(The Center Square) — Louisiana’s official revenue forecast was lowered by more than $200 million across two budget years Monday, forcing lawmakers to scale back spending plans for both the current fiscal year and the budget that begins July 1.
The Revenue Estimating Conference reduced the state general fund revenue forecast for the current fiscal year by $113 million, shrinking the amount of excess revenue lawmakers had expected to allocate before the fiscal year ends June 30. It also lowered next year’s forecast by $104 million, requiring corresponding reductions in the proposed budget for the next fiscal year.
The reductions are largely tied to weaker individual income tax and corporate income tax collections after lawmakers approved major tax changes in 2024 that lowered both personal and corporate income tax rates.
During testimony before the Revenue Estimating Conference, an economist for the Division of Administration said the “major culprit” behind the current-year reduction was the individual income tax. Louisiana lowered its individual income tax rate to a flat 3% as part of the tax package.
The division also pointed to weaker sales tax collections, saying collections were running about 2.5% below forecast.
Senate President Cameron Henry, R-Metairie, said the forecast change underscores the need for caution as lawmakers finalize the budget.
“While today’s REC-adopted forecast is not ideal, this news underscores the importance of why we traditionally adopt the more conservative of revenue forecasts we are presented,” Henry said in a statement. “It also highlights that we need to allow time for the changes we made in lowering corporate and personal income tax rates to take effect, so that we start to see more corporations and people moving here to Louisiana, and give them time to begin paying into our state.”
Henry said lawmakers will have to be cautious before adding new programs or expanding existing ones, and said state departments will be asked to “tighten their belts.”
“With today’s updated forecast, we are prepared here in the Senate to make the necessary adjustments to this year’s and next year’s state budgets, starting in the upcoming budget hearings in the Senate Finance Committee,” Henry said.
House Appropriations Chairman Jack McFarland, R-Jonesboro, told The Center Square he was not alarmed by the size of the reduction.
“$113 million is nothing,” McFarland said. “It’s having to find a billion that is tough.”
McFarland said lawmakers could look to several areas for reductions, including the supplemental spending bill and other available funds.
One potential cut is a proposed $50 million replenishment of the State Emergency Response Fund. McFarland said the state spent about $50 million on costs tied to the New Orleans terror attack, the Super Bowl and Mardi Gras security, and said U.S. Homeland Security Secretary Kristi Noem had promised to reimburse the state but that never happened.
“I’d like to build back that fund,” McFarland said, though he acknowledged the replenishment may not survive the budget process.
McFarland said he expects to meet this week with Senate Finance Chairman Glen Womack, R-Harrisonburg, as lawmakers work through the reductions.
Gov. Jeff Landry said the forecast adjustment validates his administration’s push for restrained spending.
“Today’s forecast adjustment shows why this administration has prioritized fiscal responsibility by proposing standstill budgets and implementing a comprehensive fiscal responsibility program,” Landry wrote on X. “These measures ensure we can continue delivering services efficiently and effectively while reducing costs for taxpayers.”
The forecast reduction comes as lawmakers are moving through the final stretch of budget negotiations. Under the Louisiana Constitution, the Legislature must pass a balanced budget before the fiscal year begins July 1.