Louisiana state senators worry federal aid could inflate budget

Louisiana senators opened their latest budget hearings today with concerns about using short-term federal coronavirus aid to pay for ongoing services and programs since the federal cash will disappear in later years.

Gov. John Bel Edwards proposed using more than $600 million in enhanced federal Medicaid payments to help balance his $36 billion-plus spending proposal for the budget year that begins July 1.

Members of the Senate Finance Committee questioned whether the state will have enough money in later years to offset the federal aid when it disappears, particularly the Democratic governor’s proposed education pay hikes and increases in college spending.

“There’s no guarantee we’re going to have this money in the out years,” says Senate Finance Chairman Mack “Bodi” White, a Baton Rouge-area Republican.

Sen. Greg Tarver, a Shreveport Democrat, noted: “We’ll have to find general fund money to replace this federal money. If we don’t replace it, we’re going to have to reduce services.”

Louisiana’s tax collections are rebounding from the lows of the coronavirus pandemic, but they haven’t fully recovered. Edwards and lawmakers used $920 million in federal virus aid and other stopgap financing to piece together this year’s budget.

Improved tax collections will replace part, but not all, of that money in the upcoming year.

Edwards proposes using new rounds of federal assistance to close the rest of the shortfall and boost spending by $186 million in the next budget year. He’s proposing pay raises for K-12 public school teachers and college faculty, new dollars for the TOPS tuition program and other student aid and increased spending for public college campuses.

Commissioner of Administration Jay Dardenne, the governor’s chief budget adviser, says the administration believes Louisiana’s economy will return to pre-pandemic tax collections in later years, with growth to offset the lost federal aid.

“You assume the economy is going to return to normal, which in Louisiana doesn’t usually happen,” Tarver says.

Lawmakers will spend weeks combing through Edwards’ budget proposal, with hearings in both the House and Senate starting this week and continuing in the legislative session that starts April 12. The Legislature isn’t expected to pass a final version of next year’s spending plan until June.

Officials are awaiting specific U.S. Treasury Department guidance on what restrictions will govern the federal aid, which came from the $1.9 trillion coronavirus relief package pushed by President Joe Biden and passed this month by Democrats in Congress. Read the full story.