Local officials get bill on inventory tax deferred, but say it will come up again
Although St. Charles Parish officials got a bill deferred in the state’s budget crisis legislative session that took aim at the inventory tax that generates $32 million a year for the parish, worries continue over funding as the state contends with a $1.2 billion deficit.
“We just need to be cautious and watch it,” said Jim Melohn, the St. Charles Parish School System’s chief financial officer and legislative liaison. “We’ve got to look at that when we work on the budget for the following year.”
The River Parishes rely on inventory tax revenue that is applied to materials like oil kept in storage facilities and collected as property or ad valorem tax.
Then Gov. Kathleen Blanco pushed a credit on the tax, which meant industries paid the levy locally and are reimbursed for it by the state when they filed income taxes. Last year, the state cut the tax credit by 25 percent.
State Sen. Bret Allain II (D-Franklin) proposed Senate Bill 16 that would have eliminated the tax, but he agreed to defer it for study after hearing Melohn, as well as parish Tax Assessor Tab Troxler and Sheriff Greg Champagne outline the impact of losing the tax revenue.
According to Troxler, “As it’s been said, no one is safe while the Legislature is in session. For now, we are OK, but we really will have to wait until the end of the session to see what bills have made it into law and what those effects may be.”
Although Allain agreed to withdraw the bill, Troxler said the senator wants to pursue it again in the future.For the school system, the inventory tax represents $16 million a year.
Troxler said inventory tax collections are expected to decline from lower oil prices by next year. Even as businesses store more oil, he said it’s worth less.
As Melohn remains focused on bills that could reduce K-12 education funding in the session, he’s already contributed to efforts to counter bills aimed at reducing direct and indirect statewide education revenue by millions of dollars.
Staying vigilant about funding is necessary, but he added the school system has budgeted carefully to withstand any immediate hit to funding.
“The good thing is our board has done an excellent job of putting us in a strong financial position that we can weather some storms without have to make substantial cuts,” Melohn said. “You can’t continue to have that happen, but this is why you have a fund balance to help you get through times like this, and we’ve maintained an excellent fund balance so we would be in a position to weather the storm, make long-range plans and keep the integrity of the school system.”
A potential hit could come at a time when Louisiana public school systems have experienced flat Minimum Foundation Program (MFP) funding and Melohn added at a time when many state-funded programs outside the MFP also have been drastically reduced.
“As you can see from the reduction in sales tax collections for the past two years, the local economy plays a vital role in our revenues,” Melohn said. “However, it is not just the local economy, but the state economy. We mention ‘nationally’ but actually should have mentioned ‘internationally’ as the price of oil, which our state is so dependent on, is dictated by Saudi Arabia.”
At the special session, Melohn estimated 80 percent of the bills being discussed are about “tweaks and changes” to tax credits and exemptions.
“They’re in a tough position,” he said of legislators. “They find themselves in probably one of the worst financial situations in the state’s history. There is only so much you can do with cuts.”
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