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Louisiana’s budget basics
According to the National Association of State Budget Officers (NASBO), Louisiana’s total expenditures in fiscal year (FY) 2020 were $37.2 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.
Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.
Per the US Census Bureau, Louisiana’s combined state and local direct general expenditures were $43.4 billion in FY 2018 (the most recent year census data were available), or $9,319 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.
Louisiana’s largest spending areas per capita were public welfare ($2,627) and elementary and secondary education ($1,714). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.
Louisiana’s combined state and local general revenues were $43.7 billion in FY 2018, or $9,385 per capita. National per capita general revenues were $10,071. Louisiana uses all major state and local taxes. After federal transfers, Louisiana’s largest sources of per capita revenue were general sales taxes ($1,852) and charges ($1,317), such as state university tuition and highway tolls.
Governor John Bel Edwards, a Democrat, was elected in 2019 with 51 percent of the vote. The next gubernatorial election is in 2023.
Louisiana has a divided government. Republicans control both the House of Representatives (68 Republicans to 35 Democrats and 2 independents) and Senate (27 Republicans to 12 Democrats). The entire legislature is up for election in 2023 because both representatives and senators serve four-year terms.
Louisiana’s budget institutions, rules, and constraints
Louisiana uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. Louisiana limits both spending and revenue growth with binding rules so a legislative supermajority is required to override them. A supermajority is also required for any bill that increases taxes. The state also limits total authorized debt incurred by the state, but does not restrict debt service.
(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)
Louisiana’s recent fiscal debates
- In 2016, Louisiana faced a $2 billion deficit. A local newspaper described the state budget as a “hot mess.” The state ramped up spending following Hurricanes Katrina and Rita, then former governors Kathleen Blanco and Bobby Jindal cut taxes, and soon revenues were unable to match expenditures. A mid-decade downturn in the price and production of oil exacerbated the problem. A 2016 budget deal averted big spending cuts by temporarily raising the state’s general sales tax rate from 4 percent to 5 percent and expanding the tax base. It also increased the state’s cigarette tax and enacted other smaller tax increases. In 2018, after three special sessions, the state again avoided big spending cuts by enacting legislation that set the sales tax rate at 4.45 percent through 2025 (instead of letting the rate fall back to 4 percent as scheduled).
- The Supreme Court’s decision in South Dakota v. Wayfair, Inc. gave states broad authority to require out-of-state sellers to collect and remit general sales taxes. However, that authority was based in part on states levying a relatively simple tax (i.e., without compliance burdens placed on the companies). That is an easy hurdle to clear for states like South Dakota, where the state government and local governments use the same sales tax base. However, Louisiana allows local governments to define their own tax base, creating an added layer of complexity for out-of-state companies. The state passed online-sales-tax legislation in 2018 and began collecting such taxes, but to avoid complications, the state collects both the state and local tax (using the state base and a standard rate) and then delivers revenues to localities based on population (not sales). This means some localities, such as Baton Rouge, are not getting as much revenue as they should based on their sales and local tax rates. Governor John Bel Edwards signed legislation in 2019 that empowers the Louisiana Sales and Use Tax Commission for Remote Sellers to create a system enabling localities to collect revenue based on their sales and tax rates, but the process is taking longer than anticipated to complete.
Louisiana’s current budget
Governor Edwards released his FY 2021 budget proposal in February 2020. His proposal included $10 billion in general-fund spending, a 3 percent increase over FY 2020 spending, and $32.2 billion in total spending. The governor’s budget proposal prioritized early-childhood education, juvenile justice, and Medicaid.
Louisiana enacted its FY 2021 budget in July 2020. The enacted budget included $9.2 billion in general fund spending, which is a roughly $900 million decrease from the governor’s proposal and 6 percent lower than enacted FY 2020 spending. However, total spending was $39.8 billion, well above the governor’s proposal because of federal CARES Act funding, which helped the state avoid some budget cuts. Governor Edwards warned of possible midyear cuts to state cabinet agencies.
Governor Edwards released his FY 2022 budget proposal in February 2021. The governor’s budget included $9.6 billion in general fund spending, still lower than the governor’s pre-pandemic plan for FY 2021, and $36.6 billion in total spending, above the governor’s pre-pandemic proposal, again, mostly because of federal funds. However, neither of these totals include the federal dollars Louisiana will receive from the American Rescue Plan (ARP). Even before the ARP passed, the governor said the state would rely heavily on federal funds to balance its budget without significant spending cuts. Governor Edwards has not yet given his State of the State address.
For more on Louisiana’s budget, see
Louisiana’s economic trends
Louisiana’s per capita income (per the Bureau of Economic Analysis) was $50,037 in 2020, ranking 40th among the states. It was below both the national average of $59,729 and the Southeast regional average of $51,796. The state’s median household income (five-year estimate) was $49,469 in 2019, ranking 47th among the states and below the national average of $62,843. Louisiana’s poverty rate was 19.2 percent in 2019 (five-year estimate), above the national rate of 13.4 percent.
Although Louisiana’s averages tell a story about the entire state, Louisiana is composed of diverse localities. For example, the city of Ruston’s median household income was $29,128, and its poverty rate was 41.6 percent; the city of Central’s median household income was $80,015, and its poverty rate was 5.7 percent.
Louisiana’s unemployment rate has historically been above the national average. The state’s unemployment rate particularly spiked following Hurricane Katrina, and in recent years it has been among the highest in the country. (See how COVID-19 is affecting state employment and earnings data.)
Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Louisiana, the average unemployment rate in 2020 was 6.8 percent for white residents, 11.5 percent for Black residents, and 9.6 percent for Latino residents.