The March 29 election is coming up fast, and four Constitutional Amendments will appear on the ballot. Amendment 2 is the longest and has gotten the most attention, for good reason. It significantly streamlines Article VII of the Louisiana Constitution, which deals with fiscal policy, cleaning up decades of build-up that has contributed to Louisiana’s economic lag compared to other states.

The most promising change associated with Amendment 2 is that it gives Louisianans the opportunity to continue the momentum of last year’s special legislative session, which cut and flattened income taxes and eliminated the harmful corporate franchise tax. Here is an in-depth look at some of the most noteworthy ways Amendment 2 further upgrades the structure of Louisiana’s fiscal and tax policy, providing relief to the Louisiana people, ensuring more responsible use of taxpayer dollars, and positioning the state for economic competitiveness.

Amendment 2 Simplifies and Lowers Taxes

Tax policy ought to be fair: low, flat, and broad. Tax exemptions often work against this philosophy by creating winners and losers—meaning that some end up paying more than others to raise the same amount of revenue. Amendment 2 makes advancements in tax simplification and fairness while preserving the homestead exemption and property tax exemptions for religious organizations. The three major sales tax exemptions on groceries, residential utilities, and prescription drugs will also remain in place under the Amendment.

  • Amendment 2 requires that new sales tax exemptions be approved by a two-thirds vote in the state Legislature, whereas currently only a majority vote is needed to enact new exemptions.
  • New sales tax exemptions would be prohibited unless applied to both state and local sales taxes, meaning that there would no longer be location-based carve outs.
  • Amendment 2 reduces the state constitutional maximum income tax rate from 4.25% to 3.75%, providing Louisianans permanent tax relief and guarding against future large increases. This is not the same rate that is currently in effect, which is a flat 3%. However, as more states continue to lower, flatten, and eliminate their income tax, it is essential for Louisiana to also work toward phasing out its state income tax to stay economically competitive.
  • Individuals aged 65 and older will have their standard deductions doubled with the passage of Amendment 2, allowing them to keep more of their income in retirement.
  • Local governments will gain the ability to opt out of taxing business inventory in property tax collection to encourage economic growth, provided that the sheriff, the school board, and the parish authority agree.
  • Amendment 2 removes the cap on how much money local governments can receive from severance taxes on natural resources in their parishes, thereby reducing local dependency on state funds.
  • Amendment 2 prohibits charging a property tax on prescription drugs.
  • A minimum sales tax rate on cigarettes would no longer be enshrined in the state Constitution, nor the requirement that the state must charge a motor vehicle license tax. Instead, more appropriately, lawmakers could change or eliminate these rates in statute in consultation with their constituents.

Amendment 2 Creates a Government Growth Limit

Louisiana has a constitutional annual expenditure limit, but this has not stopped state spending from growing remarkably, despite a decline in population in recent years. Amendment 2 would introduce a Government Growth Limit (GGL) to the state Constitution, alongside the current expenditure limit, further restricting the growth of recurring spending from the State’s General Fund. The GGL is important because our state has had large ups and downs in revenue. Traditionally, when the state receives higher levels of funds, such as during an oil boom or because of a federal grant, the money is quickly spent. When revenue returns to normal levels, rather than cutting spending, taxes are raised on Louisianans to make up the difference.

The GGL aims to break this cycle by limiting government growth to what taxpayers can afford to support, ensuring greater stability and predictability. Not only does this help protect individuals from higher taxes, but a more stable economic climate is business-friendly and encourages innovation and opportunity—it’s better for everyone.

The GGL is reasonable—it still allows for government growth, but this growth must be merited given the corresponding growth of the state’s population and inflation. No longer can government grow simply because politicians wish to continue to spend more of the people’s money. Revenue over the GGL but below the expenditure limit could be used on one-time items that don’t create ongoing spending, such as further tax relief and investment in state infrastructure, like improving roads and bridges.

Amendment 2 Strengthens Louisiana’s Rainy Day Fund

Louisiana has two state funds that function as savings accounts: the Budget Stabilization Fund, or “Rainy Day Fund,” and Revenue Stabilization Fund. Money is stored in the Rainy Day Fund for usage on critical priorities, such as predicted budgetary deficits. The Revenue Stabilization Fund acts in a similar fashion to the Rainy Day Fund, but it is easier to access—only a two-thirds vote in the legislature is needed to reach this account.

Amendment 2 would increase the cap on the Rainy Day Fund from 4% to 7.5% of the total state revenue receipts for the previous fiscal year. A companion bill would transfer money from the Revenue Stabilization Fund to the Rainy Day Fund—reaching its new cap and putting Louisiana’s Rainy Day Fund among the more robust in the country. For another couple years or so, the Revenue Stabilization Fund would still contain around $1 billion for usage toward incentives for local governments to be able to remove the uncompetitive inventory tax and to mitigate any potential shortfalls in corporate revenues. Eventually, the Revenue Stabilization Fund would be dissolved, streamlining two very similar state funds into one.

Amendment 2 Makes Permanent the Recent State Teacher Pay Raise

Amendment 2 proposes eliminating three dedicated funds, the Louisiana Education Quality Trust Fund, Quality Education Support Fund, and Education Excellence Fund, and transferring each’s liquidated fair market value to the Teacher’s Retirement System of Louisiana (TRSL). The TRSL would apply the transferred funds to its oldest debts, and any remaining balance would be spread out into equal yearly payments. As a result, local school systems and higher education establishments will have to pay less on their retirement systems, allowing them more financial flexibility. This would also save the TRSL about $1 billion in interest.

With their newly freed funds, K-12 school systems that participate in TRSL would be required to make permanent the $2,000 teacher stipends and $1,000 school support worker stipends that lawmakers granted for the last two years, resulting in a permanent pay raise. This would be on top of any increases in compensation granted by local school boards, which employ these individuals.

The Next Steps

Amendment 2 will make Louisiana’s state Constitution a more effective framework of government—one that better serves Louisianans. It will also allow the Legislature more discretion and financial flexibility ahead of this year’s legislative session to meet the needs of our state. Soon, voters will have the opportunity to shape the Louisiana they want.

Plan to go vote on March 29. A sample ballot can be found at the Louisiana Secretary of State’s website or by using the Geaux Vote app. Additional information regarding each amendment may be found at Ballotpedia. Also check out the Pelican Institute’s recent round-up of news on these measures here.