Budget Surplus For Now, Not Forever
On October 21st, the Joint House and Senate Committee that oversees the Louisiana government budget had their monthly meeting. In October of each year, lawmakers and the public get a first look at the surplus revenue from the previous fiscal year. This year, the state posted some massive numbers.
After all the tax receipts were in for fiscal year 2022, and all the expenditures were subtracted, there was a whopping $727 million left at the end of the fiscal year. While these numbers won’t be official for a few more months, they are typically pretty accurate and give us a great deal of insight into the activity within our state’s economy.
Surpluses are generated at the end of the fiscal year (which runs from July to June in Louisiana) from revenues that exceeded expenditures. With the help of economists, lawmakers do a decent job of forecasting the amount of revenue that will come in during a fiscal year, and they create a budget that will spend every dime of that revenue. However, sometimes revenue beats their expectations, and when that happens, we get surpluses. When a surplus occurs, they are required to spend the funds in accordance with instructions spelled out in the state’s Constitution.
Due to reforms enacted in the last few years, all funds in excess of $600 million from corporate income or franchise taxes get deposited directly into the Revenue Stabilization Fund. In the last fiscal year, these taxes came in over that amount by an estimated $788 million. These funds will be placed in the Revenue Stabilization Fund for future use in the event that revenues decline. These funds come out of the revenue before any other expenditures are made, and before the surplus is calculated.
Fiscal year 2022 posted a record budget for the state. In addition to expenditures for the regular operation of state government, there was money left over to spend on several large one-time projects. This includes paying the federal government back $400 million of what the state owes for a hurricane risk reduction project built in the wake of Hurricane Katrina, and a $600 million deposit in the newly created Megaprojects Fund that will help pay for several large transportation projects. And still, the state managed to post a surplus of funds.
Those who believe Louisiana’s budget and tax system need to be reformed and more tax dollars returned to the people see this as the time. As we’ll write about in the future, these surplus revenues won’t last forever. The state needs to be wise and begin to take proactive measures.
The Pelican Institute supported tax changes made in fiscal year 2021, which lowered rates and eliminated some deductions in the corporate income, franchise, and personal income tax. But as our state economy posts negative growth in the first two quarters of this year, more must be done to further decrease the burden of state taxes on our people and businesses. At the same time, Louisiana must also address spending, which has grown 63% since 2014.
By simplifying the tax code, lowering rates, and reining in government spending, our state could prompt an economic boom that would bring in more high-quality jobs, allowing more Louisiana people to prosper.