This year’s Question 5 asks voters whether to update a law that allows taxpayers to get money back from the state.

Back in 1986, Massachusetts voters passed another ballot measure to create the law, known as Chapter 62F, which capped how much tax revenue the state can collect in a fiscal year. And it requires that the state give taxpayers rebates if tax collections exceed a threshold based on a complicated formula tied to wage and salary growth.

The law was triggered once in 1987, but then faded from public memory. That is until 2022, when a pandemic-era revenue surge caused the state to hit the cap a second time, surprising many top lawmakers. That fall, the state’s Department of Revenue sent a total of $3 billion in refund checks and direct deposits — ranging from hundreds to thousands of dollars — back to taxpayers.

Now, this year’s ballot question asks voters to approve or reject a change to Chapter 62F. Both proponents and opponents agree the proposed change would lead to the state providing more rebates, more frequently. But they differ over whether that’s a good thing for the state’s finances.

The clash over the ballot question has shaped up to be a classic campaign fight between business groups and unions. There are echoes of ballot measure fights over the 2022 “millionaire’s tax,” which passed, and the 2016 charter school expansion, which failed. (Unions backed the former and opposed the latter, and vice versa for business groups.)

What would Question 5 do?

The question proposes to change the formula for the cap in a few key ways.

Currently, each year’s fiscal cap is calculated based on the previous year’s cap. This means the state uses a projection of what it may collect. However, the state’s true revenue rarely matches that amount. If passed, Question 5 would change that, making it so the cap is based on the state’s actual tax collections from the previous year.

It would change the formula to account for revenue from the so-called millionaire’s income surtax passed in 2022. Currently, that money isn’t included. The question would also get rid of a few technical rules that give officials flexibility in calculating the year-to-year cap.

Taken together, those changes would put strict limits on annual revenue growth, according to an analysis from Gov. Maura Healey’s budget office.

“As a result, the proposal would reduce the amount of money available to support the state budget, which includes local aid for schools and municipal budgets,” the analysis said. It would also reduce deposits into the state’s $8.2 billion “rainy day fund,” which is meant to help Beacon Hill budget writers weather economic downturns, the analysis added.

If Question 5 passes, a Tufts University think tank projected that taxpayers would get eight to nine rebates over the next 20 years.

Tufts’ Center for State Policy Analysis, which has not taken a position on the question, ran several simulations and found that future refunds would amount to “a few hundred dollars in the early years and roughly $500-$600 by the 2040s.” That would average out to about $200 to $250 per year, the center said.

Question 5 supporters estimate that taxpayers would’ve received 24 rebates in the last 40 years, if their proposed changes had been in place.

If voters pass the ballot measure, it goes into effect on July 1, 2027, the start of the next fiscal year.

What do supporters argue?

With state spending growing faster than the rate of inflation, backers say the proposal’s changes will shore up “fiscal guardrails” and help “ensure government growth reflects what taxpayers can afford” as residents struggle with the high cost of housing and groceries, according to a summary of their arguments from the secretary of state’s office.

The Pioneer Institute, one of the groups supporting the measure, says it would also place “greater discipline” on Beacon Hill spending.

“Restoring teeth to the state’s 62F revenue cap—by requiring more frequent refunds when revenues surge—would return billions to the taxpayers who drive that growth,” the group said when it signed on to the initiative last year.

However, if Question 5 passes, the law wouldn’t necessarily only be triggered when revenues surge, but also in “some years with less-than-stellar revenues,” according to the Tufts analysis. Still, the analysis said that one of supporters’ strongest arguments is that “the link between revenues and refunds is already broken – only in a way that serves the state rather than taxpayers.”

Funders of the ballot question include business groups, like the CEO-backed Mass. Competitive Partnership, whose membership includes New England Patriots owner Robert Kraft and Bank of America CEO and Chair Brian Moynihan.

The same groups backed another ballot question to cut the state income tax down to 4% from 5%, but the state’s Supreme Judicial Court in June struck it from the November ballot, citing a “misleading” summary prepared by Attorney General Andrea Campbell’s office.

What do opponents argue?

Opponents of the Chapter 62F ballot question warn of fiscal chaos if the measure passes.

“The result will be often unpredictable budget cuts and the abandonment of planned public investments,” according to the Mass. Budget and Policy Center, a think tank whose board includes a top official at a union opposed to the question.

If passed, opponents say the measure will lead to cuts to education, public safety and healthcare. They argue it would bring about layoffs for teachers and police, as well as the closure of hospitals and nursing homes.

Had rebates been issued multiple times in the last 40 years, the policy center said state revenues would have lost $13 billion.

They also cautioned that, under the proposed formula changes, Chapter 62F could also be triggered after an economic recession. That would “impair the state’s ability to make investments at just the time when they are most needed to jumpstart the economy,” Phineas Baxandall, a policy expert for the Mass. Budget and Policy Center, told lawmakers in March.

The independent Tufts analysis explained that the formula change could lead to situations in which “large refunds are sometimes distributed when the economy isn’t particularly strong” and “small or no refunds” in better economic times.

The organizations funding the opposition include unions, which represent public sector employees and rely in part on state government spending. Top funders of the “No on 5” campaign include SEIU MA State Council, 1199 SEIU, SEIU Local 50 and the Massachusetts Teachers Association.

What happens next if it passes?

State lawmakers, who would be forced to grapple with any new budgetary complications resulting from the initiative, have expressed their distaste for ballot questions generally, and Chapter 62F specifically. (House Speaker Ron Mariano told CommonWealth Beacon this summer that he’d “love to be able to” get rid of Chapter 62F.)

Beacon Hill leaders have rarely outright rejected voter-approved ballot questions, but they have tinkered with the details. Take, for example, the 2016 marijuana legalization question that was reworked to set up a regulatory bureaucracy closer to the commission overseeing casinos. And they’re already eyeing changes to soften the potential impact of Question 5.

Lawmakers are working on legislation that would keep Chapter 62F in place but limit the number of rebates compared to what the ballot question would allow.

Jason Lewis, a Democratic state senator who is pushing that legislative effort, said in July that rebates would have occurred in 1987 and 2022 under his proposal, though the amount that would have been sent out to taxpayers was not mentioned, according to State House News Service. The proposal was part of an economic development bill that is still being ironed out by House and Senate negotiators.