Record-Breaking Revenues Chugging Into State Coffers
Louisiana has seen record-breaking increases in state government revenue over the past few years. In fact, we haven’t seen revenues like this since the aftermath of Hurricane Katrina and the rebuilding construction boom that followed. The state’s general fund revenues were $9.9 billion in fiscal year (FY) 2018, and at the end of FY 2022, these revenues surpassed $11.7 billion. An increase of nearly $2 billion in just five years.
What is even more astounding is the growth in the total taxes, licenses, and fees. These are all the taxes the state collects in a year from various sources, such as sales, income, and gas taxes, as well as mineral and gaming revenues. They have increased from $12.4 billion in FY 2018 to $15.6 billion in FY 2022, an increase of $3.2 billion in just five years.
Not all these taxes make it to the state’s general fund, however. Before lawmakers can appropriate any money, a certain portion of these taxes are taken of the top and put into special funds (revenue dedications) for specific purposes. That number is increasing as well, reducing the amount left for use in the state’s general fund to meet other needs. These dedications have increased $1.4 billion since 2018.
Based on these increases, and if legislative spending becomes a repeat of the last two years when excess revenue was available, there will be no shortage of funding to local governments and non-profits for projects like ballparks, splash pads, festivals, and parade floats. There will also be no shortage of increases to items that will need to continue to be funded in future years when these surpluses may no longer be available.
Let’s take a deep dive into the revenue and expenditures in FY 2022, the most recent year for which complete data are available. At the beginning of the year, lawmakers appropriated $10.07 billion from the state’s general fund to run state government for the year. As the state chugged throughout the year, analysts and tax collectors realized that they would bring in more revenue than was initially expected. Along with moving some money around to make even more available, there ended up being an additional $1.675 billion in excess revenue that was appropriated in supplemental funding.
Then, at the end of the year, after all expenditures were complete, even more revenue was realized than estimated, leaving a surplus of $727 million. The legislature is constitutionally bound to spend the 2022 surplus on six items: the rainy day fund, public employee retirement debt, capital expenditures, highway construction, debt payments, and the Coastal Protection and Restoration Fund. The rainy day fund (officially known as the Budget Stabilization Fund) is set to receive a minimum of $182 million, bringing the balance of the fund to $902 million.
While all this is happening, there is a significant increase in corporate income and franchise tax. On average, the state collects roughly less than $600 million per year from these two onerous taxes. In 2016, lawmakers created a Revenue Stabilization Trust Fund to hold any revenues from the corporate and franchise tax that exceed this $600 million threshold, to save for a rainy day. These revenues have been so high over the last few years that $788 million was added to this fund in FY 2022, bringing its balance to $1.84 billion just since 2020!
All told, that is nearly $3 billion sitting in savings accounts to be used during economic downturns.
And FY 2023 is looking to be another record-setting year. $11.4 billion was appropriated at the beginning of the year and another $45 million was appropriated in a special session in January to combat the homeowner’s insurance crisis. In December, revenue estimators met to increase the revenue forecast for this year, giving lawmakers an additional $884 million to spend. And an additional $262 million is expected to be deposited into the Revenue Stabilization Fund.
For FY 2024, the train does not seem to be slowing down. According to the same December forecast, lawmakers have $11.4 billion to spend. This budget is currently being negotiated in legislative session.
So how did the $1.7 billion in excess money from FY 2022 get spent?
Over $1 billion was transferred to various funds for different projects and savings accounts.
Of the remaining $622 million:
- $227 million went to reimburse the federal government for disaster-related expenses
- $154 million was added to the operating budgets of various departments
- $128 million for highways
- $126 million for pork projects and to local governments for various projects
- $20 million for local water and sewer system projects
- $6.7 million to pay lawsuits
Just in the last two years (FY 2022 and 2023), the state has had excess revenue of $4.4 billion, over and above what is needed for normal operating expenses. Before the train derails, now is the time to bring spending under control and give the citizens of Louisiana REAL tax relief. Now is the time to write Louisiana’s Comeback story to spark economic growth that will allow every Louisianan to flourish.
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