News + Notes

When dedicated taxes lock up options

Conventional wisdom in politics dictates that, in an election year, candidates will play it safe. Don’t expect any major initiatives or innovations because there is little to be gained politically by rocking the boat. But for many Lafayette residents, it feels like the boat is slowly sinking, and there is only so much time and so many ways to plug the holes. With constant pressure on infrastructure and drainage, it’s understandable why people are frustrated that problems aren’t fixed more quickly. However, those problems take money to fix.

One obvious option is to raise additional revenues, but Lafayette voters have proven unwilling to pay more taxes. In the 2017 and 2018 elections, voters rejected taxes for schools, libraries, the courthouse, the jail, the sheriff and rural fire protection. Meanwhile, the economic crunch of the past few years limited expanding business and sales tax revenues. The parish general fund’s primary revenue source is sales taxes collected in the unincorporated areas of the parish. As surrounding municipalities have annexed unincorporated areas, the general fund has shrunk. While there has been a recent increase in parish sales tax receipts, the fund remains functionally on life support.

Another option is to shift funds around within Lafayette’s budget. This path requires jumping several political hurdles, as so much of our tax revenue is dedicated or locked up for specific functions. Dedicated tax propositions became a standard tool of state and municipal governments in the 1980s as anti-tax sentiment swept much of the nation. Rather than raising sales or property taxes generally, increases were earmarked for particular projects or placed on the ballot with specific language restricting how the money was spent. This tactic was used to convince otherwise tax-averse voters to invest in community projects like building new schools, roads or parks.

The parish budget reflects how far Lafayette has taken that approach. In the 2018-2019 adopted budget, the general fund (money not allocated to a specific purpose) pulled in only $12.4 million in revenue (with a nearly zeroed out fund balance), while all other parish funds generated $69.2 million. Those additional dedicated funds support projects like infrastructure, libraries and public health. Reallocation of any dedicated funds requires a majority vote of the council to advance the proposal to the public, followed by a majority approval by Lafayette voters.

Mayor-President Joel Robideaux built his successful 2015 campaign bid on the promise that he would rigorously scrutinize the budget and find creative ways to address problems without raising taxes. Tax re-dedication, moving locked up money to other purposes, has been critical to that strategy. In 2017, he successfully spearheaded a rededication of tax dollars from public health to drainage, and the cultural, economic program CREATE. His recent proposal to rededicate a large portion of the library’s fund balance to drainage follows suit.

The August 2016 flood put into clear light the limitations of dedicated funds. With so many dollars locked in, there is little room for flexibility. To find money for drainage, Robideaux needed to jump through hoops, despite the public urgency. Our priorities may shift, and pressing needs arise, but without a vote of the council and the voters, dedicated dollars can’t be shifted. That takes both time and money.

The Louisiana state budget faces an even more extreme version of this same problem. Federal mandates as well as state constitutional or statutory dedications constrain most of the state’s money. When the budget runs tight, the two unprotected categories of spending — health care and higher education — are always the first on the chopping block. Around the state, a coalition has been growing among economic drivers, chambers of commerce and state legislators calling for a new state constitutional convention. There are so many special protections and earmarks built into the current constitution, maybe the only way forward is to start over from scratch — at least concerning economics.

In an era where trust in government is strained at the national, state and even local level, dedicated taxes may be the only viable path to garner voter support for a new property or sales tax. Even then, as recent Lafayette voting patterns have shown, it’s an extreme uphill battle to convince the voters to go along with the proposals. There is so much suspicion about waste that voters consider even fiscally sound practices as potentially corrupt. A department could build a fund balance to take on high-cost projects without having to borrow money at high-interest rates — as did Lafayette’s library system. In this political climate, however, such a move is considered, at best, hoarding, and at worst, graft. Currently, even the Baton Rouge Metro Council is undergoing a review of all departments carrying a fund balance with a wary eye. A surplus raises concern, not praise.

Our political reality demonstrates the real tensions facing our political negotiations heading into the October election season. At the Jan. 22 City-Parish Council meeting, Councilman Kevin Naquin articulated his frustration over the current state of tax discussions in Lafayette. On the one hand, residents demand services and general maintenance of infrastructure, but on the other, they summarily reject tax proposals that would raise additional revenue to address those concerns. With a cash-strapped parish budget, Naquin raises a fair point. Voters demand flexibility and quick responses, but representatives are hamstrung in their ability to divert funds. Lafayette may not be able to afford to wait until another election cycle has passed to have the hard conversations about its budgetary future.