The Legislature concluded its first special session of the calendar year last week with a balanced budget, but that doesn’t mean the COVID-19 pandemic and economic downturn are done with us — or state government.
A mid-year deficit could be in the cards if revenue collections, unemployment figures and industries like and oil and gas don’t rise back to traditional levels in the coming months. Hurricane season could always knock us off course, too, but hopefully not. The budget for next fiscal year, meanwhile, could be worse than the version lawmakers recently voted on. The new tax breaks and incentives adopted during the special session will cost Louisiana at least $20 million next fiscal year, if not more.
The upcoming 2021-2022 budget should be a cause for early concern, especially since this year’s saving graces — money from the so-called Rainy Day Fund and $900 million in relief from the federal government — won’t be able to make the same kind of dent.
With so much uncertainty having over state government it should surprise few that another special session of the Louisiana Legislature in the fall is highly likely. This would be triggered by either Congress directing more aid to the the state (another stimulus is anticipated) or the current budget requiring more changes. Other policy topics could sneak onto the year’s second special session call. This most recent call featured 41 areas for lawmakers to tinker with, and which was drafting largely by a pro-business legislative task force.
Some Democrats have voiced an interest in seeing the some of the second special session’s policy approaches crafted by the governor’s task force, which was similarly formed to help guide the state through our time with the Coronavirus and the resulting economic tumble.
New moving pieces to the budget puzzle are surfacing almost weekly — and there are a lot of moving pieces. The volume of tax collections will be greatly influenced by what happens in the oil and gas sector, and by whether tourism and the service industry rebound sooner rather than later.
The judicial branch is hoping for more state funding this fiscal year. State workers have been asked to wait on promised pay raises, which may never materialize. Agency and department heads are wondering if they’ll be forced to make enhanced pension contributions, which is possible due to tough times on Wall Street.
The role of the Revenue Estimating Conference will be as important as ever as the state plows forward. Politicos from all over Capitoland will be eager to hear what the REC has to say next, since it’s charged with determining how much the state has to spend.
Local government officials are between a proverbial rock and a hard place. Secretary of State Kyle Ardoin knew that back in May, when he started asking around about how the economic downturn could alter local tax revenue in terms of ballot initiatives.
At the time, he urged the Legislative Auditor’s Office to mix that factor into their study models on local government funding implications, but his concerns were largely overshadowed by a variety of other, more pressing issues that were driving the day.
Will voters soon begin rejecting more tax renewals?
Will tax elections have to be put on hold?
If so, how would this impact local government budgets?
Last week we saw the first signs of a possible trend when Lafourche Parish school officials decided to delay a half-cent sales tax question for teacher salaries. The Nov. 3 ballot initiative was supposed to generate $7.3 million annually, but now no one is sure when voters will get to decide.
As Lafourche officials have spread the word that the decision postpones and doesn’t cancel the initiative, they’ve also taken care to explain that the economy was the culprit. If other local government entities follow suit, they’ll need to make their intentions known soon. Missing the November ballot would push local governments onto either the winter runoff ballot or into next year’s election cycle.
Having to wait for funding until the next budget year can be brutal for local and state government officials. But that’s the ballgame right now. Department heads and judges and teachers and every citizen of the state are waiting.
Those most closely attached to the state budget process know full well the fight isn’t over. Yet it’s also fair to say the real waiting game has most certainly started.
Jeremy Alford can be reached at JJA@LaPolitics.com.