EDITOR’S NOTE:

The Public Affairs Research Council of Louisiana has prepared a guide for voters statewide who will be asked to decide yes or no on six proposed amendments to the Louisiana Constitution on the Nov. 8 ballot. Amendments 2, 3 and 5 are particularly significant because of their impact on state policy. They address who will set college tuition levels, the rate and deductions for corporate income taxes and a new trust fund to address state revenue surges.

This PAR Guide, slightly abridged for space purposes, to the 2016 Constitutional Amendments provides a review of each item in the order they will appear on the ballot. The guide is educational and does not recommend how to vote. It offers concise analysis and provides arguments of proponents and opponents.

No. 1 Establishes new requirements for local registrars of voters

m Yes

m No

A VOTE FOR would require standards of professional and educational experience for local registrars of voters and more public disclosure in their hiring process.

A VOTE AGAINST would leave the existing job requirements in place and allow local governing authorities greater discretion when filling registrar vacancies.

• ARGUMENT FOR: As technology continues to evolve, registrars of voters will need to have the skills and aptitude necessary to utilize innovative tools and instruments on the job. Voting and voter registration is becoming increasingly digital in nature and we must ensure that individuals in these positions can maintain voter registration lists, register voters appropriately, appoint and train staff and volunteers, and help conduct early voting. Some parishes have not posted jobs appropriately or have used nepotism to fill openings. These qualification requirements will help shake Louisiana’s historic reputation of patronage and incompetence.

Requirements outlined in the legislation are not arbitrary. The subcommittee created by House Resolution 94 during the 2015 regular session received input from the Secretary of State, the commissioner of elections, the attorney general, the Louisiana Registrars of Voters Association, the Police Jury Association of Louisiana, and others in order to produce recommendations that were fair and fitting for the duties of registrars of voters and the expectations of local governing authorities responsible during the hiring process. The package of legislation was unopposed.

• ARGUMENT AGAINST: Although the Secretary of State and other stakeholders were part of the dialogue when the subcommittee recommendations were crafted, work requirements imposed by the new legislation tied to the amendment may still set the bar too high and prevent competent and capable individuals from serving as parish registrars. This problem may be particularly problematic in rural parishes where registrar offices consist of just the registrar and one assistant; because education and work requirements are lower for those having previously served in a registrar’s office, an assistant may have a serious and unfair advantage when a sitting registrar retires.

This amendment may be unnecessary as registrars already have access to appropriate training after being appointed to the position. This training program is fairly intensive, requiring a minimum of 12 courses of 12 hours in length within five years, maintenance of a yearly rating of “excellent,” and work experience requirements. Registrars and staff are schooled in strategies necessary to perform their duties effectively. If these educational standards are not met within a five-year time frame, the registrar will lose certification and the additional pay associated with it.

 

No. 2 Tuition and fee autonomy to college management boards

m Yes

m No

A VOTE FOR would let higher education management boards set annual tuition rates and fee amounts for colleges and universities without legislative approval.

A VOTE AGAINST would preserve the state Legislature’s authority over tuition and fee levels.

• ARGUMENT FOR: Louisiana remains one of just two states that do not allow colleges to make autonomous decisions regarding tuition and fee levels at their respective universities. It is the only state that requires a two-thirds vote of the Legislature to change tuition and fees. Because the Legislature is sometimes slow to act, public universities across the state are often unable to price themselves in a competitive manner or raise enough tuition revenue to deliver appropriate education services to their students. Among the many considerations, the state’s colleges must factor rising competition for students, mounting competition to recruit and retain superior faculty,

growing expectations from industry for better prepared graduates, annually escalating pension liability payments, and the prospect of the state’s general fund appropriation decreasing in the future. The Legislature may also allow political considerations to outweigh academic concerns when deliberating on tuition rates.

Louisiana can expect colleges and universities to be more efficient. Because Act 18 of the 2016 Regular Session sets TOPS awards at 2016-2017 levels, colleges will need to stretch dollars as far as possible before increasing tuition for students now paying more out of pocket. If granted the freedom to set tuition rates, colleges may elect to charge students in some degree programs different rates per course hour than those in other programs. The ability to impose differential tuition rates on degree programs with higher instructional costs (e.g., business, health care and engineering programs) will allow schools to match revenues more effectively with costs, improve program quality, and respond to market demand for various types of college degrees. For those who argue higher education should be more business-like, this authority would force colleges to reassess efficiency across their operations.

• ARGUMENT AGAINST: There is little evidence in recent years that the Legislature would not raise tuition when appropriate. As stated earlier, tuition has almost doubled since 2007. If colleges still feel that tuition levels are too low, they can make a case to the Legislature.

