REC Meeting 011921

Louisiana will have $228 million less to spend in the multi-billion dollar state budget that will be crafted in the coming months, after the state Revenue Estimating Conference on Tuesday, Jan. 19, 2021 agreed to a revenue forecast that assumes recovery from the pandemic will be slower.

Louisiana will have $228 million less to spend in the multibillion-dollar state budget that will be crafted in the coming months, after a state panel agreed Tuesday to a revenue forecast that assumes recovery from the pandemic will be slower.

But with more aid likely from the Biden White House and a better-than-expected economic performance in recent months, the state budget could be pieced together without major cuts as the governor and lawmakers begin the process of creating the state’s spending plan.

Still, economists are facing unprecedented challenges in forecasting how much the state will collect in various taxes and fees because of the pandemic, which health officials hope will be beat back this year through mass vaccinations. And it’s not yet clear how much money Louisiana will receive from another federal aid bill.

“I think it’s all sort of wait and see,” said Senate President Page Cortez, a Lafayette Republican.

“We’re probably going to be OK next year,” he added. “It’s the out years that we’ve got to get the economy in gear.”

The Revenue Estimating Conference voted to recognize about $9.6 billion in total revenues flowing to the state general fund for the fiscal year that begins July 1, which is money available to spend by lawmakers and the governor. That is a downgrade of $228 million from the previous forecast, and represents $223 million less than the state brought into the general fund last year.

Commissioner of Administration Jay Dardenne, Gov. John Bel Edwards’ chief budget adviser, will use the new funding numbers to craft the first version of the state budget that will be debated by lawmakers. Dardenne said the first draft, due in February, will likely include proposed cuts, though those may be taken out if Congress and President-elect Joe Biden swiftly send federal aid to state governments, as expected.

“We’re hopeful there will be some relief from the fed government,” Dardenne said. “But we can’t assume we're going to have that money.”

Last year, the state used roughly $900 million in federal aid to plug holes in the state budgets for the previous and current fiscal years.

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In the current fiscal year, which ends June 30, economists said federal aid helped buoy the state’s revenue collections, after Congress and the Trump administration agreed to stimulus checks, boosted unemployment and other aid. The panel voted to recognize an increase of $292 million in the current year compared to the previous forecast, though that is still a drop of $289 million from the actual money received last year. And that includes $90 million in funds that lawmakers and Edwards agreed to use from the state’s rainy day fund to help stave off cuts.

“The income support we’ve gotten from the federal government is what has gotten us to where we are today,” said Greg Albrecht, an economist for the Legislative Fiscal Office.

The Legislature can spend much of the $292 million in a supplemental budget bill to use on current year expenses. And Dardenne said lawmakers can also shuffle funding around to mitigate cuts in next year’s budget. He said there will be a “significant contribution” from the increased funding to help reduce cuts.

The four-member Revenue Estimating Conference, made up of Dardenne, Cortez, independent economist Stephen Barnes, and House Speaker Clay Schexnayder, picked the less rosy of the two available forecasts.

Manfred Dix, an economist for the governor’s administration, forecast a drop of only $35 million in the state general fund for the upcoming fiscal year, citing what he sees as a quicker recovery as vaccinations ramp up.

Dardenne initially moved to recognize Dix’s forecast, saying the panel would meet again in two months to revise its forecast. President-elect Joe Biden’s administration is also expected to push for aid to state and local governments now that he has Democratic control in Congress.

The panel’s independent economist, Barnes, sided with Dardenne, but Cortez and Schexnayder refused, with Cortez saying the panel should proceed cautiously with so many unknowns. Instead, all four agreed to the more conservative estimate, with Dardenne saying he wanted to avoid going without a revenue forecast, something that had thrown the budget process into chaos amid previous disagreements.

Albrecht said he thinks the state’s employment and tax collections will recover slowly, over the course of several years, after the pandemic ravaged the economy.

“I think the economy here is very vulnerable to shocks,” Albrecht said. “Negative shocks to this economy, we’re very tenuous.”

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