This year there are only four constitutional amendments on the fall ballot, a thankfully small number considering what we have seen in years past. Each of them represents examples of why Louisiana’s constitution has become bloated with too much detail, and repeatedly requires amendments to deal with the often mundane issues that tend to arise.
That’s one of the reasons CABL, through its RESET Louisiana partnership with the Public Affairs Research Council and the Committee of 100 for Economic Development, supports a much leaner constitution that is shorter on detail, but more appropriate as a modern framework for governing.
This year we support two of the amendments and have taken a neutral stance on the others.
Amendment #1 Property Tax Exemption for Offshore Goods
Generally, property is taxed by local governments in Louisiana to provide needed resources for roads, schools, and other basic governmental functions. But as with virtually every tax, there are exemptions, and these are spelled out in the state constitution.
This amendment would create a new constitutional exemption for goods that are held or stored in Louisiana, but headed for the Outer Continental Shelf (OCS).
But as with so many proposed amendments to the Louisiana constitution, it’s more complicated than it might appear. The U.S. Constitution, through its “commerce clause,” says states cannot regulate interstate commerce which would include not being able to tax property that is simply passing through a state destined for another state or country.
Because of this, the practice has been that tools, machinery, and equipment stored in Louisiana, but intended to be shipped offshore for drilling and production in the Gulf of Mexico, were not taxed. This was the case for many years. However, more recently, some assessors in coastal parishes have begun to question that practice and started to tax this property. As one might expect, this has caused tremendous concerns in the oil and gas industry. They fear that this relatively new taxation will have a negative impact on their ability to stage, maintain, and transport large amounts of needed equipment for oil and gas production in the Gulf.
To date there have been no definitive court rulings on this issue. This amendment would clarify in the state constitution that regardless of how the federal constitution is interpreted, Louisiana would exempt this type of property from taxation.
Comment: This is a case where there has for a long time been an interpretation, or at least an understanding, that various items destined for oil rigs in the OCS fell into the same category as other types of goods that travel through states to another destination without being taxed. Now some assessors have challenged that thinking and this has created a taxing question of some significance to a handful of parishes, the offshore oil and gas industry, and the businesses that support it.
Usually, tax disputes like this are resolved in the courts. But this amendment seeks to bypass that possibly costly and lengthy process, by clearly providing an exemption for these types of goods. CABL is usually wary of state government limiting the ability of local governments to raise their own revenues. We see this most often with the property tax. And we are reticent about continuously amending and reamending our state constitution, often on issues of relatively low importance.
But in this case, the property in question has generally not been taxed for decades and this comes at a time when the offshore oil and gas industry and the communities that support it are struggling. And while it’s unclear exactly what dollar amounts we are talking about, it could be sizable. If this amendment passes, what is the potential loss of revenues to local governments? Conversely, what will it cost the industries and what impact will it have on the local economies if it fails? We don’t know. There are also concerns about what other types of exemptions might be coming next if this amendment wins approval.
As can be seen, there are a number of issues at play with this amendment. We support flexibility for local governments, but we are also concerned about the impact on many businesses both large and small from what for them is essentially a new tax.
Amendment #2 New Dedications from the Millennium Trust Fund
The Millennium Trust Fund was established in 1999 to place revenues received from the state’s share of the national tobacco settlement in permanent trust. The earnings from the trust are dedicated to three areas: TOPS, health care, and education through what’s called the Education Excellence Fund. The revenues from that fund are generally targeted to schools to provide educational enhancements in specified areas such as early childhood education and remediation. In addition, several special schools that are outside the regular school system, but created by the Legislature, receive constitutionally dedicated funding of $75,000 per year, plus some per pupil costs.
These schools include the Louisiana School for Math Science and the Arts, the New Orleans Center for the Creative Arts, the Louisiana School for the Deaf and Visually Impaired, and the Louisiana Special Education Center. This amendment would add additional schools to that list – the Thrive Academy and BESE approved lab schools operated by universities – as well as the Louisiana Educational Television Authority which operates Louisiana Public Broadcasting. Each would generally receive a dedicated appropriation of $75,000, similar to what the other schools are allotted.
Comment: It has long been argued that the lab schools should have been a part of the original dedication, but were left out because of an oversight. The Thrive Academy is a unique public boarding school in Baton Rouge geared toward students with special needs. It was authorized by the Legislature as a state school in 2016 and thus, wasn’t in existence when the Millennium Trust Fund was created. LETA through LPB develops and distributes a wide variety of high-quality educational programming and classroom resources. It is in the same budget category as the special schools that do receive funding from the Education Excellence Fund.
