While most states, particularly southern states, see growing populations, booming job markets, and incoming families and businesses, Louisiana continues to struggle with tepid economic growth and declines in population. This must change.

Louisiana families and businesses are hungry for tax relief. They also want an assurance that state government will use the tax dollars they collect responsibly. Tax reform that encourages growth and treats individuals and businesses fairly can spark an economic revolution in Louisiana. It can also serve as an incentive to attract and keep people here. Following years of short-term thinking, policymakers have an opportunity and responsibility to embrace a more comprehensive, holistic approach that will modernize Louisiana’s tax and budget policy, bringing long-needed fiscal stability, economic growth, and opportunities for our citizens to flourish.

However, fiscal stability is hard to come by: Louisiana is continually challenged with balancing the budget, in part, from a system riddled with dedicated funds. These funds lock away taxpayer dollars for specific purposes, limiting lawmakers’ ability to prioritize scarce resources. These dedications severely restrict budget flexibility and hinder efforts at setting priorities and comprehensive tax reform.

Imagine a household where a significant portion of a family’s income is automatically reserved for specific expenses, leaving little room for unforeseen costs or changing priorities. This is essentially what dedicated funds do to a state budget.

Dedicated funds create what are commonly referred to as budget silos. These silos effectively lock up funds for particular expenditures, with minimal oversight from legislators. Such a setup significantly constrains the ability of both current and future elected officials to adapt to changing fiscal circumstances and allocate resources according to evolving priorities.

These silos come in three primary forms:

1.Dedications of taxes, licenses, and fees: Nearly 25% of state tax revenue is automatically diverted to specific purposes before lawmakers even get a chance to consider how best to allocate it. This reduces the flexibility of the state’s general fund, the pot of money used for core government services. The continued dedication of revenue streams, exemplified by the most recent dedication of the vehicle sales tax and others in 2021, worth over $300 million annually, further exacerbates this problem. While individual dedications may appear inconsequential, their cumulative effect diminishes the discretion of future legislatures.

2.Statutory Dedications: These “special purpose funds” are typically funded through permits, fines, or fees and often operate without adequate oversight. With over 450 such accounts in Louisiana, and growing each legislative session, the proliferation of statutory dedications erodes budgetary flexibility and impedes comprehensive planning.


3.Non-discretionary expenditures: Mandated by constitutional or statutory requirements, these expenditures reduce legislative flexibility. A staggering 71% of the state general fund falls within this category, leaving very little room for lawmakers to address emerging needs. With a significant portion of funds tied up in non-discretionary allocations, lawmakers are left with limited maneuverability in addressing pressing needs and responding to economic challenges.

Past legislatures have attempted to address this, periodically reviewing the use of and need for statutorily dedicated funds. However, political considerations and vested interests often undermine the effectiveness of such measures. Additionally, the lack of mechanisms to repurpose funds during budget crises exacerbates the problem, leaving lawmakers with few options beyond raising taxes or cutting essential services.

To address these challenges, lawmakers must undertake comprehensive reviews of all dedicated funds, including those enshrined in Louisiana’s state constitution.

Revising non-discretionary expenditures and reducing the proliferation of dedications would allow for greater flexibility in budgeting, increase transparency, and enable more responsible allocation of taxpayer money.

Such reforms are crucial for providing limited government that aligns spending with the state’s priorities and facilitating comprehensive tax reform that fosters economic growth.

Louisiana cannot afford to remain trapped in a system of inflexible budgets. Legislators should refrain from creating any more dedications and prioritize a comprehensive review and reform of this system. Then the state can unlock the ability to create a more responsible budget, provide much needed tax relief to its citizens, and position itself for long-term economic prosperity.

The time for action is now. Lawmakers must demonstrate the leadership necessary to break free from the silos and build a budget that serves the best interests of Louisiana citizens, not Louisiana government.