This story was first reported by Louisiana Illuminator and republished with permission.
As expected, Gov. John Bel Edwards and Louisiana lawmakers were not on the same page Tuesday about how the state should spend billions of dollars in additional, unexpected revenue.
Edwards unveiled his state spending proposal this week, kicking off a season of negotiations with lawmakers that could last until June. The budget will go into effect July 1, the start of Louisiana’s budget year.
The governor and lawmakers are forecasting $2.1 billion in “one-time money” – funding that won’t be replenished – over the next 18 months. They also have $1.7 billion more in recurring revenue to spend than initially expected.
Edwards and legislators both want to prioritize bridge and road construction and pay off state debt, but they don’t agree on the specifics of the plan yet.
“Everyone in the room has a different idea on how to spend the money,” Senate President Page Cortez, R-Lafayette, said at a budget hearing Tuesday.
The following questions will be key to the budget debate over next few months:
How far will Edwards get with his new Mississippi bridge proposal?
The governor took a big swing when he proposed setting aside $500 million for a new Mississippi River bridge in the Baton Rouge region.
South Louisiana’s business community has wanted the bridge for decades, believing it will lead to economic growth throughout the state. But it’s expensive – between $1 billion and $2 billion.
Edwards has some support in the Legislature for the project. House Speaker Clay Schexnayder, R-Gonzales, told The Advocate he backs the governor’s proposal. The speaker lives in Ascension Parish, an area poised to benefit from a new bridge.
Other Republican leaders in the Legislature seemed cold to the idea. Cortez said he isn’t sure so much money should be set aside for a project that isn’t expected to get underway for several years. The state hasn’t even settled on a location for the bridge, he said.
Senate Finance Chairman Bodi White, R-Baton Rouge, said he’s afraid lawmakers will “raid” the $500 million bridge fund if they face a future budget shortfall.
“I just don’t see how we hold that money for years and years,” White said.
Will the governor and lawmakers be mindful of the fiscal cliff?
Edwards and lawmakers have all said they intend to take a conservative approach to state spending, despite being flush with cash, so as not to cause a fiscal shortfall in future years.
They have said they want to focus most of their new money on one-off projects, those that won’t increase state spending in the years to come. These typically include road, bridge, technology and building projects.
There’s also some concern that tax revenues are artificially elevated this year because of money the federal government has pumped into the economy for the pandemic as well as hurricane recovery spending.
After Hurricane Katrina, Louisiana saw a similar surge in revenue when people had to spend money to rebuild their homes and businesses. That revenue boost led lawmakers to pass a massive income tax cut. When state revenue eventually dropped back down to normal levels, Louisiana sank into a years-long budget crisis. It no longer had enough tax revenue and legislators were unwilling to cut more spending.
Even without radical changes in spending or taxes this year, another fiscal cliff is already on Louisiana’s horizon.
In 2023, the state will start diverting money from a fund that pays for K-12 schools, higher education, and health care services so it can spend more on transportation projects. Other money will be needed to make up for for the education and health care funding loss.
In 2025, an automatic drop in the state sales tax of 0.45% will take effect. Sales tax revenue is primarily used to pay for K-12 schools, higher education and health care services. The state doesn’t have a way yet to fill the financial hole this tax cut will cause.
Will conservative lawmakers push a tax cut?
In spite of the looming fiscal cliff, Sen. Sharon Hewitt, R-Slidell, broached the issue of further reducing taxes because of Louisiana’s revenue boom.
Republican leadership hasn’t been receptive to that idea. When asked about the possibility of a tax cut, Cortez said one is already scheduled in 2025 when the sales tax rate drops.
How big will Louisiana’s K-12 teacher pay raise be?
Edwards has suggested Louisiana increase K-12 school teacher pay by at least $1,500 and school support staff pay by $750 annually.
While lawmakers agree teachers deserve to be paid more money, a few question whether the governor’s proposal is fiscally responsible.
If Louisiana’s tax revenue is in the middle of a temporary surge, the state might not want to add to its expenses for years to come with a teacher pay raise, they said. The increases would cost the state an extra $148 million annually for years to come.
“The reality is it is going to be tough to consider such a substantial teacher pay raise,” House Appropriations Chairman Jerome Zeringue, R-Houma, said in an interview Monday.
Will low-wage workers make more money?
Edwards has proposed spending more money on early childhood education and services for people with disabilities, in the hopes it will raise wages for people working in those fields.
Businesses that provide at-home assistance to people with disabilities have said they are having problems finding staff because they can’t offer a competitive wage with the money they get from Medicaid.
The Edwards administration is hoping to direct an extra $31 million to those wages. The extra money will increase pay from about $13 per hour to $18.50 per hour. Several conservative lawmakers also support this proposal.
How much money will go toward Hurricane Ida recovery?
Neither Edwards nor lawmakers have mentioned it much publicly, but legislators have said in interviews they want some of the state’s extra funds directed to areas hard hit by Hurricane Ida. The Bayou Region, in particular, is struggling to rebuild. Two members of legislative leadership, Speaker Pro Tempore Rep. Tanner Magee, R-Houma, and Zeringue, represent the area.
How much will be spent on university maintenance?
The governor has proposed $109 million for “deferred maintenance” of state buildings. This includes construction projects on Louisiana’s college campuses, though the money could be used for other state buildings as well.
Cortez has expressed an interest in using more state funds for significant construction needs at state colleges and universities. A few schools have libraries that leak or flood. Southern University has an erosion problem along the Mississippi River that is threatening to make some of its buildings uninhabitable.
Will flood victims finally get money the state owes them?
The governor has suggested spending $60 million on outstanding legal judgments against the state.
The largest of these judgments involves more than 100 residents and business owners in Tangipahoa Parish whose properties were destroyed in a 1983 flood. The damages total $300 million, though plaintiffs have been willing to settle with the state for less than half that amount.
Last year, Edwards and the Louisiana House agreed to start paying the residents, business owners and their survivors a portion of the money owed, but the Senate balked. At the time, Cortez said the Legislature shouldn’t set a precedent of paying large judgments against the state.
Edwards and lawmakers haven’t mentioned pet projects yet, and they aren’t likely to show up in budget documents for several weeks.