The Advocate. December 19, 2022.
Editorial: Once again, will Legislature be future-foolish?
When it was approved by a modest 54% of voters in 2016, the Revenue Stabilization Fund was a big win for Walter Leger III, then a New Orleans state representative, who proposed the complex idea.
In the free-spending mañana world of the Louisiana Legislature, the idea of putting money into a savings account didn’t have a lot of appeal to begin with. But the amendment passed anyway.
And it’s worked, although maybe not fully in the way expected: Higher revenues in volatile tax categories, chosen because they fluctuate a lot, have indeed been flowing into the fund. As the Public Affairs Research Council reported, more than $1 billion in higher-than-usual business tax collections have been placed into the trust fund intended to stash away big years from the fluctuating category of corporate income and franchise taxes.
That last is something of a surprise, and the way that the fund is not working out exactly as expected. Corporate income and franchise are unpredictable taxes, true, but in an oil-and-gas state like Louisiana, most folks probably expected a spike in revenues to come from energy tax collections, part of the original plan.
Instead, the oil-price slump that began in late 2014 has eased over time but not enough to prompt a boom that would have filled the Leger fund with energy revenues. Nevertheless, over the last two years of an economy recovering from the pandemic, $205 million was deposited in the 2020-21 budget year and another $802 million in the fiscal year that ended June 30. That boom is slowing, but PAR said the state is projected to send at least another $50 million to the fund from the current budget year.
How is the fund supposed to work? Once it reaches $5 billion, which will be a while even as post-pandemic revenues continue to go up, lawmakers can spend a portion of it on infrastructure — roads and bridges, state buildings and so on.
God forbid that we have another pandemic crash and then recovery, although it’s good to have the trust covering unusual spikes in both business and energy revenues. But what now?
PAR is worried, because the mañana attitude toward state finances still exists: “(T)he constitutional provision also lets lawmakers use the money in an undefined emergency or change the minimum fund balance triggers by getting a two-thirds vote of the House and Senate.”
State elections are next year. If legislators are too often short-term thinkers — Leger was quite an exception — the impulse to cut taxes to curry favor with voters is probably stronger in 2023.
For the moment, legislators still have a recovering economy to buoy spending on popular one-time expenditures like roads and bridges, or repairing leaking water pipes, or other projects. After the Leger fund and other constitutional deductions, PAR said there’s about $473 million to spend on construction projects, road and bridge work, coastal restoration and other one-time items.
Look just a bit head, though, and some short-term tax increases expire. They were approved by legislators and Gov. John Bel Edwards to deal with last decade’s budget failures.
Pandering lawmakers, or a new governor, could balk at renewing part of these measures, without ensuring with other tax reforms that the budget is balanced. That would force spending cuts akin to those in Gov. Bobby Jindal’s administration.
That’s a political emergency, but not a real fiscal issue. Louisiana still needs more comprehensive tax reforms.
Again, PAR should be heeded: “If the savings account is used as a short-term budget fix, policymakers will squander another opportunity to put Louisiana on solid fiscal ground.”
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