Surplus puts question of raising spending limit

BATON ROUGE — The Legislature convenes Monday for the start of the 2023 session, and lawmakers, blessed with a large budget surplus, are at odds about whether they should raise the state’s spending limit.

Thanks to an influx of federal dollars from hurricane and pandemic relief and an increase in revenue from a temporary 45-cent sales tax hike, the state is expected to have a $1.6 billion surplus, and the fight over the expenditure limit will greatly influence how much of that money is spent.

The state Constitution requires a portion of the surplus to go into a rainy day fund and other savings, leaving the Legislature with about $500 million in additional spending power without exceeding the cap.

In a recent Public Affairs Research Council webinar, Senate President Page Cortez, R-Lafayette, said he favors increasing the spending cap if the money goes toward one-time expenses. That could include transportation infrastructure projects and the revamping of water and sewer systems, he said.

Sen. Gerald Boudreaux, D-Lafayette, chairman of the Senate Democratic Caucus, generally agreed with Cortez, noting that some parameters should be in place for lawmakers to raise the expenditure limit.

Boudreaux also said lawmakers need to hear from constituents on how to spend the excess revenue. But he also said he supports the teacher pay raises of at least $2,000 under Gov. John Bel Edwards’ proposed budget.

Cortez called it a “disservice” to let the majority of the surplus go into the rainy day fund and other savings instead of budgeting more money for projects and services, like early childhood education, that will immediately benefit Louisianans. He favored using some of the money to offset rising costs on infrastructure projects caused by inflation.

Still, other lawmakers are hesitant about raising the expenditure limit.

Rep. Jack McFarland, R-Winnfield, chairman of the Louisiana Conservative Caucus, said he is not in favor of increasing the spending cap and thinks other things, like paying off hurricane debt, can be accomplished without raising it. He also pointed to the anticipated loss of up to $900 million when the temporary sales tax increase ends in 2025.

“We still haven’t officially addressed that shortfall,” McFarland said. “Some of the things that will inform our financial well-being going forward we don’t know yet.”

McFarland is not alone in his thinking. Rep. Blake Miguez, R-New Iberia, also has pushed back against Gov. Edwards’ proposed budget, questioning if the expenditures could leave the next governor facing another deficit when the sales tax increase expires in their second year in office.

Other Republican lawmakers will undoubtedly join McFarland and Miguez in their hesitation. They think that Edwards’ successor is likely to be a Republican, and they do not want to see their party face a hole in state revenue two years from now.

In proposing his budget for fiscal 2024, Edwards acknowledged the potential ramifications of the sales tax expiration. But he said the state’s economy seems to be on solid ground, and the next governor would have ample time to handle any changes that may come.

McFarland said conservative lawmakers support some kind of teacher pay raise. But said he would like to see more local participation in those raises and worries about the recurring cost of them.

Under Edwards’ proposal, school support workers would receive a $1,000 pay raise, and teachers could receive an additional $1,000 raise, bringing their total to $3,000 a year, if the state’s Revenue Estimating Conference increases its revenue projections in May. State Commissioner Jay Dardenne said this would cost the state about $74 million annually.

Rep. Richard Nelson, R-Mandeville, has pushed a proposal to eliminate the state income tax, citing the growth of states like Texas and Florida that do not collect income tax. Nelson, who is running for governor, has already prefiled bills to eliminate the corporate and personal income taxes, which account for nearly $5 billion in revenue.

McFarland said it would be unrealistic to get rid of this tax, though, and Cortez said he does not think its elimination is likely.

In the webinar, lawmakers also discussed proposals to clarify medical exceptions to abortion bans and legalize recreational marijuana. But Cortez said these are also unlikely to gain much traction this year.

Boudreaux expressed support for a legislative pay raise. Rep. Joe Marino, I-Gretna, has filed a bill to increase legislators’ annual pay from $16,800 to $60,000, which would be the first raise for Louisiana lawmakers in more than 40 years.

“I think we get what we pay for,” Boudreaux said.

More than 800 bills have already been prefiled ahead of the session that must end no later than June 8.

This session is limited mostly to tax and budget issues, and each lawmaker cannot introduce more than five non-fiscal bills once the session starts.