Mention the state is going to have a budget surplus and conservatives immediately begin talking about cutting taxes. What they conveniently ignore is the fact that surpluses in Louisiana help the state reduce its debt quicker, replenish the state’s rainy day fund and pay for long-neglected maintenance of state buildings and highways.
The Legislature at this year’s fiscal session used $308 million from the previous fiscal year and $110 million from the fiscal year that ended June 30 to fund a number of critical areas.
The state’s rainy day fund received $77 million and about $30 million helped pay down pension debt called the UAL (unfunded accrued liability). Another $55 million went to coastal erosion, and $145 million was used for things like maintenance of state buildings and highways.
The $110 million surplus from the year ending June 30 was used to pay $25 million towards FEMA debt, $12.5 million to pay court judgments to those who won suits against the state, $18 million to the Department of Corrections and $7.8 million on a new software system for state government.
The Legislature in 1993 began restricting the ways state surpluses can be used. A constitutional amendment approved by voters that year said it could only be used to pay off state debt. In 1998, voters approved an amendment expanding the use of surpluses for one-time capital outlay projects.
Those who are quick to call for tax cuts know the state has some serious debt and funding problems, but they are worth repeating.
reported in 2017 that state and local governments have retirement debt (those UALs) totaling over $6 trillion. The report said that is a whopping $18,676 for every man, woman and child in this country. Louisiana’s four major state retirement systems have $18 billion of that UAL.
Tennessee’s UAL is the lowest in the country at $7,601 per capita. Alaska’s is the highest at $45,689 per person. Louisiana comes in at No. 36 with a $21,412 UAL per person.
Thirty years ago, Louisiana voters approved a constitutional amendment calling for retirement debt to be retired by 2029. State Rep. Kevin Pearson, R-Slidell, and chairman of the House Retirement Committee, said the original debt will be paid, but the systems won’t be debt-free because UAL will always be created.
Barry Erwin, president and CEO of the Council for a Better Louisiana (CABL), makes a good point about what paying off that debt means to state government. He said the annual UAL payments with tax revenues divert money from the state general fund that is needed for critical projects.
State money used in 2018 to make a UAL payment for the Louisiana State Employees Retirement System (LASERS) totaled $625 million. The total this year is $677 million. Those are funds that would go a long way in helping to build new roads and bridges and maintain other infrastructure projects at ports and other state facilities.
The state’s road and bridge construction and maintenance backlog now totals $14 billion. Another $15 billion is needed to build new roads and bridges like the Interstate 10 bridges that are long overdue at Lake Charles and Baton Rouge.
How can anyone honestly call for cutting taxes with monumental debts and needs like those? Unfortunately, they do it strictly for political reasons.
Efforts were made at the recent legislation session to begin lowering a state sales tax increase of 0.45 percent approved in 2018, but they were unsuccessful. The tax increase is already scheduled to go off the books in 2025.
The extra revenues helped many areas of state government that had seen their budgets reduced for nearly a decade. Higher education, K-12 education and early childhood education were major beneficiaries.
Thanks to surpluses and the sales tax increase, state general fund revenues increased by only $246 million
(2.6 percent) over the previous year to nearly $9.9 billion.
Another extremely small state surplus of some $300 million has been forecast for the fiscal year that ended June 30. The surplus should be applauded rather than seen as a cause for cutting taxes that are some of the lowest in the country.
Greg Albrecht, the Legislature’s chief economist, said the surplus probably comes for the same reasons there was a surplus last year. State citizens paid increased personal income taxes then that were caused by a federal tax cut and increased standardized deductions. Albrecht said sales taxes aren’t playing a role in surpluses because they were weak last year and have remained weak.
Rather than lowering taxes, those legislators who will be elected this fall should give their highest priority to tax and budget reform. That is how you can reduce taxes. Taxpayers were promised reform would take place in 2017, and they are still waiting.
Meanwhile, we should thank our lucky stars that another surplus means the state can continue reducing some of its monumental debts.