Analysis: Federal aid changes Louisiana budget conversation

Only months after concerns the coronavirus pandemic would force hefty budget cuts, Louisiana instead is awash in cash, billions of dollars in federal COVID-19 aid passed by Democrats in Congress.

Those billions — including nearly $3.4 billion in direct federal aid to the state — are changing the financial conversations of Gov. John Bel Edwards and state lawmakers ahead of the regular legislative session that starts April 12.

And that’s not even counting the $1.8 billion sent to cities, parishes and municipalities — or the $2.6 billion going directly to K-12 education and $545 million headed straight to public colleges.

“This is obviously something we’ve never seen before. It’s just this huge volume of money coming to the states,” said Commissioner of Administration Jay Dardenne, the governor’s chief budget adviser.

The money was part of the $1.9 trillion COVID-19 aid package pushed by President Joe Biden.

Much remains unclear about the strings attached to the money. The U.S. Treasury Department is expected to issue the eagerly anticipated regulations in April.

Still, the Democratic governor and lawmakers already are developing ideas for how to use the cash. The list of proposals — and needs in poverty-ridden Louisiana — is long.

Edwards and legislative leaders seem to agree they don’t want to use the dollars to grow ongoing programs and services with short-term federal relief that will disappear within a few years.

They also want to use a sizable portion of the state’s windfall to refill Louisiana’s bankrupt unemployment trust fund, which was drained to pay jobless claims in the coronavirus pandemic. The state has borrowed $139 million from the federal government to cover unemployment payments to those who are out of work.

Dardenne said the governor intends to recommend “multiple hundreds of millions of dollars” be steered to replenishing a trust fund that topped $1 billion before the coronavirus outbreak.

“I think it’s universal in terms of the approach to address the unemployment insurance fund balance and making sure that we can shore that up,” said House Appropriations Chairman Jerome “Zee” Zeringue, the Houma Republican whose committee will be the first stop for any spending proposals.

Beyond the unemployment fund, Dardenne said the administration likely will propose steering dollars to the state’s struggling tourism industry, water system improvements and expansion of broadband internet around the state. Edwards is expected to announce his detailed recommendations before the legislative session begins.

Zeringue said lawmakers want to use many of the dollars for infrastructure projects. There’s quite a hefty list of ideas along those lines. The state has a $15 billion backlog of road and bridge work, not counting $13 billion in projects to improve traffic flow and lessen gridlock.

Louisiana officials are asking for federal guidance on whether the dollars could be used to help pay a debt it owes to the federal treasury for improvements made after Hurricane Katrina to the federal flood protection system stretching across five parishes in the New Orleans area. The debt tops $1 billion — and could reach as much as $3 billion with interest — with the first payment due soon.

Republican state Treasurer John Schroder wants the governor and lawmakers to use the federal aid to pay down an array of state debts, calling the money “an opportunity” that could put Louisiana on a stronger financial footing.

Schroder made the comments at the latest Bond Commission meeting, where members received a report showing Louisiana’s per capita debt grew to $1,545 per person in 2020, up from $1,523 per person a year earlier. The Southern average is $1,224.

Others are proposing short-term aid programs for people who lost jobs because of the pandemic or whose businesses have been hammered during the outbreak.

Unlike with previous coronavirus aid packages, state and local governments have years to spend the money, through the end of 2024. Zeringue said legislative leaders would like to establish the “general framework” for using the cash, however, in the upcoming session.

The federal aid comes on top of a $270 million state surplus from last year and $293 million in unspent state cash from this year, giving the governor and lawmakers more money than would have seemed imaginable when the pandemic began.

“Whenever you have a lot of money, there’s always a lot of hands out and a lot of uses proposed for the money, so sometimes it’s more difficult to craft a budget,” Dardenne said.