Louisiana lawmakers have more money to spend with state revenue projections up

Louisiana lawmakers have extra money to spend on teacher pay and other budget priorities after state revenue projections were adjusted upwards through June of next year.

The state’s revenue estimating conference – made up of lawmakers, a gubernatorial appointee and an economist – adopted a financial forecast that increases the amount of money available to lawmakers for spending by $197 million in the current budget cycle and $88.6 million in the next. 

The additional funding is coming from higher interest earnings on state fund investments, as well as larger corporate and severance tax collections than expected.

The revenue hike makes it less likely public schools teachers will see the pay cut included in the budget plan passed by the Louisiana House last month. An approximately 2,000-seat reduction in early childhood education slots could also be be reduced or restored, according to interviews with legislative leadership.

Gov. Jeff Landry’s administration would also like to put more money into child welfare programs, which are experiencing chronic staffing shortages, said Commissioner of Administration Taylor Barras, who acts as Landry’s budget chief, in an interview Tuesday. 

All of those budget issues must be resolved within the $88 million newly available for the budget year that starts July 1. Legislators are not supposed to use the increase in money for this fiscal year – the extra $197 million – to cover those expenses.

If lawmakers are budgeting prudently, the extra $197 million would mostly be reserved for covering one-time expenses, such as paying off the state’s outstanding debts, covering one-time maintenance costs or fixing roads and bridges. 

But there is a catch this year.

Legislators would only be able to spend the entire $197 million in extra cash over the next year if they voted to lift a constitutionally-imposed spending cap. That’s unlikely to happen, said Senate President Cameron Henry, R-Metairie, in an interview Thursday.

“Busting through the expenditure cap is not an option,” he said. 

Without that cap-busting vote, they will only be able to access $86 million of that extra cash until at least July of 2025, according to legislative staff.

The governor and legislative leaders are also strongly considering diverting money that is supposed to go into a state savings account called the Revenue Stabilization Trust Fund and using it to refurbish prison, jails and juvenile justice facilities. Some of the funding might also go to help a new state police troop in New Orleans get established.

Landry and the lawmakers passed several new criminal justice laws in February that affect the state’s juvenile justice operations. One high-profile change mandates 17- year-olds must now be housed in adult jails and prisons instead of facilities for minors.

The law change caused problems for local sheriffs. Federal regulations prohibit people under 18 from being housed alongside adults in correctional facilities. This means sheriffs have to find space in their jails for 17- year-olds that is separate from where adults are held. Some have complained they don’t have the flexibility to do so. 

The lawmakers may use at least some of the money that would normally go into a state savings account to address those challenges for sheriffs. 

Public university maintenance projects and water system upgrades may also get some of the extra money that would normally go into this savings account, which currently stands at $2.3 billion.

In order to tap into that money however, legislators will need to vote for a resolution sponsored by Rep. Julie Emerson, R-Carencro, by at least a two-thirds majority in the House and Senate to divert the funding. 

Lawmakers are also trying to be mindful of a budget deficit the state is facing after June of 2025, when a state sales tax cut goes into place. Landry and legislators could be short over a half of a billion dollars in revenue to meet state obligations at that time.

The legislators are thinking about pulling back on a financial commitment to transportation construction projects. When fully funded, the transportation fund devotes $340 million to road and bridge construction that legislators might consider transferring to other needs, such as health care and higher education.

For the first time, growing income tax collections could also trigger an automatic income tax rate reduction. Louisiana passed a series of laws over the last three years that put in place automatic tax rate cuts when state revenue reaches a certain threshold, but whether the trigger will be a factor won’t be known for several more months. 

Louisiana is generating more money, in part because the state’s robust savings have allowed it to have a more aggressive investment strategy. With $2.3 billion sitting in the Revenue Stabilization Trust Fund, the state doesn’t have to be as conservative when it puts money into the market, said Benjamin Vincent, the Legislature’s economist.