Posted on September 19, 2018
It will be a few weeks before the size of Louisiana’s budget surplus from the fiscal year that ended June 30 gets verified, but state leaders are already contemplating how the money might be used.
“We are hopeful that the surplus will be around $300 million,” said Commissioner of Administration Jay Dardenne, who builds the state budget for Gov. John Bel Edwards.
Louisiana law dictates that at least 10 percent of the surplus money must be used to pay down state employee retirement debt and 25 percent of it must go to the “rainy day fund” — a savings account that is tapped during tougher budget times. Together, those two expenses should take up at least $105 million of what is expected in the surplus.
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It doesn’t necessarily mean Louisiana’s on the road to financial stability.
There also are limitations on how the rest of the money — around $195 million or more — can be spent. State law dictates the remaining balance of a surplus can only be used for a handful of one-time expenditures — such as paying down more debt, a larger contribution to the rainy day fund, state construction projects and coastal restoration.
Lawmakers get the final say on what happens with the budget surplus dollars, but the governor can make recommendations to them. Edwards has already committed $2 million — even though he needs the Legislature’s support to do so — to match a an Entergy Corp. grant for Southern University’s engineering program, according to the Associated Press.
Dardenne said the Edwards administration is also likely to recommend lawmakers put the remaining money toward outstanding construction projects. Its suggestions might be similar to how money from a smaller budget surplus — around $120 million — was spent last fall, Dardenne said. That money went toward bridge and road projects, college buildings and a water system upgrade, among other things. Coastal restoration investment should also be considered, he said.
Senate President John Alario, when reached Friday, said he hadn’t thought much yet about how the surplus money should be spent, but agreed with Dardenne that it should be “spread around” to several different areas in need. The Republican from Westwego said he was mostly relieved not to have ended the year with a deficit that would have required mid-year budget reductions, especially to higher education.
“I am pleased things are going in the right direction at this point,” Alario said.
There could be some pushback from conservative House Republicans to any plan that spends the surplus dollars on road, bridges or one-time expenditures such as the one proposed for Southern’s engineering program, which the university has already announced in a press release.
House Appropriations Committee chairman Cameron Henry, R-Metairie, said he would prefer most of the surplus be used for paying down state employee pension debts — not university projects or road improvements. “Personally, I would like to see us paying down as much debt as possible,” he said in an interview Friday.
Some conservative Republicans are also questioning how the state ended up with a large surplus in the first place.
If more revenue is coming than expected, perhaps the Republican-controlled Legislature and Edwards could have let the state sales tax rate drop from 5 percent to 4 percent as it was set to do after June 30. Instead, they renewed it at 4.45 percent rate that went into effect July 1.
Now, Republicans are asking whether the tax revenue forecast was too conservative.
“If this is accurate, it appears the conservative House Republicans were right to question the governor’s claim of a need to raise taxes to cover a purported $400-500m deficit,” Rep. Nancy Landry, R-Lafayette, said on Twitter Friday.
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The new federal tax law caused state income taxes to go up.
Officials can’t say yet why revenue collections exceeded expectations, but economists have said oil and gas revenues have been higher than expected. The corporate income tax collection forecast was also very conservative, Alario said.
Several changes to corporate tax breaks have been made over the past few years. State economist Greg Albrecht, who determines the state revenue forecast, has said he is having hard time predicting what those collections might be from year to year, so much so that he is trying to be measured with his projections.
A fairly significant change to state income tax collections also took place at the end of the most recent budget cycle. An federal income tax cut Congress and President Donald Trump approved was supposed to make state income tax collections higher.
Louisiana changed its tax withholding tables, which businesses use to determine how much money comes out of employees’ paychecks to pay for taxes, in February to reflect the larger state income tax payments that are anticipated. That means the increased collections could have shown up in the budget surplus, though it is hard to tell.
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This is a major breakthrough in a stalemate that has lasted over a year.
Henry said when the state has more information, he wants to know if any of the surplus can be attributed to higher-than-expected sales tax collections. If so, lawmakers will have to look at whether this was known before the Legislature voted to raise the sales tax rate to avoid budget cuts.
“We will have to make sure the numbers weren’t being artificially skewed to raise taxes,” he said.
Source: nola
