Fair or Excessive?
In February, the City proposed that schools pay a whopping 7.5%, or $11.5 million sales tax collection fee. The School Board rejected that proposal because it was unfair, unreasonable, and a threat to the sustainability of our public schools.
Sales taxes are part of the school financing formula and, by law, schools get 98% of the 1.5 pennies of sales taxes dedicated to public schools. Any collection fee charged by the City truly comes directly at the expense of students and teachers.
The City is now pursuing legislation that could impose an excessive fee (up to 5% or $8 million) via Landry HB 795.
Schools have offered to pay their fair share – their proportional cost to collect sales taxes (up to 1.5%).
30% of the sales taxes collected by the City are dedicated to schools. The City spends between $5–7 million each year to collect these taxes; schools’ proportional cost would be 30% of the collection expense, or $1.5–$2.1 million (less than 1.5% of their share of the sales taxes).
Most school boards pay 1% or less for sales tax collection.
So, why has the City filed this bill?
The back story:
The City and OPSB reached a settlement in fall of 2024 over a lawsuit alleging the City has unlawfully charged the school district tens of millions of dollars in collection fees, siphoning off taxes dedicated by the voters to schools. As part of the settlement, the City agreed to cease charging schools for tax collections.
While Mayor Cantrell backed out of the agreement, City Council vice president and mayoral candidate Moreno pledged to honor the deal if she was elected and not charge schools collection fees.
Now that the City is facing financial challenges, Mayor Moreno’s administration is backing out of the deal and wants schools to pay excessive collection fees to help the City with its budget deficit.
The City is using Jefferson Parish as the rationale for charging a high fee. A statute permits the Jefferson Parish Sheriff’s office (JPSO) to charge Jefferson Parish School Board schools a 9.5% collection fee.
Jefferson Parish is the outlier: not a valid justification.
In 1982, it appears the Jefferson Parish School Board (JPSB) struck a deal with Sheriff Harry Lee to pass a half penny sales tax to avert a teacher’s strike. JPSB agreed to a large collection fee to help fund the Sheriff’s office. The measure went before the voters and was approved. JPSB and Sheriff’s office then entered into a cooperative endeavor agreement codifying the terms.
- The ballot proposition approved by the Jefferson Parish voters contained a provision allowing the School Board to pay collection fees out of the sales taxes collected.
- However, in Orleans Parish, voters did not approve a provision for sales tax collection and the School Board and the City have never had a cooperative endeavor agreement for the City to charge schools for sales tax collection.
Schools support a fair fee – not an excessive fee.
New Orleans schools are willing to pay their fair share of the cost of collecting sales taxes and maintain that any collection fee should be transparent, reasonable, and limited to the city’s true cost of collection – nothing more.
Charging schools millions of dollars beyond the actual cost of collection is taking away money that was dedicated by the voters for teachers, classrooms, and students.
An even better solution: have the state collect the sales taxes for free.
Under state law, the Louisiana Department of Revenue can collect sales taxes on behalf of the City free of charge, and the law requires the Department to remit the collected taxes to the City no later than the 10th day of the month following their collection.
If the City is concerned about the cost of sales tax collection, it can agree to let the state Department of Revenue collect on its behalf and save $5-7M a year.