Governor Jeff Landry introduced his first state budget recommendation this week. Speaking to the Legislature in a joint committee meeting of appropriators, he touted this budget as the first step in fiscal restraint that will bring about stability, while planning for the expiration of COVID-era federal funding and a temporary sales tax increase passed in 2018. The budget for Fiscal Year 2024-2025 (FY 2025, from July 1, 2024 through June 30, 2025) is $44.2 billion, which is $3.3 billion (6.9%) less than the current year budget of $47.5 billion.

In opening remarks, Governor Landry stated that this budget “right-sizes our state’s fiscal affairs.” He mentioned that Louisiana “seriously lags behind other states,” noting a Forbes report that ranks the GDP in the bottom ten of states in 2023 and the bottom five states between 2016 and 2021. USA News and World Report ranks Louisiana’s economy 50th in the nation, which according to the Governor, “that’s okay, that means we are at the bottom, and we have nowhere to go but up.” As noted in a report from the committee’s January’s budget meeting, the state is predicting declining revenues as the massive amounts of federal COVID stimulus goes away. In the meantime, state expenses are continuing to increase, which is producing a projected budgetary deficit.

The Landry administration had very limited time to prepare the budget recommendation, and most state agency requests were submitted by appointees of Governor Edwards. However, the Governor’s main budget architects, Commissioner of Administration Taylor Barras and Deputy Commissioner Patrick Goldsmith, were able quickly identified efficiencies in an effort to ensure that only programs that are legally required and are meeting their stated goals continue being funded.

The recommended FY 25 budget uses five strategies to budget more responsibly:

  1. Removes one-time spending items from the FY 24 budget so that they will not be continued into future fiscal years.
  2. Bases decisions for requested increases solely on legal requirements and demonstrated needs.
  3. Uses remaining funding for one-time expenditures, where possible.
  4. Empowers the new leaders of state agencies appointed by Governor Landry to look for efficiencies within their agencies.

The State’s general fund, which holds the tax dollars Louisianans pay to the state, decreased $230 million from FY 24. Twelve of the thirty state departments will receive additional general funds, or remain flat, over the current year, whereas the remaining eighteen will experience decreases. The decreases are largely due to the removal of one-time funding and saving $99 million each year from extra retirement debt payments made during the 2023 Legislative Session.

What are some of the increases requested in the recommended budget?

  • $198 million for a stipend for local public-school teachers, repeating what last year’s legislature provided.
  • $127 million for acquisitions and repairs of major equipment, vehicles, and other one-time purchases.
  • $62.8 million for the Department of Transportation’s Highway Program to provide additional matching dollars for federal funds.
  • $248 million for the Department of Health, primarily in Medicaid, which is replacing the loss of federal funds from additional COVID-era funding, along with additional funding for nursing homes.
  • $64.7 million for various public safety initiatives, such as operating funds for the Department of Corrections and funding for State Police to increase the number of troopers in New Orleans and for additional cadet classes. There is also funding for additional drug courts and for the Office of the Attorney General to prosecute cases in New Orleans.

How does the state spend its general fund dollars?

$5.6 billion, or 47%, of the state’s general fund is spent on education, including K-12, higher education, and early childhood programs. $3.5 billion, or 29%, is spent on human services, such as the Departments of Health, Children and Family Services, and Veterans Affairs. This leaves just 24% to fund the remainder of state government, such as public safety, economic development, infrastructure and transportation, natural resources and environment, elections, workforce development, emergency preparedness, and tourism.

Revenue and expenditure estimates show budget deficits in the coming years.

In January, lawmakers met to approve the state’s five-year projections for state revenues and expenses. These projections showed a small deficit in FY 2025 of $65 million, which the Governor’s recommended budget was easily able to absorb through responsible budgeting. However, the projections for FY 2026 and beyond show much larger deficits above $500 million each year.

How are lawmakers proposing to handle future predicted budget deficits?

There are many tools in the toolbox for lawmakers to use when facing budget deficits, and many avoid raising taxes on Louisiana’s people. Governor Landry’s administration is taking a good first step by instructing state agencies and departments to look for efficiencies, not filling unnecessary vacant positions, and ending contracts with poor outcomes.

Additionally, lawmakers have made good choices in recent years to increase the state’s savings accounts and pay off debt. The Rainy Day Fund has $974 million that’s been socked away and the Revenue Stabilization Fund has $2.2 billion from excess corporate tax collections. Both funds can be used to fill short-term gaps in revenue.

Another option that can be utilized is a mechanism that “holds back” a certain percentage of the projected revenue, rather than budgeting (planning to spend) the entire amount at the beginning.

We’re encouraged to see state leaders actively discussing and planning for potential budgetary shortfalls and look forward to working with them to find long-term solutions that will place and keep Louisiana on a path toward fiscal stability and responsibility to taxpayers.