Right-sizing LA govt means less local govt aid

Part of Republican Gov. Jeff Landry’s fiscal reform attempts to right-size Louisiana government must include assigning spending to its appropriate level of subsidiarity, a recent controversy reveals.

Last week, when Landry had introduced the fiscal year 2026 budget, concern arose over removal of a $7 million appropriation to distribute grants to domestic violence shelters. Befitting current revenue estimates, Landry wanted to produce a budget essentially at standstill, which meant forgoing almost all temporary items from last year.

This included that line item, tucked away in the FY 2025 supplemental appropriation bill and replicating from the previous year. Direct state appropriations happen only sporadically, with the last prior to FY 2024-25 being in 2018. Note that a dedicated funding source exists – self-generated revenues from one half of the fee charged for marriage licenses, and from civil fees charged to persons filing any suit or proceeding for divorce, annulment of marriage, or establishment or disavowal of the paternity of children – but this generates less than half a million bucks a year for general domestic violence mitigation.

But after legislative Democrats complained about the removal, Landry committed to finding some money for the cause, as it appeared the loss of funds – historically, the dedication plus grants from the federal government amounts to around $18 million annually, but only a portion goes to shelters although private funds also finance these – would cause a significant reduction in shelter services. That discovery may not be difficult, especially given an upcoming vote in late March on a constitutional amendment dealing with fiscal reform that if passed after the dust settles could provide a boost in revenues, as well as a current-year surplus may emerge for use next fiscal year.

Regardless, that avoids a question mostly neglected in Landry’s rejiggering of the state’s fiscal structure with an aim to raise revenue more efficiently that produces fewer obstacles to wealth creation, whether by bureaucratic adjustments or removal of needless disincentives – deciding whether a particular function should have revenue raised at and spent at the state or local level. Both statutory reforms implemented from the third special session of last year, called specifically for fiscal restructuring, and from the amendment probably will end up having even more money flow from the state to local governments.

Reforms include getting rid of the ability of parishes to implement inventory property taxes but making state taxpayers pony up for them rather than the entities with the movable property, although parishes could opt out. But it also includes shifting the burden of local education agencies’ unfunded accrued liabilities to state government, as long as school districts take what they would have paid and plow that into permanent educator pay raises (another two-year temporary expense, but with this one close to $200 million each year), as well as eliminating a cap on severance tax royalties going to parishes that at current levels would transfer $75 million from the state to parishes. Some property tax exemptions also could be wiped out, sending even more revenue to local governments.

Keeping this in mind, it would behoove the majoritarian branches of state government to begin ratcheting down in their budgeting the state picking up spending responsibilities that local governments should have, especially with increased revenue streams heading downstream under reforms. The shelter example is an illustrative test case, as only a quarter of parishes have a shelter which serves local residents, so why should taxpayers across the state pick up part of the tab?

Landry’s commitment of at least some state resources, and ongoing at that, for shelters subverts a purer subsidiarity and invites even more bloated government at the local level, not asked to pick up more of expenses that benefit that locality, thereby sabotaging his goal. To avoid that, policy-makers should pursue something like increasing the fees for civil actions that allow diversion of a portion of those to the Battered Women’s Shelter Fund, adding to that continuing revenue stream, and then tell the local government with shelters in their jurisdiction the rest is up to them.

Yet a larger conversation is needed over all such kinds of undedicated transfers, which perhaps is something Landry’s recently constituted Fiscal Responsibility Program can consider. Right-sizing state government won’t succeed without this.