The state Legislature has a responsibility to ensure that all Louisiana children have access to a quality and affordable learning experience. Instead of passing on tuition-raising autonomy to the boards of supervisors, legislators should focus on increasing direct investments to public colleges and universities to ensure that schools are able to provide the best education possible rather than allowing colleges to become less affordable.

Louisiana is not as different from other states as it might first appear. While Louisiana might be only of one of two states that directly controls tuition, other state legislatures exert indirect influence.

Giving boards the ability to differentiate tuition rates between degree programs may also put valuable degrees out of reach for low-income and minority students. As the price of tuition increases in these fields, demand may drop and less revenue may actually materialize. Competitive programs in relatively more expensive programs such as business, engineering, and health care might also become further dominated by students from affluent families and could run counter to the state’s workforce needs.

 

No. 3 Eliminates federal income tax deduction for corporations on state tax returns and sets a flat rate

m Yes

m No

A VOTE FOR would eliminate the deduction for federal income taxes paid by corporations when calculating state income taxes while triggering a flat corporate tax rate of 6.5-percent.

A VOTE AGAINST would allow corporations to continue receiving a state income tax deduction for federal income taxes paid and allow the existing corporate tax rates and brackets to remain.

• ARGUMENT FOR: A core principle of tax reform is to broaden the tax base by having fewer deductions and exemptions, while lowering the rates. This amendment eliminates one of the biggest corporate income tax deductions while lowering the top rate. As one of just three states that offer a full federal corporate income tax deduction, eliminating the deduction would bring the state in line with standards observed around the country.

The state’s highest tax rate is currently 8%. That rate is higher than most other states, particularly in the southeast and central regions. Dropping the rate to 6.5% would make the state more competitive at the national level. While 27 other states use a corporate flat tax, just six (Montana, Utah, South Carolina, Florida, Arizona, and Colorado) would have lower rates than Louisiana after adoption of the amendment. The elimination of lower tax brackets and rates may mean some larger corporations would enjoy a tax break at the expense of some smaller corporations. However, most small business owners would continue to avoid the tax altogether as a large majority organize as limited liability companies (LLCs) and report business income as individual income instead.

Eliminating this deduction also distances our corporate tax system from the federal system. Under the current system, if federal taxes increase, businesses can take larger state income deductions. Thus, state revenue could decline because of actions outside of the state’s control.

• ARGUMENT AGAINST: Few understand the real impacts of the proposed amendment on the Louisiana business climate. No action should be taken to raise taxes on those corporations making relatively less income currently and thus being taxed at the 4%, 5% and 6% levels. Some of these businesses do not have the luxury of building up large net operating losses to later claim against their taxes. Also, the amendment serves no purpose in either increasing or decreasing state revenue in any substantial direction.

The timing of the proposal is poor and should be reconsidered at a later time, if at all. This should be brought as part of an overall package that includes personal income tax and sales tax reforms. While estimates are difficult to make because of the volatile nature of corporate income tax, this bill would increase taxes on some corporations. Elimination of the federal income tax deduction for individual filers, many of which are LLCs and other business entities, was originally part of this initiative but the Legislature left that part out. Singling out C-corporations is unfair.

 

No. 4 Property tax exemption for surviving spouses of persons killed in the line of duty

m Yes

m No

A VOTE FOR would give surviving spouses of military, fire protection officers and law enforcement personnel who died while on duty a full property tax exemption on their home.

A VOTE AGAINST would leave existing ad valorem property tax exemption levels and eligibility requirements in place.

• ARGUMENT FOR: This amendment is a good gesture of support towards widows and widowers with spouses that have paid the ultimate sacrifice to protect our country and local communities. Surviving family members may also have a difficult time making ends meet after losing a substantial portion of the household’s annual income. The impact on local taxing bodies would be minimal as the population of eligible recipients is small.

• ARGUMENT AGAINST: Although this expansion of the homestead exemption is relatively minor, the combination of this and other special homestead exemptions has a large impact on the local revenue base. While no single exemption is a significant problem, the trend toward creating more of these exceptions adds up to a negative impact and should be stopped.

 

No. 5 Creates a Revenue Stabilization Trust Fund

m Yes

m No

A VOTE FOR would create the Revenue Stabilization Trust Fund to receive a portion of revenues from corporate and mineral taxes and to spend the money on infrastructure and pension liabilities.

• A VOTE AGAINST would continue to allow corporate tax and mineral revenue above a certain threshold to flow into the state general fund for appropriation by the legislature.

