aka: Taxation Amendment
Amendment 59 was an amendment to the Arkansas Constitution, ratified by voters overwhelmingly in 1980, that overhauled the system of valuing and taxing private property. It quickly became known for its bewildering complexity—an Arkansas Supreme Court opinion called it “the Godzilla of constitutional amendments”—and for its damaging effect on the financing of public schools. The amendment and its various interpretations had a major role in the long legislative and judicial battles over school reform and tax reform (as with the court cases Jim DuPree v. Alma School District No. 30 and Lake View School District No. 25 v. Huckabee).
The valuing of private property, both real and personal, had long been a divisive issue, owing to the property tax’s role in paying for public education. Property taxes had once been the principal source of funding for Arkansas’s schools, although over time the state government stepped up its role because the state’s 1874 Constitution made the state responsible for providing a suitable education for everyone. As the Arkansas General Assembly increased the state’s level of funding every two years, it devised formulas for distributing the state aid in ways that were supposed to compensate for the vast disparities in the property wealth of school districts. School districts with weak property bases would get relatively more state aid per child than wealthier ones, as the constitution required equal school opportunities for children wherever they lived. Periodic lawsuits, notably DuPree and Lake View, challenged the distributions as being insufficient to overcome the unconstitutional inequalities.
A lawsuit in 1979 over the valuation of property triggered a stampede in the legislature to change the provisions for valuing and taxing property in Article 16 of the constitution, which said all property in the state had to be valued for tax purposes uniformly. There could not be one method of valuing one type of property and another method for another type. The lawsuit, which became known as Public Service Commission v. Pulaski County Board of Equalization, challenged the state’s manner of enforcing the uniform valuation of property.
The county equalization board, which believed it was appraising property for tax purposes according to its real value while much of the rest of the state was assessing property at far lower values, asked the state Public Service Commission, which also served as the state equalization board, to study the inequities and order a statewide property reappraisal. Relying on the research of its Assessment Coordination Division, the commission concluded that the inequities were exorbitant—some counties were assessing property for tax purposes at less than three percent of its value while Pulaski and Washington counties were assessing property at more than twenty percent of its value. It meant that through the state school-aid formula, Pulaski, Washington, and other counties whose assessments averaged close to twenty percent were subsidizing school operations in areas of the state that were under-assessing their property. The commission granted the request for a statewide reappraisal of property. Its decision was appealed to the Pulaski County Circuit Court, and, after a trial, Judge Warren Wood upheld the commission and ordered the statewide reappraisal, which was to be undertaken fifteen counties a year for six years starting in 1979.
The decision caused political panic. If the decision was upheld by the Supreme Court (and it was indeed upheld on June 25, 1979) it would mean that people’s property taxes would increase by as much as 1,000 percent. Bill Clinton, the Democratic nominee for governor, said it would be a catastrophe and promised to take steps as governor to soften the impact. The remedy that he and legislators came up with was to amend the constitution and roll back millage rates for schools and local governments to offset the huge increases in property assessments that would follow the reappraisals in each county. That became the heart of Amendment 59, which the legislature referred to the 1980 election ballot. If a reappraisal produced an increase of ten percent or more in a county’s total assessed property valuation, all the property tax rates for schools, cities, and counties in the county would be rolled back so that property owners overall would realize no increase in taxes.
As the 1979 legislative session progressed, however, one group after another sought additional protections through the amendment. Lobbying groups for farmers and wood-products companies wanted changes so that their lands would not be assessed on the basis of their real market value, as the constitution then required, but instead upon a system basing the value upon their “productivity” or “use,” which was usually far below market value of the lands. The proposal was amended to provide for the assessment of those lands and commercial property based upon their productivity, not their market worth. Public utilities, railroads, and other commercial carriers had the document amended to avoid higher taxes on equipment and other personal property. Hobby farmers, who leased their farmland to commercial operators, wanted an amendment shifting some of the tax burden to the farm operators. By the end of the legislative session, the proposal had lengthened to 2,000 words. Baffling sentences spelling out the procedures that were to be followed often exceeded 100 words. At the end, the legislature’s chief bill drafter begged the sponsors to pull the bewildering proposal back so that it could be rewritten to make better sense. The sponsors said it was too late and that the legislature could fix any problems after voters ratified the amendment.
Soon after the legislative session, the Supreme Court upheld Judge Wood and said the vast differentials in county assessment methods violated the constitution, and he ordered the reappraisals to begin in 1980.
Its ballot title in the 1980 election described the proposed amendment as a “proposed constitutional amendment to reduce the property tax burden upon the taxpayers of this state.” It was ratified by a vote of 649,307 to 152,629. The only significant opposition came from the Arkansas Education Association and the editorial page of the Arkansas Gazette, both of which said it would prove calamitous for the schools. The Gazette said that protections from massive tax increases could be achieved by lowering the uniform state assessment ratio of twenty percent and then gradually adjusting it to make it uniform and by allowing local governments to make tax-rate adjustments. The effect of Amendment 59 was felt most strongly in growing communities, where the schools, cities, and counties did not realize the normal tax growth from new property going on the tax rolls each year. It would take many years after the reappraisals for tax growth to normalize.
Confusion over how the amendment should be interpreted and applied produced several lawsuits. In one, Clark v. Union Pacific Railroad (1988), the court ruled that Amendment 59 exempted the railroad from certain property taxes. Opening his dissenting opinion, Justice Darrell Hickman made his widely repeated disparagement of the law as “the Godzilla of constitutional amendments.” He added: “Nobody knows what it means. It was the child of fear and greed.” He seemed to invite a lawsuit over its constitutionality. The court reconsidered the case and altered its opinion.
Amendment 59 and the court decisions on property valuation that spawned it were at the center of the landmark case on school-finance reform, DuPree v. Alma. The state argued that the statewide reappraisals ordered by the courts and Amendment 59 together would solve the problems of unequal educational opportunities, but the Supreme Court held that the reappraisals and millage adjustments under Amendment 59 would not bring about uniform funding and that the state would have to take further steps to see that funding by the state and local property taxes was equal and sufficient.
Three subsequent constitutional amendments dealing with personal and real property assessments and school finance—Amendment 71 in 1992, Amendment 74 in 1996, and Amendment 79 in 2000—supplanted the provisions of Amendment 59.
For additional information:
Clark v. Union Pacific Railroad, 294 Ark. 586, Arkansas Supreme Court (1988).
Public Service Commission v. Pulaski County Board of Equalization, 266 Ark. 64, 582 S.W. 2d., Arkansas Supreme Court (1979).
Little Rock, Arkansas
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