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Far From Short and Obscure

October 12, 2015

By: Stephen Waguespack

Napoleon Bonaparte once said, “A Constitution should be short and obscure.”

If he were alive today and able to read our current long and substantive Louisiana Constitution now, he would likely not be pleased.

Our first state Constitution was written in 1812, largely rewritten at least 10 times since then and has been amended in bits and pieces numerous times throughout the years. The last wholesale re-write was pushed by then-governor Edwin Edwards in 1974 during the Constitutional Convention of that year. All of the current candidates for governor have said they will propose additional amendments to this document next year.

Our state Constitution has constantly evolved over time and will continue to do so in the years ahead. In fact, four proposed amendments await voters as they head out to vote in two weeks.

The Louisiana Association of Business and Industry (LABI) has taken an official position on two of the four Constitutional Amendments below.

CA No. 1 – Budget and Transportation Stabilization Trust

LABI takes no position on Constitutional Amendment No. 1, but did work closely with the Legislature in the recent session to remove our concerns with the originally proposed language.

The Louisiana Constitution provides for a Budget Stabilization Fund, which is often referred to as the “rainy day fund,” since a portion of it can be applied toward offsetting a budget deficit when certain circumstances arise. The source of monies for the fund includes non-recurring revenues and a portion of mineral revenues. Deposits into the fund cease once it reaches 4 percent of the prior year's state revenues. The cap for FY 2014-15 was $811.4 million and the current balance in the fund is approaching $515 million.

This proposed Constitutional Amendment renames the fund the Budget and Transportation Stabilization Trust and creates two sub-funds within it. Mineral revenues are to be deposited into the Budget Stabilization Sub-fund until its balance reaches $500 million. Then, up to $500 million of mineral revenues are deposited into the Transportation Stabilization Sub-fund. The Transportation Stabilization Sub-fund is to be used for the state highway program, but at least 20 percent is to be used for the Louisiana Intermodal Connector Program designed to tie together various modes of transportation such as airports, ports and rail facilities.

Constitutional Amendment No. 1 will not change current provisions regarding the cap, the deposit of non-recurring revenues, or conditions regarding the use of monies in the fund. The proposed Constitutional Amendment interrupts the mandatory deposit of mineral revenues into the trust in the same year, and in the fiscal year after, when funds are used from the trust to offset a budget deficit.

Finally, under the present Louisiana Constitution, there is a determination of a mineral revenues “base.” Mineral revenues above the base amount are deposited into the Budget Stabilization Fund. Any increase in the base amount decreases the amount deposited into the Budget Stabilization Fund. The proposed Constitutional Amendment allows the base to be increased every five years instead of every 10 years. However, increases in the base will still require a two-thirds vote of the Legislature and remain limited to 50 percent of the growth in the consumer price index for the preceding 10 years.

CA No. 2 – State Infrastructure Bank

LABI supports Constitutional Amendment No. 2.

The Louisiana Constitution prohibits the state’s funds, credit, or property or any of its political subdivisions from being loaned, pledged, or donated to or for any person, association, or corporation, public or private. However, there are a dozen specific exceptions to this prohibition.

Constitutional Amendment No. 2 would add another exception to this list by authorizing the investment of public funds to capitalize a state infrastructure bank to be used solely for transportation projects. Act 431 of the 2015 Regular Session established the Louisiana State Transportation Infrastructure Bank. If the Constitutional Amendment is adopted, public funds invested in this bank can be used to assist in financing eligible public transportation projects in the state. Considering the tremendous challenge we face with our infrastructure, this is a productive proposal.

CA No. 3 – Matters Considered During Fiscal Sessions

LABI takes no position on Constitutional Amendment No. 3.

The Louisiana Constitution provides that during any session convening in an odd-numbered year, commonly known as a “fiscal session,” the Legislature cannot consider a bill unless it is for the purpose of enacting the General Appropriation Bill or the capital outlay budget; making an appropriation; levying or authorizing a new tax; increasing an existing tax; levying, authorizing, increasing, decreasing, or repealing a fee; dedicating revenue; legislating with regard to tax exemptions, exclusions, deductions, reductions, repeals, or credits; or legislating with regard to the issuance of bonds.

Constitutional Amendment No. 3 would replace the phrase “dedicate revenue” with the broader phrase “legislate with regard to the dedication of revenue.” It would also replace the phrases “levy or authorize a new tax; increase an existing tax” and “legislate with regard to tax exemptions, exclusions, deductions, reductions, repeals, or credits” with the broader phrase “legislate with regard to taxes.” Finally, the proposed Constitutional Amendment would specifically add legislating “with regard to rebates” to the subject matters that can be considered during a fiscal session.

CA No. 4 – Ad Valorem Tax Application for Public Entities in Other States

LABI opposes Constitutional Amendment No. 4.

The Louisiana Constitution authorizes the imposition of ad valorem property taxes by the state and its local governments but provides an exception for “public property held for a public purpose.”

Recently, there was a court decision that the city of Memphis, Tennessee, in storing natural gas owned by the city of Memphis in a storage facility located near Epps, La., fit that exception, resulting in a loss of ad valorem tax collection in excess of $400,000 to the parish of West Carroll.

The proposed Constitutional Amendment would specify that the “public property” exception does not apply to land or property owned by other states or their political subdivisions. LABI does not oppose this concept. However, the proposed amendment fails to extend this same exception to property owned by foreign countries. In addition, poor wording of the amendment language could have the unintended consequence of other states or their local governments – that would be required to pay property tax if the amendment passed – beginning to use Louisiana’s inventory tax credit, increasing the cost of the credit to the state.

These four amendments are not the first ones to be proposed to our Constitution, and they surely will not be the last. Whether they are approved and end up making our Constitution even less short and obscure – much to Napoleon Bonaparte’s chagrin – is entirely up to you.