 4 broadens the definition of the word "tax" to include vehicle fees, license fees, permit fees, or any increase in revenue. The ballot title places emphasis on removing the sales and use tax for used goods but doesn’t adequately inform the voter of the sweeping changes the Amendment would make in connection with all taxes. These taxes include sales and use tax on used or new goods, real property taxes, personal property taxes and other sources of revenue.

Amendment 4 provides that "the reduction or elimination of exemptions or credits or the changing of any law or rule which results in the collection of additional revenue from some or all taxpayers shall be deemed a tax increase." This must then be decided by a vote of the people at a statewide election every two years, creating a severe obstacle to budgeting and planning by state and local government and educational institutions. It may sound extreme, but the interpretation of the Amendment might require a statewide election to raise the price of a duck stamp or a camping fee at a state park. Every fee or license may be frozen. Not only is revenue lost but all options to act in even a small way - even with the agreement of the constituency paying a fee or license - are potentially eliminated.

Make no mistake: the passage of Amendment 4 will end life as we know it in Arkansas, and not for the better. While it contains some clever and attractive anti-tax language, the reality is it will cripple basic and higher education and the entire public sector in a state that has been working hard to overcome its historically poor standard of living. As everyone knows, education is the cornerstone upon which our state’s future rests, and the emergence of the University of Arkansas as a nationally competitive, student-centered research university is the necessary capstone to our state’s education system.

Amendment 4 promises to tear this system down and to make it virtually impossible to rebuild.

The prospect of Amendment 4 is as extreme an emergency as the University of Arkansas and all of Arkansas public education have ever faced. I am asking you, as a loyal and concerned member of the UA community, to consider carefully Amendment 4 and its impact on our state before you vote on Tuesday, November 7.

Please tell your family, friends, and acquaintances about the impact of Amendment 4. Feel free to copy and circulate this letter to anyone you think needs to read it. Write letters to the editor of your local newspaper. Help to arouse various citizen advocacy groups on this issue. And most important, go to the polls and vote on election day.