House committee advances bills calling for spending caps

By David Jacobs | The Center Square

A Louisiana legislative committee on Tuesday advanced a bill that would restrict how much of the money the state expects to collect that lawmakers are allowed to spend.

The nod from House Appropriations is the first step for an effort that has failed in prior years.

By law, the governor and legislators cannot call for spending more in the next fiscal year than what the Revenue Estimating Conference predicts will come in from taxes, fees and other sources. Under House Bill 118, lawmakers would be further restricted to 98 percent of that estimate.

Predicting how much money is likely to flow into state coffers is an inexact science, and no one expects the REC to get it exactly right. Rep. Rick Edmonds, the Baton Rouge Republican who authored the bill, said the change would provide a cushion in case the REC overestimates how much money will come in, he said.

But if the estimates are low or pretty close to accurate, state government would create surpluses. While surpluses can’t be spent on general government operations, they can be dedicated to one-time expenses like roads and bridges, used to pay down retirement debt, or put aside in the “rainy day” fund.

A healthier “rainy day” fund could come in handy if there is another shock to the state’s economy similar what is being experienced worldwide due to the response to the COVID-19 pandemic, supporters said. But detractors say a time of unprecedented crisis is exactly the wrong time to be limiting the amount lawmakers can spend to address that crisis.

The bill would go into effect for the 2021-22 budget year, when it might cost the state general fund as much as $206 million, according to the estimate prepared by the legislative fiscal office that acknowledges the revenue uncertainty created by the pandemic.

Rep. Barbara Carpenter, D-Baton Rouge, worried about the cuts to services the artificial limit would require. She noted that health care and higher education often are first on the chopping block. Health care will only be more critical as the state deals with and recovers from the pandemic, she said, and higher education has only just now been stabilized after a decade of cuts.

“I just think it would be a travesty if we have to go back and cut them again,” she said.

House Appropriations also advanced bills by Rep. Beau Beaullieu, R-New Iberia, that, taken together, would limit the growth of state spending to 5 percent per year at most. The change would require a state constitutional amendment, which means two-thirds of lawmakers and a majority of voters would have to approve. If enacted, a two-thirds majority of legislators still could vote to exceed the cap if they felt it necessary.

Daniel Erspamer, CEO of the fiscally conservative Pelican Institute for Public Policy, said having a spending limit helps to “smooth out the ups and downs” of state budget cycles. The state has had an expenditure limit since the 1990s, speakers said; Beaullieu’s bills would update the methodology.