Louisiana lawmakers will have an extra $1.6B to spend in the upcoming budget year; here’s why
Louisiana state lawmakers and Gov. John Bel Edwards will enter the 2022 budget season with $1.6 billion more to spend after economists updated the official state revenue projections this week.
The state’s four-member Revenue Estimating Conference (REC) adopted a revenue projection on Tuesday, which showed the state collected far more in individual income taxes, general sales taxes and corporate taxes than economists predicted last year when it remained unclear what impact the pandemic would have on the economy and the state’s finances.
Economists from the state’s Legislative Fiscal Office and Division of Administration attributed the better-than-expected revenue projections to an increase in federal spending around the pandemic, hurricane recovery and overall higher wages for Louisiana workers.
State economists now expect the state to collect $1.2 billion more than their original estimates for the current fiscal year and $770 million more than their estimates for the fiscal year that begins July 1.
But a significant portion of that money is already spoken for — $275 million will be claimed by dedicated funds, and lawmakers have pledged to send another $400 million to the federal government to pay down the state’s debt for levee improvements made after Hurricane Katrina.
That leaves lawmakers with an extra $1.6 billion that will be allocated as lawmakers see fit.
Jay Dardenne, the commissioner of Administration and Edwards’ top budget advisor, will craft the first draft of the state operating budget for the upcoming fiscal year and present it to lawmakers of the House Appropriations Committee later this month.
The state also has $1.4 billion in unspent federal pandemic aid to allocate in the coming legislative session and $1 billion in combined surpluses from the budget year that ended June 20, 2021.
State lawmakers and Gov. John Bel Edwards have already indicated that they plan to spend the remaining federal pandemic relief money on the state’s crumbling water and transportation infrastructure, rural broadband improvements and replenishing the state’s Unemployment Insurance Trust Fund. The fund was depleted by a spike in jobless claims in the early days of the pandemic.
The state could collect even more money than is included in the revenue projections adopted on Tuesday. The panel, which includes Dardenne, State Senate President Page Cortez (R-Lafayette), State House Speaker Clay Schexnayder (R-Gonzales) and economist Stephen Barnes, was presented with two sets of revenue projections and opted for the estimate crafted by the Legislative Fiscal Office, which was $371 million lower than the estimate created by Edwards’ Division of Administration.
While the state of Louisiana is flush with cash right now, it’s unlikely that legislative leaders will push for tax cuts in the coming year.
Louisiana faced a similar influx of federal aid and an economic recovery in the aftermath of Katrina, and lawmakers back then chose to cut taxes. When the boom in recovery construction slowed and federal relief dollars dried up, state revenues cratered and the state experienced a years-long fiscal crisis.
The state only emerged from that crisis in 2018, when lawmakers raised sales taxes by 0.45%. The measure was opposed by Democratic members of the Legislative Black Caucus, who argued that the tax disproportionately affected their low-income constituents who spend a larger portion of their income on basic necessities, as well as far-right conservatives who opposed any new taxes at all.
Proponents of the bill struck a compromise and added a seven-year sunset on the tax.
Now that the sales tax increase is scheduled to expire in 2025, lawmakers and the state’s budget architects are preparing to live without the roughly half-billion dollars that it brings to the state coffers each year.
Legislative leaders have indicated that they would like to spend large sums on the state’s chronically-underfunded transportation infrastructure. The Edwards administration is likely to include additional funds for early childhood and higher education in its executive budget proposal due later this month.