Louisiana has discovered that some extra money likely will come its way, but doesn’t change the dynamics of why its Legislature shouldn’t start spending bonus bucks like a drunken sailor.
This week, the state’s Revenue Estimating Conference forecast that tax coffers would be a little fuller than previously believed early in the year. It accepted that this year would see an extra $350 million into the general fund and next year another $104 million would come the fund’s way.
Unless the Legislature can find ways to spend the former in the next 50 days, it will have to go to nonrecurring purposes. There’s plenty of use for that, starting with the billions in infrastructure needs, or defeasance of unfunded accrued liabilities due for payoff by 2029, or going a long way towards the state paying off the final installment to the federal government for flood protection due over a year from now. Democrat Gov. John Bel Edwards would like to see it used to entice federal funding for Interstate 10 bridge construction over the Mississippi River connecting Baton Rouge, an idea already rebuffed by the Legislature but to which it could become more receptive with the realization of this largesse.
As for the latter figure, it came with cautionary notes from the economists that policy-makers couldn’t count on this as sustainable. This comes as bad news for lawmakers who already have chosen to commit hundreds of millions of new dollars to pay raises in education and other programs under past higher forecasts that also might peter out.
Added to this not only is that by the start of fiscal year 2026 the sales tax increase that began in 2016 and pared slightly in 2018 will have rolled off, but it might also roll off more quickly. HB 438 by Republican state Rep. Tony Bacala continues to progress through the Legislature. This would phase out the 0.45 percent hike, dropping it to 0.30 for FY 2024 and 0.15 for FY 2025.
Also relevant is GOP state Rep. Rick Edmonds’ HB 80 that would limit general fund spending to 98 percent of the forecast, also starting in FY 2024, which likewise has moved to the Senate. That $104 million would be around half the amount needed for sequestering under this requirement.
If we can liken the state’s Budget Stabilization Fund to a savings account, with limits on its use, then several measures floating around the Legislature create a fund that would act like a money market account, holding excess dollars for future use with only appropriation necessary to free these. Such a vessel created then can hold the FY 2023 excess to provide the cushion for tax cuts and/or caps on spending launching in FY 2024.
Lawmakers already have acted somewhat recklessly in creating new commitments with the earlier largesse. With that now expanded further, they can reduce some of the risk by husbanding this money and resisting calls to spend any of it in the next fiscal year while pursuing accelerated sales tax rate restoration and implementing a general fund spending buffer for the future.