The 2023 regular session of the Louisiana Legislature is underway, and it should be interesting. There will be a lot of discussion about money because there is a lot of money to spend, but also debate about taxes and other issues around state finances.
This is a “fiscal session” which occurs in odd-numbered years. As the name implies, the purpose is to focus on fiscal issues which could include dealing with taxes and fees, but also dedications and other matters involving revenue. As such, lawmakers can introduce as many fiscal bills as they want, but they’re limited to just five bills on matters of a more general nature.
It also means it’s a shorter session, lasting only 45 legislative days as opposed to the 85-day sessions in even-numbered years. And there are fewer bills. The 829 bills filed so far represent just over half the number introduced in the longer session last year.
On the good news side, the state has a lot of money on the table. It comes primarily from federal pandemic relief, but also about $1.6 billion in state funds that are basically unexpected revenues that came in when tax collections exceeded projections. In a sign that lawmakers can learn from past mistakes, most of those revenues are not being used to grow government operations, but are being targeted to one-time expenses like infrastructure, coastal projects, repairs of aging state buildings, and paying down debt in retirement systems. That’s a good thing.
There is also a requirement to put some of that money in the state’s Rainy Day Fund which when transfers are made should have a balance of more than $900 million, the most in its history. That pairs with a relatively new savings account called the Revenue Stabilization Fund which receives deposits when mineral or corporate tax revenues reach a certain threshold. That fund now has just over a billion dollars in it.
In fact, the state is so flush with money that there will be a significant debate this session about whether the Legislature should vote to break its self-imposed spending cap to allow it to spend all that money or whether to hold some back.
But there are darker fiscal clouds on the horizon. A temporary .45-cent sales tax is set to expire for the 2026 fiscal year. At the same time, more than $300 million in vehicle sales taxes are being phased out of the State General Fund for regular spending and dedicated to the Transportation Trust Fund for infrastructure. The combined hit to the general fund in just a couple of years is almost $800 million.
Continued growth in revenues and wise spending of some of the current dollars can mitigate the problem, but you can already hear the concern in the voices of some legislators worried about yet another possible fiscal cliff.
On the tax side, legislation to get rid of the personal income tax is grabbing the most headlines, but saying that’s a very longshot to pass is still being overly-generous. But there are substantive proposals on the table to restructure or phase out a number of corporate taxes that are largely seen as bad tax policy which needs to be fixed. These include changes to the Industrial Tax Exemption Program, and getting rid of corporate franchise and inventory taxes.
The challenge there will be doing it without busting the state budget, easing the concerns of local governments that would be affected, and smoothing out the impact on both the winners and the losers. Whatever happens, it’s a debate worth having because even though we remain a relatively low tax burden state, we have a complicated tax structure that hurts our competitiveness.
In education the big debate will be about teacher pay raises. The governor is asking for a $2,000 per year increase which he would like to grow to $3,000 if more funds are recognized by the Revenue Estimating Conference. While most legislators favor pay raises, future budget concerns will likely produce a lengthy conversation about how much it should be.
Also look for a spirited discussion about Education Savings Accounts, a school choice concept that is gaining traction in some states. ESA programs allow parents to take their children out of public schools and pay for their education in other settings with the state funds that would have otherwise gone to their local school district. Two limited ESA bills passed last year, but were vetoed by the governor. The big debate this year will be over a much more expansive approach to ESAs.
There will be other issues, too. Insurance will get a lot of attention as will concerns about public safety. Home and commercial insurance has become unaffordable for many in disaster-prone areas of the state. While there are no easy solutions to that problem, lawmakers will be looking at several ideas to at least lessen some of the impact.
Public safety is another difficult issue that’s on the minds of many. There is often little a state Legislature can do to reduce crime, but legislators will try. The challenge will be passing legislation that sends a message that officials are trying to address public safety concerns, without doing damage to recent criminal justice reforms. The reforms were focused entirely on non-violent crimes, and though they led to a significant decrease in the state’s prison population, there is no evidence to date that they had anything to do with increases in violent crime.
The final thought about this session is that it comes in an election year. Typically, that means you can see the extremes of hot-button, emotionally-charged issues in the spotlight, along with legislators up for re-election who want to keep their heads low and not rock the boat.
The result is that big things don’t usually happen at the Legislature when most lawmakers are also running for office. But sessions like this sometimes set the stage for more meaningful debates to come. Whatever happens, the hope is we won’t see the level of political turmoil we have seen in some other states and the focus will be, where it always should be, on making Louisiana a better state for all of its citizens.