Louisiana May Face Tough Budget Decisions Because Of Lower Tax And Fee Collections

By Julie O'Donoghue, the Louisiana Illuminator

January 19, 2021

Louisiana state tax and fee collections will not return to their pre-pandemic levels until at least 2022 or later, according to estimates released from the two state economists who calculate the state’s revenue projections.

General state tax and fee collections are expected to be lower overall for the next 18 months than they were in last budget cycle because of COVID-19, the economists predict, making it more likely that the state government will have to make budget cuts later this year.

Louisiana’s Revenue Estimating Conference projected Tuesday (Jan. 19) that the state will take in about $380 million less in general funding in the current budget cycle than it did in the previous budget cycle, which ended June 30. Some of that has already been backfilled by moving $90 million from a reserve “rainy day” fund into the state’s general budget.

But the depressed revenue is expected to continue into the next state budget cycle too. Revenue collection for the general fund in the last budget cycle was $9.8 billion and is only expected to be $9.5 billion for the cycle that starts July 1, according to the state’s latest official estimate.

These drops in revenue would normally mean the state would have to prepare for major budget cuts. But it’s not yet clear whether federal pandemic funding could offset any losses the state experiences and help Louisiana avoid deep cuts.

The Associated Press reports that Louisiana is supposed to receive $2 billion from the package passed by Congress in December to deal with the coronavirus, but the federal government could attach restrictions on how that money can be used.

A previous round of funding approved last spring could not be used directly to make up for losses in state tax revenue. That made it harder to use the funding to cover the downturn in state tax and fee collections from the pandemic-related recession.

Once President-elect Joe Biden takes office, Congress could also put even more federal funding relief on the table — and that could also affect how large any state budget cuts would need to be.

State budget cuts typically hit higher education and health care services hardest. Many other areas of spending are protected by state law, making them harder to slash. That results in higher education and health care bearing the brunt of most economic downturns in Louisiana.

The Louisiana Illuminator is an independent, nonprofit, nonpartisan news organization driven by its mission to cast light on how decisions are made in Baton Rouge and how they affect the lives of everyday Louisianians, particularly those who are poor or otherwise marginalized.