(The Center Square) – Louisiana has a $1 billion budget surplus and another $1 billion in remaining American Rescue Plan funds, said Commissioner of Administration Jay Dardenne, who also is “optimistic” about the state’s financial outlook for next year.
Dardenne is the top official at the Louisiana Division of Administration, the management arm of the state government, and the agency responsible for developing the state’s annual budget.
Speaking at the Press Club of Baton Rouge on Monday, Dardenne said low initial budget forecasts for the recent fiscal year ending June 30 and an influx of federal aid – both because of the COVID-19 pandemic – combined with a better-than-expected state economy in fiscal year 2021.
The result was extra money in state coffers after all bills were paid.
“The good news is the economy performed better than that forecast thought it would and the economy continued to do well throughout the year,” Dardenne said.
The main benefit of the state’s resilient economy, he said, was an increase in individual income tax and corporate tax revenues.
That doesn’t mean, however, lawmakers will have free rein over how to spend the revenue bonanza. The Louisiana Constitution has specific provisions relating to the surplus, including a requirement that will send nearly $350 million to the state’s Revenue Stabilization Trust Fund.
Dardenne said the constitution also requires 25% of the remaining $650 million to be saved for future budget shortfalls and another 10% must go toward funding that state’s pension liabilities.
Chicago-based fiscal watchdog Truth in Accounting said Louisiana has billions of dollars in unfunded pension obligations that lawmakers are able to keep off-the-books because of deferring payments to future years.
Legislators will decide how to spend the remaining pot of money during next year’s regular legislative session.
“We’ll recommend that money be divided evenly between coastal projects, deferred maintenance projects within the state – primarily on university campuses – and the Department of Transportation and Development to go to the backlog that we have on our roads and bridges,” Dardenne said.
The Legislature also will decide how to spend roughly $1 billion in unspent federal ARPA funds.
The Louisiana Budget Project, a nonprofit that advocates for low- to moderate-income families, said Louisiana has received $5.18 billion in ARPA funds since March for the express purpose of filling state and local government budget gaps because of the pandemic.
Within that mandate, state lawmakers have broad discretion about how to allocate the funds, the group said, though financing tax cuts and pensions are not allowed.
The Louisiana chapter of the National Federation of Independent Business has said a portion of the financial windfall should go toward replenishing the state’s unemployment trust fund.
“We urge [the Louisiana Legislature] to use some of these funds to return the UI Trust Fund to its pre-pandemic level,” NFIB Louisiana tweeted Tuesday morning.
The state’s unemployment trust fund balance was $1.1 billion before the pandemic, but a recent analysis by Washington-based Tax Foundation, shows Louisiana’s unemployment trust fund is down to $307 million.
The reduced fund will not lead to unfilled benefits for unemployed workers; rather, businesses could see higher taxes to keep the fund solvent in more financially stressed times.
“The good news is I think we will have a significant amount of money to spend, and I hope and believe that we will spend it wisely,” Dardenne said.