Lawmakers will have hundreds of millions of extra dollars to spend in the next budget

BATON ROUGE, La. (BRPROUD) — Louisiana lawmakers will have hundreds of millions of extra dollars to spend in the next budget as tax revenue comes in strong for another year. The state’s top economists told the Revenue Estimating Conference that Fiscal Year 23, the current year, is coming out with $925 million in excess.

While the governor’s executive budget is still being crafted, the Commissioner of Administration Jay Dardenne said they will focus on major one-time investments.

“It’ll be similar to what we recommended last year and that is investments in infrastructure. We need to make certain we have a pot created for matching dollars for federal projects,” said Dardenne.

Other than infrastructure, Dardenne said they will also focus on coastal protections and propose another teacher pay raise. In FY24 there is an additional $608 million that will be folded into the bottom line.

While economists are projecting a strong current year, the one after is uncertain as things like inflation and supply chain issues could shift. Trends are showing a change in the explosive growth the state has seen in recent years. It doesn’t mean a massive drop, but rather a slowing that will reduce the extra dollars.

“To me not it’s not preparing for the worst, it’s just preparing for the fact that maybe some of this demand-driven revenue that we see is based on things that we can’t measure,” said Deborah Vivien, Chief Economist for the Legislative Fiscal Office.

This is why Dardenne suggests the money will be treated as if they were one-time dollars. As for the teacher pay raises, with the continued growth in FY24, they can be feasible. 

“Rather than growing the budget, even though these are recurring dollars, we’re not going to grow the budget on the fact it will be automatic every year because we have to be cautious about the economy,” Dardenne said. “And we have to be uncertain about what’s going to happen to the .45 in the next administration.”

That .45% sales tax is set to roll off in 2025 unless the legislature votes to keep it. There have been talks about reducing or doing away with the income tax as well. A large part of why the state is flush with tax money is due to high collections in income, sales, and severance taxes. 

With multiple years of extra money, economists are not sure if there will be a new bottom line for the state budget. Dardenne urges lawmakers not to be tempted to cut taxes as the out years are not clear yet.

“If you look down the road and you see the 0.45 rolling off, the vehicle sales tax going to the transportation trust fund…” Dardenne said. “So what’s the answer going to be? How are you going to fill that?”

Heading into an election year, the budget will be a critical player. While some are suggesting dealing with the roll-off of the half-cent sales tax and the shift in vehicle tax dollars now, Dardenne said he is not confident it will come through in the next session. But he does believe that any candidates for governor will need to be aware of what they will potentially be walking into.

“The budget is always probably the most important challenge that a new legislature, a new governor has to figure out how they’re going to handle the budget,” said Dardenne. “We’ve gone from a crisis in the first four years of this administration to now having a pretty good glide path toward the end of the administration, passing the baton to the next folks.”

The official executive budget will be presented in February which will be the starting point for what the legislature will debate and eventually pass in the regular session.