• ARGUMENT FOR: Louisiana’s spending problem stems from the fact that the Legislature appropriates nearly every dollar it receives every fiscal year. This amendment will stop that practice by introducing forced fiscal restraint as it relates to the volatile revenue sources of corporate income tax and mineral revenues. It will have the added benefit of recognizing that credit rating agencies assess the strength of Louisiana’s trust funds when calculating the state’s fiscal health and the reliability of the state to make good on its commitments. Irresponsible spending and fiscal mismanagement could cause these entities to further downgrade the state’s bond ratings, driving up the cost of borrowing money to finance important programs or long-term construction projects.

Paying down state retirement unfunded accrued liabilities would reduce the amount needed to keep these systems solvent in the future and remove a substantial drag on Louisiana’s economy. This amendment helps pay down retirement liabilities and shows credit rating agencies that the state is prepared for economic cycles. It also would show that the state has a plan for stabilizing the revenue made available for general fund expenditure in a given year. It sets aside money in the long term for capital improvements and transportation infrastructure without losing sight of the potential need for emergency spending, all seen as positives by rating agencies.

• ARGUMENT AGAINST: This proposal further ties the hands of the people’s elected legislators and reduces the flexibility needed to fund priorities appropriately. In order to govern effectively officials need every tool possible at their disposal to capitalize on opportunities or address downturns.

If the Legislature is serious about making government more transparent and stabilizing the state’s budget, simpler solutions exist that do not require the creation of yet another trust fund that would further complicate an already convoluted system of transfers, thresholds, and other mechanisms. Reforming the existing Budget Stabilization Trust Fund by removing the cap on the total fund balance or adjusting the types of revenue channeled into the reserve may be more prudent. This amendment is an overly complicated fix.

Additionally, the lack of limitations on what might constitute an “emergency” and the two-thirds vote authorization to sweep money from the fund undermines the ability of this account to serve its stated purpose. When lawmakers are forced to cut popular programs, raise taxes, or tap into reserves of one-time money, transferring cash from accounts such as the Revenue Stabilization Trust Fund would likely be the path of least resistance. 

The proposal put forward in this amendment fails to establish the trust fund needed to promote real fiscal responsibility.

 

No. 6 Adjusts threshold for tapping protected funds

m Yes

m No

A VOTE FOR would provide legislators a new way to tap into constitutionally protected funds during

revenue downturns and also extends protection to five existing funds.

A VOTE AGAINST would keep in place the existing trigger which allows the Legislature to tap into otherwise protected funds.

• ARGUMENT FOR: While it is important to have a trigger high enough to discourage legislators from using protected funds in every instance a budget deficit occurs, the existing trigger for handling ensuing year shortfalls is too high and was crafted in such a manner that it was never intended to be activated. Because official forecasts for the current fiscal year and subsequent fiscal years are often revised up or down at the same time, obtaining a 1% drop in projected revenue between the two forecasts would be unusual. The new trigger threshold remains high but allows public officials to access these dedicated funds in more realistic scenarios.

Granting access to most constitutionally and statutorily protected funds during severe budget deficits would also allow the Legislature to more equitably distribute necessary cuts across a variety of state programs and reserves. Because many parts of the state budget have been locked up through laws or the state constitution, deep cuts must often be made to health care services, higher education, and other parts of the discretionary budget. Spreading the pain of cuts across several areas would reduce the severity of the reductions made to any one particular component of the budget. The adoption of this amendment would also buy the Legislature more time to produce comprehensive budget solutions in years in which large budget deficits exist but the Legislature has no way to raise substantial amounts of additional revenue. Because tax reform bills can only be considered in odd years or in extraordinary legislative sessions, using funds from a variety of state accounts would give lawmakers more flexibility to protect Louisiana’s institutions and programs and prevent deep and profound cuts to a handful of important budget items like higher education.

• ARGUMENT AGAINST: This amendment discourages the development and adoption of long-term and comprehensive budget reform as it allows legislators to rely on additional one-time money to paper over underlying systemic problems with the state’s recurring revenue streams and spending patterns. Giving officials another instrument to kick the can down the road should be avoided. Leaving the existing trigger in place will preserve the integrity of dedicated funds and force officials to find other means of reducing budget gaps.

There is also uncertainty about what would happen if revenue forecasts changed multiple times during the year. Would funds still be available for sweeping even if a later forecast did not project a revenue shortfall for next year? Without a clear answer, future legislatures and governors would probably take the most flexible interpretation possible.

Tapping into protected accounts is also a rejection of the primary concerns Louisiana voters have expressed through the adoption of previous constitutional amendments. By electing to shield some funds from the threat of discretionary cuts, constituents have voiced their support for various causes and initiatives and told lawmakers to look elsewhere to plug budget shortfalls. Adoption of this amendment would allow the Legislature to more frequently take money from these priorities.