Revenue forecasts improve; House voted to phase out tax

May 9, 2022 GMT

NEW ORLEANS (AP) — Higher tax revenue is helping add nearly $350 million to Louisiana’s general fund budget for the fiscal year that ends at the end of next month and $104 million in projected revenue for the year that starts July 1.

The state Revenue Estimating Conference adopted those projections Monday in Baton Rouge during a meeting at the Capitol.

The higher revenue projections will renew debates between Democratic Gov. John Bel Edwards and the Republican-dominated Legislature over budget priorities.

For instance, the proposed 2022-2023 budget moving through the Legislature already raises pay for teachers and support personnel. Edwards has said he believes the raises can be higher.

He reacted to Monday’s higher estimates by calling for the current raise proposals of $1,500 for teachers and $750 for support workers to increase to $2,000 and $1,000 respectively.

And he said the expected $349 million in crease in revenue for the fiscal year that is drawing to a close should be treated as a one-time windfall that should be spent on infrastructure. He renewed his push, rejected so far by legislators, to commit $500 million in one-time revenue to making an initial payment for a new Mississippi River bridge at Baton Rouge, expected to have a total cost of $2.5 billion.

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“The support for the bridge is there and, without question now, so is the money to get this project started,” Edwards said in a news release. “Once again, legislative approval is necessary to make this happen.”

Underlying Monday’s projections and the budget debates are uncertainties over the future of the national economy. Deborah Vivien, of the state Legislative Fiscal Office and Manfred Dix, of the Division of Administration under the governor, both said they were being cautious.

Vivien said her projections take into account slower growth. However, she’s not predicting a recession, citing signs of peaking inflation and Federal Reserve efforts to curb inflation without tipping the economy into recession. “I’m predicting a soft landing,” she said.

Dix, whose somewhat more conservative estimate of $104 million for next year was adopted by the panel, agreed but added, “The question is how soft.”

The four-member panel that adopted the latest projections was made up of House Speaker Clay Schexnayder, Senate President Page Cortez, Edwards’ commissioner of administration and University of Louisiana-Lafayette economist, Stephen Barnes.

Aside from numerous economic uncertainties cited by Vivien and Dix, including the Federal Reserve effort to curb inflation and the crisis in Ukraine, there is concern among lawmakers over the impending end of a 0.45% sales tax. The tax was approved in 2018 and currently brings in $420 million a year.

The tax is set to expire in mid-2025 — the beginning of the state’s 2025-26 fiscal year.

There has been little talk of trying to win renewal of the tax. There have been competing proposals on how to deal with its looming demise but one got a big boost in the House on Monday. Rep. Tony Bacala, a Prairieville Republican, won passage of his measure phasing out the tax — knocking it down to 0.30% in mid-2023; 0.15% in mid-2024 and expiring as scheduled in mid-2025.

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Another measure would have dedicated the revenue from the tax through the next three years to a new Mississippi River bridge in Baton Rouge, an Interstate 10 bridge in Lake Charles and expansion of the Interstate 49 South corridor and, possibly, other road projects. That measure was voted down by a House committee Monday morning.

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This story has been corrected to show that economist Stephen Barnes is with the University of Louisiana-Lafayette.