STATE OF LOUISIANA

HousE OF REPRESENTA’fJvES
Post Ovpic; Box U4062
JIM TUCKER BATON ROuGE, LouIsIAtA 70804
PHONE 225-342-7263
FAx 225-342-8336

June 2, 2011

The Honorable Kirk Taibot

State Representative
9523 Jefferson Hwy.
Suite B
River Ridge, LA 70123
Re: HB479
Dear Representative Talbot:
The question arises, does the HB 479 increase inteem ployee contribution
rate required of certain employees in LASERSe of constitu a tax, a fee or raise
revenue in such a way as to require a 2/3 vot the membership to pass?
to determine ihe characteristics
There are several questions that should be asked
of a fee, tax, charge:
1) Upon what or upon whom is the charge levied: d for some type of formal
Case law tells us that a fee is usually charge
y on some business or is charged for
permission to pursue some occupation, carrperson requesting the permission or
a “grant of a benefit”. The charge is on the is not shared by other members of
receiving the benefit. The benefit is one that
society. rge on a benefit or right
The case law also tells us that a tax is a cha
common to many persons for a benefit or ben
efits which do not primarily or
by others besides the payer, for
directly benefit the payer, but which are shared
instance, the public in general.
2) What is the reason for the charge? in nature, levied under the state’s
A fee is a charge which is regulatorypromoting public order, individual liberty
to
police power. The charge is incidental
and general welfare. er the state’s taxing power. Revenue
A tax is a charge to raise revenue und
and regulation is merely incidental
is the primary purpose for the chargeraised?
3) What amounts of revenue are t of the reuiation or service or the t
A fee generates funds to cover theiscos tha
It okay to include all incidental costs
cost of conferring the grant or benefit.ulation that are not an expense of the direct
may be likely to go along with the reg
regulation.
A tax is a charge which clearly and materially exceeds the cost of the
regulation or the cost of conferring the special benefits on those assessed. The
revenue realized is materially in excess of the cost and bears no comparative
relation to the cost.
4) What is the state’s recourse for non-payment?
In the case of a fee, the non-payment usually results in the requested
permission to do something not being granted or the right or benefit not being
granted.
En the case of a tax, the non-payment usually results in the state pursuing
legal action to recover.
The definitive and much cited case regarding the question of whether an
imposition of a charge or fee by the government constitutes a tax is Audubon
Insurance Company vs Bernard, 434 So.2d 1072 (La. 1983), followed by Safety Net
For Abused Persons vs. Segura. 96-1978 (La 4/8/97). 692 So2d 1038.. It is well
settled in Louisiana that the nature of a charge is determined not by it’s title, but
by its incidents, attributes and operational effect. The nature of a charge must be
determined by its substance and realities, not it’s form. If the primary purpose of
an assessment is to raise revenue, as opposed to the regulation of public order,
that assessment would constitute a tax. Moreover, a tax is a charge that is
unrelated to or materially exceeds the benefits of the regulatory purpose to be
served.
HB 479 increases the employee contribution rate for certain (but not all)
employees who are members of LASERS. The purpose and result is to raise
revenue. The question then becomes, is the increase related to the regulatory
purpose. The purpose of LASERS is to provide retirement benefits toe state
employees who are members of that retirement system. The increas in revenue
generated by this bill would go to the state general fund.
utions for
As much as can be determined, past increases in employee contrib by a benefit
current members of the retirement system s have been accom panied
enhancement When current employees have been charged more, they have is not
gotten something for it. Going from a contribution rate of 7.5% to 10.5% yees will
actually an increase of 3%, but in reality is an increase of 40%. Emplo
be paying 40% more than what they pay now.
LASERS employees currently pay more than 50% of each year’s cost of their
benefit, The employees have consistently made their payme nts, while at times in
tly funding
the past, the employer (the state) has not. The employees are curren
53.15% of the benefit they will receive.
The executive budget, as reiterated in original HB 1, on page 11, lines 22-25,
indicate that it is intended that the increas e in revenu e gained by the 3%
d by HB 479, was to increas e the state
retirement contribution increase require by $24.6M . Emplo yees will
general fund (and not the retirement system itself)
$25M in state genera l fund
pay an additional $70M into the system, supplanting The admini stration has admitt ed
payments and $45M in federal and other funds increas e in certain LASER S
publicly numerous times that the reason for the fund revenues.
employee contributions is to fill a gap in general
 into
ld be se en fro m th e increase would be placed ent
Because the revenue th
at wou e governm
to pr ov id e fo r th e general operations of stteatd to the system
nd
the state general fu fit of the employees and therefore unre la
and not for the bene and materially exceed any indirect benefit thth e employees
e contribution
purpose, and clearly tive relation to the system, the increase in ising measure.
and bears no compaLA ra considered a revenue ra es no difference
SE RS co ul d be
rate to members of whether the increase is a tax or a fee makby the Louisiana
The determination of ired
th e le gislature to pass, as requ in
in the need fo r a 2/ 3 vo te of
I re qu ire s 2) 3 vo te to enact ei er. Thereforree,quired.
th
Constitution underre Article VI e House is
is ve nu e ra ising m easure, a 2/3 vote of th
order to pass th

Sincerely,

Jim Tucker

JWT/csm
n
cc: Representative Pearso
in
Representative Fann