State Should Use Budget Surplus to Reduce or Eliminate Homeowners’ Insurance Surcharges

   Treasurer Kennedy Says Surcharge Amounts to Additional Tax on Louisiana Property Owners

BATON ROUGE, LA – If the Revenue Estimating Conference reports a state budget surplus this fiscal year, the Legislature should appropriate the additional funds to pay Louisiana Citizens Property Insurance Corporation (Citizens) debt and reduce homeowners’ insurance surcharges, according to State Treasurer John Kennedy.

“We need to reduce or eliminate the surcharge that people will be paying on their homeowners’ insurance to the maximum extent possible,” said State Treasurer John Kennedy. “This surcharge amounts to an additional tax on Louisiana property owners. We have the largest budget ever in Louisiana’s history, and instead of spending even more money, we need to use any additional funds to pay off Citizens’ debt.”

The state created Citizens as a last-resort insurance provider for Louisiana residents who cannot get coverage from traditional companies. Most Louisiana residents who take advantage of the program live in low-lying coastal parishes. Because of the devastation caused by Hurricanes Katrina and Rita, Citizens had to borrow $1 billion to pay claims. As a result, state law requires Citizens to pass on an annual surcharge to all Louisiana property owners to pay off the debt.

The annual debt payment for Citizens’ $1 billion bond issue is approximately $78 million. Property owners in the state will see a 3.6 percent increase in their insurance premiums beginning in January so that Citizens can make this payment.

Treasurer Kennedy proposes setting up a special fund in the State Treasury to retire Citizens’ annual debt for several years, thereby eliminating the surcharge passed on to property owners. If the Legislature appropriated a $300 million budget surplus for this purpose, it could eliminate the surcharge for roughly four years. If the Legislature appropriated a $600 million budget surplus for this purpose, it could eliminate the surcharge for eight years. In addition, barring no major catastrophe in the near future, Citizens would be able to build up a reserve during this time to make future debt payments.

“Louisiana families are paying enough as it is to fill up their cars, rebuild their homes and care for their children,” said Treasurer Kennedy. “With a $27 billion budget and a potential surplus this year, the state needs to set priorities. We need to cut our spending and pay off this debt instead of passing off the payments to Louisiana residents.”

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