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Analysis: Louisiana budget boom continues for another year

1 month 1 week 2 days ago Sunday, October 24 2021 Oct 24, 2021 October 24, 2021 9:32 PM October 24, 2021 in News
Source: Associated Press

BATON ROUGE, La. (AP) — Rather than crush state finances, the coronavirus pandemic is sending a glut of money to Louisiana’s treasury, with Gov. John Bel Edwards and lawmakers facing another year of decisions about how to spend piles of cash available to them.

The state has a $670 million surplus from the last budget year, is expected to see an improved income forecast in the current financial year and has about $1.3 billion in unallocated federal pandemic relief aid to spend.

That money will be available for spending in the next regular legislative session that begins in March.

The situation is a far cry from the last term in state government, when Louisiana was struggling with a cash crunch and the Democratic governor and majority-Republican Legislature enacted taxes to avoid deep cuts to health care and higher education programs.

Still, those who remember the post-Hurricane Katrina boost to state coffers — when recovery dollars poured in, construction surged in damaged areas and people replaced their storm-wrecked belongings — are cautioning against getting used to the budget largesse.

They remember the large tax cuts that Republican then-Gov. Bobby Jindal and lawmakers approved based on a false economic surge, which led to budget problems that plagued Jindal’s tenure in office and large financial gaps that Edwards and new lawmakers inherited.

Senate President Page Cortez, a Lafayette Republican in office through the financial highs and lows, told the joint House and Senate budget committee that he didn’t want to “repeat the mistakes” of the post-Katrina surge. He said he wants to stay focused on “what not to do after a good boom so that you don’t have the bust following it down the road.”

Louisiana took in $1 billion more than expected in the budget year that ended June 30, primarily because of better-than-forecasted personal income, corporate and sales tax collections as recovery from pandemic disruptions continued and people spent temporary federal aid.

The state took in enough business taxes to trigger the first deposit into a five-year-old trust fund created to try to lessen the volatility of budgeting cycles.

After sending the $205 million to the trust fund and slicing off other dedications, the state is projected to have a hefty $670 million surplus when the accounting work is complete.

Under the Louisiana Constitution, nearly $168 million of that surplus will have to go to the state’s “rainy day” fund, while $67 million must be used to pay down retirement debt. The remaining $435 million will be left for lawmakers to spend on one-time items, such as debt payments, coastal protection projects and construction work.

Meanwhile, Louisiana’s income forecasting panel will meet within the next few months to determine if this year’s projections were too conservative — and if the state’s economic rebound, rising oil prices and hurricane recovery spending will help bring more money into the treasury.

Already in the current budget year, lawmakers had enough cash to pass a $38 billion state operating budget laden with salary hikes, education spending increases and millions of dollars in legislative pet projects. Pay raises went to college faculty, prison guards, public school teachers and state workers. Spending grew on legislative and judicial operations.

Louisiana received so much federal pandemic aid this year, pushed by President Joe Biden and passed by Democrats in Congress, that lawmakers didn’t spend it all. Instead, they allocated about $1.7 billion of the $3 billion in direct federal coronavirus aid and reserved the remaining amount to divvy up in the 2022 regular legislative session.

Lawmakers gave money to ports, water systems, tourism marketing efforts, broadband projects, road and bridge work, hurricane recovery, technology upgrades at the Capitol and the unemployment trust fund. Many of the programs created to distribute that assistance are just getting off the ground.

But much of the largesse is short-term. Financial cliffs are on the horizon.

This year’s budget is balanced with at least $720 million in short-term cash that isn’t expected to be available in later years, including $600 million in enhanced federal Medicaid money available because of the pandemic.

In addition to the one-time federal aid, Louisiana’s temporary 0.45% state sales tax enacted in 2018 to balance the budget is set to fall off the books in mid-2025, which will siphon away dollars that lawmakers are currently using to pay for ongoing state operations.

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