By james art BATON ROUGE, Louisiana (Louisiana porthole) – Louisiana is expected to have tens of millions of extra dollars to spend after the state ended its most recent budget year with a $590 million surplus, according to the latest estimate.
Gov. Jeff Landry and lawmakers face constitutional limits on how they can spend the money. They must use half of any surplus for government reserves and pay down the government debt for retirement.
The rest can go to one-time construction projects, coastal restoration, roads, bridges and other transportation needs, but cannot be used to address Louisiana’s looming budget deficit. It cannot cover, for example, teachers’ salaries.
“Surplus funds cannot be used for recurring budget operating expenses or requirements and therefore cannot be used to resolve the upcoming FY25-26 budget deficit,” Administration Commissioner Taylor Barras wrote to lawmakers in a letter last week.
$595 million remains from the state’s fiscal cycle, which ended June 30. It was the last budget plan put together by Gov. John Bel Edwards and the former Legislature, who left office in early 2024.
Louisiana faces a fiscal deficit of at least $587 million next year mainly because of the automatic tax cuts scheduled to take effect next year.
The state sales tax is expected to drop from 4.45 percent to 4 percent on July 1, costing the state $455 million annually. At the same time, a sales tax on business services is expected to drop, among other more modest changes.
An automatic income tax cut worth $200 million to $400 million a year could also take effect in January 2026 if the state is found to have met certain revenue goals later this year. This will further increase the budget deficit to at least $787 million.
However, Landry hopes that these particular tax cuts will not materialize. The Republican governor wants to overhaul the structure of the tax system.
Under Landry’s plan, most Louisiana residents and corporations would see their income tax cut, but would continue to pay a 4.45 percent sales tax that would apply to a wider range of services. Business taxes will also be realigned.
Landry hopes to pass his tax package in a special session starting in the first week of November, although part of the plan will also need voter approval through a constitutional amendment in March.
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