Bringing Home the Bacon: The Relationship Between State and Local Government
In the 1930’s, populist Governor Huey P. Long established power at the state level to exert control over the local parish and municipal government. Thus began the long-held tradition of sending local representatives to the legislature to “bring back the bacon” to run local government. Even through the changes enacted during the Constitutional Convention of 1976, this remains the case. The state funds many local government functions, or where locals tend to underfund themselves, the state is always around to fill in the gap through various programs.
Each year the state spends billions of dollars on subsidies to local governments for items that local governments traditionally pay for themselves in other states. These items include funding for local police, fire, and sheriff departments, schools, general fund revenue, roads, and other infrastructure. One of the primary ways the state funds local governments is through salary supplements, using state dollars to help pay the salaries of local government employees. Approximately $255 million is provided each year to support base salaries for police, firefighters, district attorneys, judges, and public defenders.
Local governments are also funded through various matching and direct funding programs. As required in the Constitution, $90 million from the state’s general fund is allocated each year to the Revenue Sharing Program to be distributed to local governments based on their number of homestead exemptions. This is a constitutional requirement that was put in place years ago to make up for the loss in local government income that municipalities experience as a result of having the nation’s largest homestead tax exemption. Another $40-$50 million in state gas tax revenues are transferred from the state to local governments each year to fund local roads and bridges. And the state gives billions of dollars each year to the popular Capital Outlay program that state lawmakers use to fund local priorities or pet projects requested by local leaders.
One of the largest local funding transfer programs is the Minimum Foundation Program (MFP), which funds local school systems. The MFP is a state-local partnership in which the state provides, on average, 65 percent of funding and local school systems provide 35 percent. This year, the state’s contribution to the formula is over $4 billion and comes primarily from the state’s general fund. Simplistically, the formula is based on the number of students in a school system, and the amount of funding a local school board can raise through property and sales taxes. School systems also receive additional funds through other state sources. Year after year, local school systems and teacher organizations advocate for the state legislature to place additional money in the MFP to fund teacher, and other school employee pay raises, although there is little, if any, coordination with local school district efforts to approve tax revenue for the same costs. State lawmakers are routinely asked to approve public school employee pay raises without being given any information about efforts made by local school systems to do the same, whether such efforts were successful, how much revenue was generated, how school systems are using their revenue to prioritize employee pay, how school employee compensation compares regionally, and more.
There are many other programs like these, as well as various grant opportunities for local governments to take advantage of state taxpayer dollars. Many of which, like the MFP and Revenue Sharing, are constitutionally required to be funded. These local transfer programs eat up approximately 38 percent of the state general fund available for appropriation and make it very difficult to adjust when revenues fall. The fact that many of these local projects and programs are legally required creates silos of government revenue that inhibits full flexibility in the budgeting process. Eliminating or reducing many of these programs and shifting the burden back to local government, where these responsibilities lie, would free Louisiana’s state budget to allow for bold tax reform. Requiring local governments to fund their own activities also gives taxpayers greater access to have input in where the funding goes and how it is spent.
Why don’t local governments fund these local responsibilities themselves? State law limits how much money local governments can raise. Louisiana also has one of the highest homestead exemptions for property taxes in the nation, further limiting the ability of local government to raise their own revenue.
To achieve meaningful tax reform without creating massive budget deficits, this relationship between the state and localities needs to change. Local governments must be empowered to become more self-sufficient. To accomplish this, they need the ability raise their own funds to meet the needs of their citizens.
Why make these changes? Essentially, all politics are local. How much easier would it be for voters to advocate for more efficient use of school funds, for example, at their local school board meeting, rather than having to advocate at the state capital each year? Accepting fewer states dollars should also lead to having fewer state mandates to follow. This allows policies to be set at the local level, closest to kids, families, and educators, where all have a greater opportunity for input.
In short, to have an effective tax reform agenda, the state must stop being the “daddy” to local government by creating a framework of self-sufficiency.