Budget proposals serve as a cornerstone for shaping government policy. Given Louisiana’s numerous challenges, a responsible budget that removes obstacles for families to thrive is needed now more than ever.

Governor Jeff Landry recently unveiled his first budget proposal for Fiscal Year 2025, and it demonstrates responsible budgeting, which has long been missing. It reduces excessive government spending while supporting much-needed future pro-growth tax reform and allocating resources toward key budget areas.

Significant past budget excesses are not expected to continue, and Governor Landry’s proposed budget begins to prepare for that possibility. It also leaves room for further improvements in future years, recognizing that the reversal of recent less-than-prudent budgeting decisions will take time.

Figure 1 shows how state funds appropriations, which exclude federal funds, have increased 43.3% since 2015. This increase is more than double the 20.4% increase in the average taxpayer’s ability to pay for the state’s budget, as measured by the rate of population growth plus inflation.

Figure 1. Louisiana’s State Funds Appropriations Compared with Population Growth Plus Inflation

If the state funds budget would have followed population growth plus inflation every year from 2015 to 2024, it would be $3.6 billion less than it stands today. The result is that Louisiana taxpayers are having to pay higher taxes to fund this level of spending, which is one reason why so many people are leaving Louisiana for more opportunity elsewhere.

The Governor’s budget proposal includes a 1.7% increase in state general fund appropriations to $12 billion. Considering all state funds, the proposed budget decreases by -0.4% from the past fiscal year to $22.5 billion. If federal funds are included, which are reduced by -8.8% in his budget because much of the COVID-related funds dried up, the proposed total budget is 4.6% lower than last fiscal year ($47 billion total).

However, because the state mixes some federal funds with state funds in dedicated accounts and there needs to be more transparency in how these funds have been used, we have assumed the federal amounts are the same as in FY 24. This allows us to make an estimated consistent comparison with the responsible budgeting standard we have set for not exceeding population growth plus inflation. In the future, this important information should be publicly reported in the official proposed budget documents.

The Pelican Institute’s proposed Responsible Louisiana Budget (RLB) emphasizes the importance of addressing the root causes of fiscal challenges, particularly the issue of excessive spending. The Governor’s budget is well below the RLB standard based on the 4.85% increase in the average population growth rate plus inflation over the last three years. This rate results in a maximum amount of $23.7 billion to achieve a responsible budget. Of course, this amount is not a target, it’s a ceiling; so, being below is better.

Figure 2 illustrates how the Governor’s budget is $1.2 billion below Pelican’s RLB standard.

Implementing a robust appropriations limit and prioritizing measures to streamline government operations can help rein in unnecessary expenditures and promote fiscal discipline. By embracing evidence-based decision-making and rigorous evaluation processes, Louisiana can ensure that scarce taxpayer dollars are used appropriately.

Moreover, Governor Landry and lawmakers should explore opportunities to enhance transparency and accountability in the budgetary process. Leveraging performance audits of programs and performance-based budgeting can foster greater trust and confidence in the state’s fiscal management practices.

The Governor’s budget proposal represents a significant step in advancing Louisiana’s economic prosperity. By leveraging responsible budgeting practices and limiting spending to what is needed to fund limited government and achieve positive outcomes, Louisiana can chart a path forward that ensures its residents’ long-term flourishing. This should include using any resulting surpluses to reduce personal income tax rates annually until they are zero. While this tax relief can’t happen until next year’s tax session, the pillar of spending restraint should start now.

While there is always room for improvement, the proactive approach outlined in the budget plan sets a positive precedent for responsible budgeting to shape a brighter future for Louisiana.