Wednesday, October 28, 2009

Legislative Update: A Five-Part Series

As we prep for another legislative session, we thought it would be helpful to highlight some key issues we have been working on over the interim period. To avoid an overly-long posting, we thought we would break the issues into five separate posts -- I know you can hardly wait to read them all. Today we will focus on our first issue -- General tax policy and budget review:

PART I: General Tax Policy and Budget Review

Well, there isn't much to say about the state budget, other than it is not looking any better as we begin to approach the 2010 legislative session. We are currently staring an $850 Million dollar shortfall in face and don’t anticipate any improvements prior to the session -- in fact, many are bracing for an even wider state funding gap. This year there will be no federal stimulus funds to back fill cuts to critical programs and, as of now, there is little or no momentum to look at revenue enhancements. State appropriations committees are beginning discussions on how to cut roughly 15% from each department of the state, and some of those cuts will obviously have a trickle down effect on local government programs that utilize state funding.

We are keeping a close eye on most of these discussions and will continue to keep you updated as committees make recommendations on budget cuts. In addition to budget cuts we do anticipate discussions to begin on revenue enhancements at some point. The likely candidates at this point include the tobacco tax, alcohol tax and possible reinstatement of sales tax on food, but as mentioned earlier those discussions are still appearing fairly premature. We will keep you up to date as they proceed.

On another tax note, the Revenue and Taxation Committee of the legislature is also examining a few issues of general interest. There will be a recodification effort on the code sections dealing with transportation taxes. We have been heavily involved in this effort to ensure that the recodification did not inadvertently harm current local option transportation tax authorities, and those discussions have been very successful. The effort will simply look at “cleaning up” the code with no real substantive changes. In addition, there has been some discussion regarding statewide equalization of the basic property tax levy for education. While the ULCT has not engaged on this issue due to conflicting points of view among the various cities, we did want to make you aware that the discussion is occurring, and if it is of interest you should make sure you are contacting your legislator to articulate your opinion on the equalization effort.

As always there are likely to be additional tax bills of note, but this at least captures some of the very general concepts that are being discussed.

Look for Part II to this legislative update tomorrow, where we will focus on the public sector retirement issue.