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|LABI's Juneau warns of tax increase|
The Louisiana Association of Business and Industry believes the state's fiscal situation and a proposal to raise Homestead Exemption will be key issues during the 2009 regular legislative session.
That was the message LABI President Dan Juneau delivered Wednesday at the West Monroe Convention Center. He appeared at a luncheon hosted by the West Monroe/West Ouachita Chamber of Commerce.
"First, the good news," Juneau said. "There's an $865 million surplus from the 2007-08 budget year, and the state Legislature will be looking at what to do with this surplus when they meet in Baton Rouge.
The constitution mandates that money be spent on specific areas of the budget, Juneau said.
"It must be spent to pay off the unfunded accrued liability of our state retirement system, pay off state debt and put into the highway priority system," he explained. "I think there will be a healthy debate about what to do with the surplus. Some folks in the Legislature want to spend it all and some don't want to spend any of it."
"Businesses across the country are hoarding cash and considering our outlook we might want to do that also," Juneau added.
Some of the almost $2 billion deficit in the proposed 2009-10 budget could be offset by the federal stimulus money the state is in line to receive, Juneau said.
"We're looking at hundreds of millions of dollars coming from the federal government and the Legislature should get some creative thoughts on how they do this," Juneau said. "If we just use it to patch up most of that budget deficit and keep going forward, all we are doing is kicking the can down the road for a couple of years."
While the state's "rainy day" fund balance stands at roughly $800 million, Juneau says it cannot be used to shore up the anticipated budget deficit for the 2009-2010 fiscal year.
However, some members of the Legislature are advocating doing just that, he said.
"The reason we can't do that is because the constitution stipulates the rainy day trust fund can only be used when you are in a budget year and the Revenue Estimating Conference certifies you had a shortfall in revenues over what was projected," Juneau said.
If projected revenues fail to meet expectations in the upcoming fiscal year and the Revenue Estimating Conference says the state is short on revenues, some of the of the rainy day trust fund money can be used to shore up the budget. The state can take up to one-third of the almost $800 million from the rainy day trust fund and "supplant the revenues that had fallen off for that budget year," according to Juneau.
"That will stop them from making mid-year budget cuts in the middle of that budget year," he said.
The issue of increasing Homestead Exemption most likely will be one that will be hotly debated during the regular session, Juneau said. Louisiana has the highest Homestead Exemption in the country, he said.
"The only state that ties us at $75,000 is the state of Mississippi," Juneau continued. "Every other state is below that and most states are drastically below that level of homestead exemption."
If Homestead Exemption is increased, it will not lower property taxes, he said.
"The people who are paying property taxes will have to pay higher property taxes," he said. "That is usually businesses, renters and other homeowners."
According to data compiled by the state Tax Commission, roughly $650 million of homeowners' property tax burden is shifted to businesses, renters and other homeowners due to the existing $75,000 Homestead Exemption.
"Increasing the Homestead Exemption is not the answer," Juneau said.
The Legislature will consider raising Homestead Exemption to $150,000 in some instances and up to $175,000 under other circumstances.
He said the Legislature also will consider tying Homestead Exemption to the consumer price index so it would increase every year, Juneau said.
"So every year the people unfortunate enough to have to pay property taxes in the state of Louisiana will pay a higher burden, and the business community pays the lions share of that, and the taxes will go up every year," he said.
"It would be the largest tax increase on business since 1982 when Homestead Exemption went up from $50,000 to $75,000," he said.