Republican Gov. Jeff Landry promised a “standstill” fiscal year 2025-26 budget. What the Legislature spat out ended up as a 6 percent increase. How could and why did this happen?
Back when he introduced it, Landry in fact foresaw a cut in spending of nearly a billion bucks from the budget as it existed last Dec. 1 to $49.4 billion. General fund spending he thought would fall from $12.5 billion nearly $350 million. Falling statutory dedications to the tune of nearly $700 million would surpass an expected more than $600 million in federal funds.
Instead, when the dust settled it shot up from $50.4 billion to $53.5 billion. Federal funds ballooned almost a billion smackers beyond what had been offered, but that was nothing compared to statutory dedications that far from a reduction exploded nearly $1.7 billion. Indeed, aside from a small increase in self-generated funds only a bit larger than the general fund settling lower by about $70 million fewer than estimated, almost the entirety of the escalation came from these two sources.
And of these two places, only a few parts of government constituted the bulk of the increase. The Executive Department – essentially those agencies without cabinet status tied into the governor’s office – was around $450 million higher for each, or double the original budget. The Department of Health had over $500 million more in dedications and an enormous $2.4 billion more in federal funds; again, about double the original budget. Statutory dedications also were up over $500 in the “other requirements” category, a potpourri of items that include money shoveled to local governments for various things such as housing prisoners, for certain quasi-government activities, or to nongovernmental organizations both of the nonprofit variety and corporations for economic development. (Also notable, the Department of Education saw the only sizable reduction in any category, of federal funds totaling almost $900 million from expiration of Wuhan coronavirus era grant programs.)
This spending spree in part occurred as a result of budget surpluses past and present being declared. Over $600 million went to one-time purposes such as into the Budget Stabilization Fund, defeasance of unfunded accrued liabilities (in the State Police Retirement System), and capital projects, but around $100 million was allocated to various other requirement types of activities. This all counts as dedicated funding.
Also counting were certain adjustments that in essence would have counted for other kinds of dollars into dedicated dollars. For example, Medicaid draws upon a variety of dedicated funding sources, and moves the Landry Administration made such as having to pay more to fulfill the statutory favorable funding treatment nursing homes receive, to the half-dozen managed care organizations and hospitals for services rendered to clients and to boost reimbursable provider rates to relieve a shortage of providers, jacked spending up. These end up coming out of dedicated funds.
As well, since Medicaid is so dependent on federal funding, this had a multiplier effect on drawing many more federal dollars. Especially relevant to rates, approvals from the federal government throughout the process pumped in more.
Affecting dedicated funding also was the Revenue Estimating Conference. The same panel that declared surpluses also revised estimates upwards of money flowing into various dedicated funds. Monies in these generally only can be used on a certain purpose.
The Executive Department saw spending skyrocket beyond what originally had been budgeted mostly with homeland security. This primarily came from disgorging a lot more dedicated money from the Water Sector Fund, a repository of federal funding given during the Wuhan coronavirus era, for grants to local governments to improve water and sewerage provision.
So, to summarize: (1) higher revenue estimates triggered increased spending, (2) especially in Medicaid, more federal dollars were leveraged in, and (3) more spending, and amplified, courtesy of another round of sending out the door past federal funds received. In other words, spend it if you got it, and that’s what happened through various means.
That should disappoint smaller government advocates, especially in light of the fact that there were popular items, such as the LA GATOR educational savings account program that received much less than requested, or income tax cuts, that were denied by the Legislature, specifically the Senate. In part, this happened because general fund revenues overall were down, and things like this depended upon those kinds of dollars.
But, the surplus for this fiscal year and that predicted for the next could have been conceived in terms of funding for new initiatives like this. Instead, a smattering of smaller ones, some genuinely deserved, received recurring funds. At least added spending on one-time items largely was defensible, although some did go to NGOs of questionable statewide purpose, and perhaps Landry would do well to veto these.
Thus, slimming down state government seems to have taken a step backwards this upcoming fiscal year, even if not much of increases in recurring expenses had to do with state-sourced dollars.
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