BATON ROUGE, La. (AP) — Louisiana collected enough business taxes during the last budget year to deposit the first $205 million into a never-used, five-year-old trust fund created to curb the state’s boom-and-bust cycles of budgeting.
The money may not be spent for years.
Fifty-four percent of voters agreed in 2016 to set up the Revenue Stabilization Trust Fund, to siphon off a portion of the state’s oil and gas revenue and corporate taxes when those collections are higher than usual.
The trust fund was designed to help Louisiana respond to the wide fluctuations it’s seen in those two sources of state income, seeking to sock away some of the money for infrastructure investments — rather than let it be used for ongoing expenses that might not be affordable in future budget years if those income sources fall again.
The volatility of mineral revenue and corporate taxes “creates a very unstable environment,” said former Rep. Walt Leger, the New Orleans Democrat who sponsored the constitutional amendment passed by lawmakers and voters to create the trust fund.
“We’re seeing another boom-bust cycle. I’m pleased that it’s not going to result in all of this sort of boom revenue being available for general fund expenditures. That was the whole point,” Leger said in an interview Monday.
But lawmakers and economists initially had suggested it could be many years before Louisiana would reach the revenue collections needed to trigger use of the fund.
Instead, it took only five years.
Gov. John Bel Edwards’ Division of Administration said more than $205 million from the budget year that ended June 30 was sent to the trust fund.
“The provisions of the Revenue Stabilization Trust Fund have been triggered,” said Commissioner of Administration Jay Dardenne, the Democratic governor’s chief budget adviser.
Under the constitutional provision enacted by voters, if the state receives corporate tax collections above $600 million annually, any additional dollars are socked away in the trust fund. A portion of any oil and gas revenue above $660 million each year also will flow into the account.
Louisiana exceeded the corporate tax figure, collecting more than $805 million in corporate income and franchise tax collections, according to Dardenne’s office. That’s why more than $205 million went to the trust fund.
“I’m a little bit surprised that we hit it this quickly,” Leger said.
Once the fund reaches $5 billion, up to 10% can be spent on construction projects and roadwork. It’s likely to be many years before Louisiana fills up the trust fund to the level that allows lawmakers to spend any of the cash. But the law setting up the mechanics of the trust fund also allows lawmakers, by a two-thirds vote, to use the money in an undefined emergency.
The trust fund gives the state a chance “to step back and be more strategic,” about how it spends the dollars, Leger said.
Louisiana had about $1 billion in unspent cash when the books were closed on the last budget year, Dardenne said. After sending the $205 million to the trust fund and slicing off other dedications, the state will have a $651 million surplus, according to the Division of Administration.
Under the Louisiana Constitution, about $163 million of that surplus will have to go to the state’s “rainy day” fund, while $65 million must be used to pay down retirement debt. The remaining $423 million will be left for lawmakers to spend on one-time items, such as debt payments and construction work.
Dardenne said the governor will recommend spending the money on deferred maintenance work at state buildings, primarily on university campuses, along with road, bridge and coastal protection projects.