For many years CABL has been at the forefront of arguing against adding more dedications to the state constitution. It already contains too many dedications that tie the hands of legislators when it comes to budgeting. This case is slightly different, however. The funds that would be going to these additional schools and LETA are essentially a dedication within a dedication. In other words, the tobacco settlement dollars are already dedicated to the Education Excellence Fund. Adding these schools and LETA to the list of schools that already receive an appropriation from the fund has no impact on the state budget or the State General Fund.
One might look, as CABL has argued in the past, at how all the dollars from the Millennium Trust Fund are allocated and ask whether two decades later they are meeting our highest current needs. But there has been no move to do that and this amendment doesn’t address that either. In the meantime, this proposed amendment does add a degree of fairness by treating all of the entities that fall into the general category of “special schools” with some equity at no cost to the State General Fund.
Amendment #3 Extending Authority of the Board of Tax Appeals
The Board of Tax Appeals, which has been in place since 1937, effectively operates as a state-level tax court. It is made up of three attorneys, appointed by the Governor and confirmed by the Senate. At least two of the members are required to have experience in tax law. The board serves as an alternative to the courts for taxpayers seeking to settle disputes with state or local tax collectors in determining what taxes they owe.
Decisions of the board can be appealed just like regular judicial cases to the state appellate courts. While the board has jurisdiction over a variety of matters involving taxes and fees, it is not involved in cases involving property taxes or disputes that involve a constitutional issue. This amendment would allow the board to issue rulings on constitutional issues as well.
Comment: The whole point of the Board of Tax Appeals is to reduce the cost and expedite the resolution of tax disputes. By giving the Board authority over constitutional matters it gives taxpayers more flexibility in how they choose to adjudicate their tax disputes. If this amendment passes, they retain the right to have their cases heard in district court instead of by the board and they can still appeal to a state appellate court if they disagree with the board’s decision. This amendment passed with virtually no opposition in the Legislature and had the support of the business community and local governments.
Despite that, it should be noted that some express concerns about granting additional authority to the Board of Tax Appeals. They point out that the board effectively acts as a court even though none of its members are elected the way judges are. Instead, they are political appointees which gives the governor a great deal of authority. They also suggest that on constitutional matters it’s a virtual certainty that a decision by the board will be appealed to the courts anyway.
The essential question is whether to give taxpayers the option of having their constitutional disputes heard by the Board of Tax Appeals, or since these are usually weightier matters, they should be required to go to district court. We believe the additional option is a good idea.
Amendment #4 Property Tax Exemptions in New Orleans to Promote Affordable Housing
New Orleans, like many cities, has a problem with a lack of affordable housing. It has been looking for some time at ways to protect residents from skyrocketing housing costs in some neighborhoods and ensure that rents don’t go so high that they discourage people from staying or make it difficult for low-to-moderate-income people to come to the city.
To address this, it is seeking a new property tax exemption which it would utilize to create more opportunities to develop and restore affordable housing units. But the city cannot create such an exemption on its own. All property tax exemptions are required to be in the constitution and to create this one, even though it only impacts Orleans Parish, requires the statewide and local passage of a constitutional amendment. Local governing authorities such as the sheriff, school, board and other taxing districts would have to absorb the loss of any revenues as a result of the exemption and property owners would see no increase in their taxes.
Comment: One of the arguments for a constitutional convention is to remove obstacles to local autonomy like the one New Orleans is facing with its attempt to use a property tax exemption as an incentive for what it believes will result in improvements for the community. The amendment itself is light on how the program would work. It does exclude developments with more than 15 residential units as well as short-term rentals. And it gives the local government a wide degree of latitude in how it would administer the exemption.
It should be noted that some in the local community have expressed concerns about this amendment. They worry that the plans that have been offered to date lack specificity, there is no cap on the amount of the exemptions, local agencies are already strapped for operating funds so this could further hamper their effectiveness, and there are already a number of existing programs that could be utilized to address affordable housing issues.
From CABL’s perspective, we acknowledge the needs of local governments to work with their communities to develop solutions to the challenges they face. At the same time, we have various concerns about this amendment and the precedent it would set by giving one jurisdiction a property tax exemption that is not applicable anywhere else in the state.
As with Amendment #1, there are a number of issues to consider. In weighing them all we found persuasive arguments on both sides, but none sufficient to make a definitive recommendation.
For more information check out the PAR Guide to the 2019 Constitutional Amendments.