Sunday, May 26, 2024

Lawmakers debate how to spend money

by BIZ Magazine

Julie O’Donoghue, Louisiana Illuminator

Louisiana legislative leaders are not on the same page about how to spend over a billion dollars in unexpected money available to the state between now and July of next year.

Senate leadership wants to plow more funding into road, bridge and university construction projects. House lawmakers favor using hundreds of millions of dollars to pay off retirement system debt for state employees, school teachers and higher education faculty. 

The competing proposals both have barriers to getting approved.

Some versions of the House plan could jeopardize statewide pay raises for higher education faculty and K-12 teachers that Gov. John Bel Edwards has proposed. Lawmakers would also have less money available for popular transportation projects and higher education initiatives currently under consideration. 

 Meanwhile, the Senate’s plan to put more money into construction projects can’t move forward without overwhelming support from House lawmakers. To fund more projects, two-thirds of Senate and House members would have to vote to bust through a constitutionally-mandated state spending cap. But lifting that spending limit could dissatisfy Republicans, who generally look for the state to spend less money. 

Yet Senate leaders have made it clear that they would like to prioritize a lot of the money for transportation and higher education construction projects, especially those that have already been approved.

Several projects legislators have funded in recent years haven’t gotten off the ground because the cost of construction has increased. Senate Finance Committee Chairman Bodi White, R-Central, said construction projects were also prioritized in 2007 and 2008, when lawmakers last voted to bust through a spending cap.

At that time, legislators saw a surge of federal funding for recovery efforts after hurricanes Katrina and Rita. The current boom in resources is attributed to the COVID-19 pandemic.

“[After Katrina], we spent that money on one-time expenditures that helped districts all over the state,” White said. 

Edwards and legislators have already used extra funding in recent years to pay down public retirement debt, he added. Government payments to state retirement systems are expected to drop by $77 million annually starting mid-2024 because the state has made so many early payments.

“We’ve paid down [retirement debt] tremendously. We’re ahead of schedule,” White said.

Yet House members are pushing plans to spend more on retirement debt. They have floated using $704 million to pay off state employee retirement debt and at least a couple of hundred million dollars more to pay down a separate pot of teacher and higher education retirement debt.

House members believe paying off retirement obligations early will free up money for state agencies, school systems and universities that currently goes toward those retirement payments. They said it would be an effective way to get government spending under control ahead of 2025, when a state sales tax cut of 0.45%  automatically goes into effect.

House Appropriations Committee Chairman Jerome Zeringue, R-Houma, said retirement debt payoffs could also help improve Louisiana’s bond rating, which would ultimately save the state money. Bond-rating agencies look positively on state efforts to pay down obligations and could upgrade Louisiana as a result, he said. 

House members also hope putting the money toward retirement debt could let legislators avoid a vote to bust the state’s spending cap. Debt payments don’t count against the spending limit and might make it easier to operate within the current budget restrictions.  

Still, Zeringue and others haven’t said where they would get all the money – or what wouldn’t get funded – if they divert those extra dollars into retirement payments.

“We’re working on that,” Zeringue said. 

But legislators have hinted statewide pay raises for higher education faculty, K-12 teachers and staff could be on the chopping block under their plan. The governor’s budget proposal is centered around giving K-12 teachers at least a $2,000 raise.  

On Wednesday, the House Appropriations Committee moved forward House Bill 170, which would divert around $440 million in state sales tax revenue annually for the next two budget cycles to pay off teacher and higher education retirement debt and fund bridge and road maintenance projects. 

Zeringue and the legislation’s sponsor, Rep. Chris Turner, R-Ruston, suggested the state forgo a proposed raise for K-12 teachers and staff expected to cost the state $197 million if the bill passed. Instead, Turner said his proposal would free up enough money for local school systems to raise teacher pay on their own, though they wouldn’t be required to do so. 

Turner said legislators could also eliminate a higher education faculty pay raise of 2.5% in Edwards’ budget, expected to cost the state $37.5 million. Again, Turner said his bill would free up money higher education systems would otherwise have to spend on retirement debt. Those systems could also spend the money on a faculty raise, though he would not require them to do so.

Even with those cuts, Turner’s bill would blow an additional $210 million hole into the governor’s budget proposal. Turner and Zeringue declined to say what other cuts to Edwards’ plan the House might make to close that gap. 

That information should be made public in early May, when the House unveils its initial state budget plan.

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