An Irresponsible Budget Proposal

An Irresponsible Budget Proposal

Last week, Governor John Bel Edwards unveiled his budget recommendations for the upcoming fiscal year 2024 to a joint meeting of the House Appropriations and Senate Finance Committees. 

The governor showed up to make remarks, which is rare, instead of having his budget staff make the presentation. His remarks were clearly meant to highlight the accomplishments of his and his administration’s tenure, leaving his budget legacy. As he has done many times, he again turned to the years prior to 2016, blaming the previous administration, eight years into his own term, for budget deficits and reminding everyone of the $2 billion dollar deficit they faced during his first year in office. He praised his administration for digging the state out of a deficit, but how was this accomplished? Not with responsible budgeting or spending constraints but on the backs of taxpayers. Louisiana can now celebrate the highest sales tax in the nation.

The state has enjoyed numerous surpluses over the last eight years caused not by spending cuts, but because of revenue increases – meaning the state took in more money than anticipated and needed through tax collections to meet the ordinary government expenses. These increases began with raising the sales tax in 2016, continued through the booming national economy pre-COVID, and are slated to continue the next few years before the federal largesse begins to dry up. There are predictions of a looming fiscal cliff in Louisiana, and these predictions don’t even consider the governor’s recommended budget as it was presented this month, which adds even more recurring spending and does little, if anything, to curb future increases. 

The Governor said that revenues would be available to sustain all increased expenditures in the future; however, the state’s revenue estimators show revenue declines are coming, and that deficits are in Louisiana’s future. The governor’s proposed budget, therefore, seems to exacerbate those problems.

What money is available for the legislature to consider this spring? 

  •  A surplus of $727 million, which are dollars that were remaining at the end of fiscal year 2022 once all revenues were received and expenditures were accounted for;
  • An excess of $929 million, which come from an expected increase in revenue over and above the amount appropriated at the beginning of the current fiscal year; and
  • And an additional $600 million in revenue is estimated to come in for next year, over and above the previous revenue forecast for next year. 
  • How is the governor proposing that this money be spent?

There are constitutional restrictions on the expenditure of surplus funds. They can only be spent on six specific items. The governor’s recommended budget contains funding for five of those items. The sixth is paying off state debt, and the governor has not proposed to spend any of the available money for that purpose. The state must put 25% of the surplus ($182 million) into the state’s Rainy Day Fund and 10% ($73 million) towards the unfunded accrued liability of the state’s retirement systems. The remainder of the funds are divided evenly between appropriations to the Department of Transportation and Development (DOTD), Coastal Protection and Restoration Authority (CPRA), and deferred maintenance on state buildings, resulting in $157 million towards each priority. 

The $927 million in excess funds do not have any restrictions, but because these funds aren’t promised for future years, it is sound budgeting practice to limit their use to one-time expenses. The majority, but not all, of the proposed uses of these funds are for one-time costs. Approximately $160 million will be spent on hurricane recovery payments. $84 million on acquisitions for agencies, $340 million for the DOTD highway program, $100 million for higher education initiatives, $28 million for an oyster strategic plan, $38 million to restore the White Lake shoreline and $26 million in additional funding for early childhood education. The proposal also includes $10 million for voting technology, bringing the total amount of funding available for voting technology upgrades and new voting machines to $41 million. It has been estimated that this project could cost as much as $60 to $80 million to complete. 

The governor’s recommended budget for next year totals $50 billion. This is $3 billion more than the $47 billion that was appropriated at the beginning of the current year, and $19 billion more than was appropriated in the fiscal year 2017, this governor’s first budget. If this isn’t the largest state budget increase any governor has ever experienced, it’s certainly among the highest. 

The state general fund budget for next year (exclusive of federal funds and other sources of state money such as fees, permits, and investment income) is $11.4 billion, up from $11.2 billion in the current year. This is money that comes from the state taxes Louisianans pay. How does the governor propose to spend these tax dollars? Well, it’s mostly on items that will need to continue to be funded in future years, putting Louisianans on the hook to keep paying current levels of state taxes or even more.  

  • $196 million for a proposed, recurring pay raise of $2,000 for teachers, who are local government employees; 
  • $111 million for higher education, which also includes pay raises; 
  • $53 million for cybersecurity; 
  • $52 million for increases in early childhood education; 
  • $23 million for pay raises for law enforcement and firefighters, who are also local government employees; and 
  • $205 million for Medicaid. 

The increases mentioned thus far have been strictly relegated to the use of money in the state’s general fund. However, the state has many other sources of funding, including fees, dedicated funds, and federal funds. What are some of the other increases and decreases the governor has proposed?

  • The executive department, which contains many agencies run by the governor, is proposed to decrease by 15%, or $855 million, as some of the federal COVID-19 and disaster-related funding begins to subside. 
  • The Department of Health has an overall proposed increase of $340 million, or 1.7%, to replace federal COVID-19 funding for Medicaid. 
  • There is also a proposed increase of $68 million, or 64%, for the Department of Natural Resources for federal infrastructure funding, a grant for grid resilience, and the Regional Clean Hydrogen Hubs Program. 

Also included in this proposed budget are pay raises for many local government employees. As noted earlier, teachers will be getting a pay raise, but so will local law enforcement, judges, and Registrars of Voters, totaling $222 million in additional money for this year that will need to be continued in future years as long as state leaders continue wanting to fund the staff expenses of local government. All told, the state funds more than $1 billion annually for local government employee salaries. This represents nearly one-tenth of the state’s general fund revenues. 

During the presentation about this proposed budget, the governor and his staff were continually challenged by state lawmakers about its sustainability and responsibility because state economists are predicting lower revenues in the near future. This budget proposes significant, irresponsible increases in expenses that, if approved by lawmakers, will be required to be continued in future years. Will lawmakers say no to any of this additional spending in an election year? In the upcoming legislative session that will run April 10 through June 8, lawmakers will hold several hearings about the budget, hear from state agency leaders and citizens, and ultimately approve what will become the final state budget for fiscal year 2024 (July 1, 2023 through June 30, 2024). Let’s hope they make significant improvements toward a responsible, sustainable budget they can be proud of and tout to voters this fall, not an irresponsible one they’ll be forced to defend.  

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