That was the message given Wednesday by the Louisiana Senate Finance Committee to skeptical local government leaders when the panel overwhelmingly approved the first revenue-raising measure of the 2015 session, a repeal of the state’s business inventory tax.
Sheriffs, parish presidents, assessors, police jurors and school system superintendents all testified against Senate Bill 177, which by scrapping the inventory tax would cost local governments about $500 million per year in tax revenue that they use for schools, police and other services.
“How are we going to fill the bucket?” asked Mike Waguespack, Assumption Parish’s sheriff, in a variation of a question asked repeatedly by the parade of local government officials.
No senator could explain how on Wednesday.
But state Sen. Robert Adley, R-Benton, the bill’s sponsor, and Finance Committee members assured them time and time again that the Legislature would be sure to find ways to provide local governments with enough money to offset not being able to assess the inventory tax.
“I give you my word that we will keep them whole,” Adley testified, adding that neither the Legislature — nor voters — would approve the inventory tax repeal if the state doesn’t replace the money that local governments would lose. SB177 is a constitutional amendment that would take effect only after approval by two-thirds of the House and the Senate and a majority of voters in October.
Other senators accepted Adley’s word as the Finance Committee approved his bill, 9-1, even as local government officials remained opposed to the measure.
“One day at a time,” said a relieved Senate President John Alario, R-Westwego, in an interview moments after the committee voted.
Alario’s initial revenue-raising plan was derailed Monday when a similar tax measure by Adley, Senate Bill 85, could not win approval from the Senate Revenue and Fiscal Affairs Committee. So Alario turned to Plan B, Adley’s SB177 before the friendlier Senate Finance Committee.
While the committee approved the bill, the strong opposition by local governments reflects the problems that state lawmakers are facing in trying to balance the budget this year.
“Now we wait for the House to begin sending us revenue measures so things can be a bit clearer for us,” Alario also said after Wednesday’s vote.
The House action will begin Monday before its tax-writing committee, Ways and Means, said its chairman, state Rep. Joel Robideaux, R-Lafayette.
“We’ll start hearing bills to decide whether we’re going to invest in higher education or in all of the tax expenditures that we have been funding,” Robideaux said in an interview.
He said his committee will hear testimony from supporters and opponents of the various tax measures on Monday and Tuesday and then vote on them.
Robideaux’s comments on the choice faced by legislators exemplifies the larger debate in the state Legislature: After seven years of championing tax breaks for business and tax cuts for individuals under Gov. Bobby Jindal, they are admitting that they have dug such a deep hole that they have to begin going in the opposite direction this session.
Spurring that debate are the big cuts in state aid to colleges and universities approved by the Legislature over the past seven years at the same time that tax breaks for business have grown exponentially — from $207 million in 2004 to $1.08 billion in 2014 for six major taxes alone, The Advocate reported late last year.
Meanwhile, of the 87 corporations with the highest revenue in Louisiana in 2012, only 22 of them actually paid corporate income taxes in Louisiana, a recent study by the state Department of Revenue found.
The Legislature is facing a $1.6 billion deficit next year if it maintains spending at the current level. Failure to fill that gap, Republicans and Democrats agree, will mean the closure of college campuses and some state hospitals or clinics.
“I know you have a tough job, gentlemen,” Whitney Joseph Jr., the assessor of St. John Parish, told the Senate Finance Committee members, as he asked them to oppose Adley’s bill.
In pleading for it, Adley told the committee members that they had to start somewhere to raise revenue and that this was the best idea anyone has suggested. Adley joked that he had become a “stepchild” for upsetting local governments and that he no longer had fun in the bedroom because of the cuts to higher education. His wife, Claudia, is an ardent LSU supporter and is a newly appointed member of the university Board of Regents.
The inventory tax is an unusual levy because businesses pay it as part of their property taxes to local governments, and then the businesses turn around and get a dollar-for-dollar credit for those taxes from state government.
That’s why repealing the inventory tax would be costly to local governments but produce big savings to state government.
The debate over whether to repeal the inventory tax before the Senate Finance Committee revealed a sharp split between the state’s biggest business groups and the local government officials, who repeatedly argued that the state’s budget shortfall is caused by businesses getting too many tax giveaways.
“We can’t continue to give it all away,” said Tommy Roussel, who is president of St. James Parish.
Roussel and other local government officials said repealing the inventory tax would force them to raise property taxes on homeowners and businesses to make up the lost revenue if they wanted to keep the same level of services — unless the state comes through with an offsetting amount of aid.
“How many times in the past did the state let down local government?” Roussel asked.
Follow Tyler Bridges on Twitter @TegBridges. For more coverage of the state capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.