With the state budget certain to cause big problems for the new administration, a state judge’s ruling gave Gov.-elect John Bel Edwards a bit more breathing room this week.
The ruling dismissed a lawsuit by the Louisiana Chemical Association, whose members will have to pay an estimated $103 million in higher taxes because of action by the 2015 Legislature.
The association sued on the grounds that the temporary suspension of a 1-cent sales tax exemption on business utilities didn’t receive the required votes for passage in the state House of Representatives and was thus unconstitutional.
District Judge Michael Caldwell disagreed. “I think the procedure for adoption for this concurrent resolution was in accordance with the constitution,” he said.
Chemical association spokesman Rob Landry said in a statement the organization will review the judge’s decision “and evaluate our options before deciding whether to appeal.”
Whether the association does so, it served a good purpose in getting this issue settled before the new administration comes in on Jan. 11.
The budget malpractice during the administration of Gov. Bobby Jindal backed lawmakers into a financial corner earlier this year. They had to raise revenue quickly to balance the budget, as required by the Louisiana Constitution.
Because so many big tax exemptions and other special breaks had been passed in prior years, the main source of new revenues was the suspension of current business tax breaks. Lawmakers scaled back dozens of tax breaks to stop deep cuts to public health care services and colleges. Suspension of the business utility tax break expires in August of next year.
The decisions of the Legislature were much-criticized by business interests, but the reality is that cuts in revenues — business and individual tax breaks under Jindal — had reached a financial tipping point. In an emergency, the House had to act.
The Caldwell ruling addressed the constitutional complaint of business: The suspension bill didn’t receive support from two-thirds of House lawmakers.
The House and Senate took two votes each to pass the legislation. Both times, the Senate had more than a two-thirds vote for the measure. The House never reached that mark, which would have been 70 votes. The first House vote May 7 was 63-41, and final passage came with a 60-42 House vote June 11.
Then-Rep. Edwards voted with the majority on the tax issues.
A two-thirds vote is required to levy a new tax. The House argued that suspension of a tax break is not a new tax, in this case a tax originally levied a decade ago.
“Bottom line, they cannot use their suspension power to do something unconstitutional,” LCA’s attorney Linda Akchin argued in the case.
Caldwell said the constitution allows for the suspension of a law with the same votes as the law was passed. Since the tax break didn’t need a two-thirds vote to pass, the suspension of it doesn’t need a two-thirds vote, he said.
While the state’s budget situation is still parlous, the settlement of this issue does bring some clarity to the new administration’s tasks.