BATON ROUGE, La. (BRPROUD) — Louisiana’s economy is once again performing better than originally predicted and now there are hundreds of millions of dollars extra in the budget that need to be spent.
Economists told the Revenue Estimating Conference Monday they’re projecting an additional $350 million to go into the state general fund for FY2022. Now starts the debate of what to spend that money on.
The budget has already cleared the House of Representatives, so the Senate will get the first bite of the apple when it comes to deciding on how to spend the extra dollars.
Part of why there is the extra money is due to sales tax. There is a lot of buying going on right now that the economists believe could be to people spending money they saved during the pandemic. With a major bounce back from the pandemic, the last couple of fiscal years has been fruitful financially.
“FY22 is shaping up to be a good revenue year. The question is, and I don’t want to get ahead of myself, is this the new baseline, or is it somewhat of an anomaly,” said Manfred Dix, economist for the Division of Administration.
There has been talk of a fiscal cliff looming with economic growth slowing and the temporary half-cent sales tax rolling off in 2025. There was a 6% growth in revenue from last year to now. Next year it is expected to stay the same and plateau.
“It’s going to continue positive growth but at a slower rate through calendar 23. Which gets you through fiscal 23 and into 24. In the middle of about FY24 we will level off close to our typical inflation,” said Debbie Viven, chief economist for the Louisiana Legislative Fiscal Office.
State economists said they don’t believe it will be a severe fiscal cliff as some have feared.
“I am not forecasting a recession even though I am sure you’ve heard recession talk out there. I’m forecasting a soft landing,” Vivien said. “I’m saying that right now we’re peaking in our inflation. What the feds are doing they’re coming in with some aggressive moves on interest rates and quantitative tightening.”
The leveling out of the growth and FY22 looking to be an anomaly year which makes some nervous to increase the teacher pay raises from $1,500 to $2,000 as proposed by the governor. The Commissioner of Administration once again made a push for funds to be put towards a new Mississippi River Bridge with those additional funds. He said there is still enough money to put focus on Lake Charles as well. Jay Dardenne said he hopes to put back the $26 million that the House removed for supplemental payments to first responders.
The Speaker of the House said that the budget is now in the hands of the Senate so it will be up to them to decide the next steps on if the teacher pay raise will be increased.
Governor John Bel Edwards released the following statement:
“The increased revenue forecast by the Revenue Estimating Conference this morning, an additional $349 million for the current budget year and $104 million for the next fiscal year, is great news for the people of Louisiana. It provides a clear pathway for increasing teacher pay and providing the down payment necessary for the new Mississippi River Bridge that will benefit our entire state,” said Gov. Edwards.
“These new projections mean that the pay increases I’ve proposed for teachers ($1,500) and support personnel ($750) could rise to $2,000 and $1,000 respectively. To pay for the well-deserved pay hikes, it would require $50 million of the $104 million increase in recurring dollars estimated for next year. But this will only happen with legislative approval, which has been my hope and expectation all along. Our teachers and support staff are the backbone of our education system, and we have all learned in these last three years especially that they are valuable beyond measure. While they certainly deserve more, this would be another step toward getting them closer to the Southern Regional Average.
“Equally important is letting the federal government and private business know that we are serious about our commitment to building the new Mississippi River bridge. The $349 million is one time money that should be used for one time expenditures such as infrastructure. The support for the bridge is there and, without question now, so is the money to get this project started. Once again, legislative approval is necessary to make this happen. It is vital to our economy, serving as a connector to the world for big and small businesses, various industries, employees, visitors, and so much more. Our education and infrastructure systems have long been plagued by funding issues, and we now have the opportunity to make significant investments in both that will be transformational for our state and our citizens. I encourage lawmakers to take full advantage of where we are today and where we want Louisiana to be for future generations. The seeds we plant today will yield the harvest we all want in years to come.”Governor John Bel Edwards