The Louisiana Legislature’s Use of Extra Funds and Capital Outlay

Note: This is the fourth installment of a series on the state budget as passed by the Louisiana Legislature.

The Louisiana Legislature allocated significant surplus and excess money from the state’s general fund to address various administrative and legislative wants and needs. Lawmakers took steps to ensure that these funds are used for primarily one-time expenses, thereby avoiding an increase in recurring budget obligations for future years. There was $325 million in surplus funding and over $600 million in excess funding available for discretionary use.

Surplus funds are those that remain unspent from prior years and are very limited by the state constitution in their use because they are considered non-recurring, or not expected in future years. Excess funds are those that are remaining unspent in the current year either because they aren’t needed for their currently appropriated use, or revenue forecasters are expecting additional tax dollars. This year, lawmakers spent these funds through HB 782, the Supplemental Funding bill, and HB 786, the Funds Bill.

In addition to these bills, the Governor’s Office and Legislature worked together to create the state’s Capital Outlay Bill, or HB 2, which uses a combination of cash and borrowing to draft a five-year plan for a myriad of capital projects.

The Legislature’s budget actions reflected a conscientious effort to invest in infrastructure and public safety. For instance, approximately half of the funds were directed towards infrastructure improvements, including road repairs, local water system upgrades, higher education facility maintenance, and correctional facilities. Conversely, the other half of the funds were earmarked for pork projects or recurring purposes.

How did lawmakers choose to spend this money?

From the $325 million surplus, 25%, or $81 million, was deposited into the state’s main savings account, the Budget Stabilization Fund, fulfilling the statutory requirement to replenish this critical reserve. Additionally, 10%, or $32 million went to pay down state employee retirement debt. The remainder of the funds were allocated to the state’s Capital Outlay Program, which funds various state, local, and non-governmental organization capital projects.

From the nearly $600 million in excess funds available for the current year, nearly $320 million was socked away in various funds, some of them newly created, while the remainder was appropriated for various items in the supplemental funding bill.

Nearly $100 million in legislative projects was spent through the longstanding “State Aid to Locals” category that is filled with pork barrel spending to local governments and non-governmental organizations. Overall, there were 612 line items in the supplemental funding bill for various local purposes.

Many of these appropriations were allocated to items many would consider to be non-essential. Examples include various local parks and recreation centers, private museums, and community centers. They also include funding for favored non-governmental organizations such as the Louisiana Sports Hall of Fame Foundation, Cyberspace Innovation Center, Inc., Independence Bowl, American Rose Society, fraternity and sorority groups, 21^st Century Workforce Development, neighborhood associations, Baton Rouge Art Gallery, a dance company, Burden Foundation, and various churches and ministries. The entire list can be found on pages 28-66 of HB 782.

The remaining items in the supplemental funding bill funded lawmakers’ state priorities and include:

• $42 million for the Governor’s Office of Homeland Security and Emergency Preparedness to pay the state cost share of the federal government’s response to various natural disasters.
• $1.6 million to update and modernize the criminal justice databases.
• $2.4 million to the Secretary of State for elections expenses, litigation, and repairs to museums.
• $2.3 million to the Department of Economic Development for the Louisiana Chamber of Commerce and for the eight regional economic development organizations.
• $10 million to the Department of Transportation and Development for various road projects.
• $11.5 million to the Department of Children and Family Services for the Summer EBT program, data system updates and $7 million for domestic violence shelters.
• $10.8 million to the University of Louisiana System and $8.8 million to the LSU System

(in addition to regular operating dollars allocated through the state’s higher education funding formula).

• $15 million to the Department of Agriculture and Forestry for wildfires.
• $54.3 million to the Department of Corrections for additional anticipated operating expenses tied to the enactment of new criminal justice laws earlier this year championed by Governor Landry.
• $12.5 million to the State Police to cover a shortage in the budget for salaries, funding to start Troop NOLA, and additional funding for crime labs around the state.
• $13.4 million for the Office of Juvenile Justice for additional security and legal services.

House Bill 2: Capital Outlay

The Capital Outlay Bill, or HB 2, was filled with more than 900 individual capital projects for various state, local, and non-governmental entities, totaling nearly $11.6 billion. This is slightly less than the $11.7 billion found in last year’s capital outlay plan. This bill used a combination of surplus and excess money in the state’s general fund, other cash sources, and borrowing through bonds to pay for the various projects. The bill is typically a five-year plan for most projects, from inception to when the funds are obtained.

Through this bill, lawmakers also used $202 million in surplus dollars from the state’s general fund from fiscal year 2023. They also allocated $134 million to projects utilizing the Capital Outlay Savings Fund, which contains deposits of the excess money in the state’s fiscal year 2024 general fund found in the Funds bill.

Lawmakers included two levels of borrowing in the bill. “P1” is the line item most likely to get funding in FY 2025 through bonds. There exists $1.8 billion in various projects, though in testimony on the House floor legislators mentioned that it is over the state’s annual capacity to borrow by more than $120 million. They also included $6.3 billion in “P5” projects, which are in a holding pattern to potentially receive funding in future years if legislators move them to the “P1” category.

Over $3 billion was added from other sources of funding, such as federal funds for the highway program, self-generated revenue from agencies, and other dedicated funding sources. This includes nearly $390 million in highway projects from the newly created Louisiana Transportation Infrastructure Fund that utilizes money from the Revenue Stabilization Fund savings account.

Statewide projects include:

• $2.25 billion for the state’s highway program which uses a list of projects in the Louisiana Transportation Priority Program that is approved each year in a joint meeting of the House and Senate Transportation Committees. This funding includes $40 million from surplus, $63 million from the Capital Outlay Savings Fund, $310 million from the Louisiana Transportation Infrastructures Fund, $300 million from the gas tax, and $1.3 billion in federal funding.
• $2 billion for other state highway projects, ports, airports, and ferries
• $1.8 billion for various new and renovation projects on college campuses
• $967 million for Coastal Protection and Restoration projects
• $604 million for levies and ports
• $543 million to the Division of Administration for deferred maintenance on college campuses, disaster recovery, and deferred maintenance on state buildings

Like the supplemental funding bill, lawmakers also added pork projects to HB 2. $146 million was allocated to 33 projects to build or expand local parks and recreation centers, $110 million for 14 local or private museums, including the WWII Museum, $20 million to build or renovate 9 local community centers, and $7 million to upgrade two neighborhoods. They included $232 million for 48 building and renovation projects for non-governmental organizations, such as the Belle River Museum, the Strand Theater in Shreveport, the Mu Zeta Foundation, Louisiana Swamp Base, Inc., and various private hospital expansions and renovations.

The legislature was prudent to spend the majority of the excess state general fund on one-time line items. However, nearly $75 million of the spending allocated to the Department of Corrections, State Police, and Office of Juvenile Justice will likely be recurring spending because it is addressing chronic shortages in their budgets, or expansion of existing programs. Additionally, nearly half of the state’s general fund money that was deposited into various dedicated funds was then appropriated in HB 1 for the next fiscal year on primarily recurring spending items. The Legislature and Governor Landry have taken steps toward spending our money more responsibly than their predecessors, but some giant leaps will need to be made in the next few years to bring about the level of fiscal stability needed for the long haul.