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Commissioner of Administration Jay Dardenne told the Press Club of Baton Rouge, on Monday, Oct. 11, 2021, that the state closed its books on last fiscal year and found $1 billion left over.

After years of struggling with billion-dollar shortfalls, the state starts out this budget year with a surplus of about $1 billion.

The state recently finished closing out the books for the fiscal year that ended June 30, 2021. With the bills paid, state accountants found the amount of money leftover to be significant.

State officials had presumed a struggling economy when the pandemic began in March 2020 and set their estimates accordingly. But the economy turned out stronger than expected, which led to much higher collections of corporate and individual income taxes, Commissioner of Administration Jay Dardenne said Monday.

“The good news is the economy performed better than that forecast thought it would and the economy continued to do well throughout the year,” Dardenne told the Press Club of Baton Rouge. He is the governor’s top budget architect.

But federal largesse sent to aid in the state’s recovery from business closures and stay-at-home orders required to mitigate the spread of COVID-19 also played a role in supporting the state’s better than expected economy, which ought not to be forgotten, said Louisiana House Appropriations Committee Chair Jerome “Zee” Zeringue, R-Houma.

“Ideally, it would be based on our economy improving. We need to remain aware that this surplus is also a reflection of the federal support we’ve been receiving,” said Zeringue, whose name will appear on the budget bill outlining spending for the fiscal year beginning July 1.

“Still, it’s better to be in a surplus, in terms of what we went through over past few years,” Zeringue said in an interview after Dardenne’s announcement.

He has spent nearly every year making agonizing decisions about which program to cut and which tax to increase in order to pull out of a revenue hole, usually around $1 billion deep, and balance spending with the money available. Nine special sessions were needed in addition to regular sessions to accomplish the annual task since 2015 when Zeringue arrived in Baton Rouge.

Last year, legislators began the general session with a modest surplus, but not enough to do much more than ease the passing of a spending plan with enough money freed up to include a few long-neglected pay raises and to reverse years of appropriations decreases for some programs. This year’s surplus amount is substantially more. Lawmakers need to resist the urge to spend willy-nilly and to keep their eye on the state’s critical needs, he added.

The Revenue Estimating Conference will have to approve the surplus amount, but is expected to do so at its next meeting so that Dardenne can get on with drafting the executive spending proposal that kicks off the annual budget process for the fiscal year beginning July 1, 2022.

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Legislators won’t be able to spend the entire $1 billion as the state Constitution dictates that good chunk of the money goes to specific accounts.

Corporate tax collections were so flush that constitutional provisions triggered diversion of nearly $350 million into the Revenue Stabilization Trust Fund. The money in that fund, when it reaches certain amount in the future, can be used to pay for needed state construction projects and improvements in Louisiana’s transportation infrastructure.

That leaves about $650 million, Dardenne said.

Of that amount the Constitution requires 25% of the surplus to go to the rainy fund that helps pay expenses in off years. Another 10% goes to pay down the unfunded accrued liability, or UAL, which is the amount taxpayers owe government pensioners, if everyone retired at once, but the state for decades spent rather than set aside.

After the constitutional deductions, legislators will have about $450 million extra to spend when they reconvene March 14, 2022.

The Edwards’ administration recommends splitting the $450 million equally as grants for coastal restoration projects; address deferred maintenance, mostly on college campuses; and to cut into the backlog of road and bridge needs.

“All three one-time uses, constitutionally allowed, and we think very smart use of one-time money,” Dardenne said. “The legislature ultimately will make that determination and one of the challenges they will have this year, unlike a lot of years, is we have so much of this federal money that is to be allocated as well and is to be dedicated to certain things. It is an unprecedented opportunity for the state to make one-time investments.”

Zeringue agrees in principle but says legislators may have different ideas as to how much to spend on what projects.

“It’s an opportunity to address critical priorities and some infrastructure needs,” Zeringue said. “I don’t know whether or not we’ll go along with the administration. But we’ve always done a good job identifying where our investments can help shore up businesses and our economy.”

Email Mark Ballard at mballard@theadvocate.com.